Transcription
Most traders look at candlesticks, and they see shapes. Dojis, hammers, engulfing patterns, haramis, marubozus, three soldiers, three crows. By the way, those are some of my favorites. And so, we memorize them, right? We memorize the names. We memorize what they look like. And then we wait for those shapes to appear. And then, traders just trade them as soon as they appear. And then, here's what happens. They lose.
Here's what they're missing, and here's what I missed for a really long time. Candles aren't shapes. They're conversations. Every single candle tells you exactly what buyers and sellers did during that period. And it doesn't matter if it's a 5-minute chart, a daily chart, or a weekly chart. It tells you who is in control and who lost control. Buyers and sellers always battling. It tells you who's about to make a move. And it tells you the zones that those moves are being made in. After almost 40 years reading price, I don't see the patterns as much anymore. I see people telling their stories. I see fear. I see greed. And once you learn to read them the same way, your charts will never look the same way again.
So, here's what a candlestick actually tells you. Let's start at the beginning, because most traders were taught this probably wrong. I know I was. So, here's what I learned. A candlestick has four pieces of information. We know this, right? A open, high, low, and close. That's it. But those four numbers tell you everything about the battle that happened inside the candle. Where did price start? How far did buyers push it? How far did the sellers push back? And where did it finish?
A candle that opens low, pushes high, and closes near the high, who won? The buyers. They were in control. All right. A candle that opens high, sells off hard, and closes near the lows, who won? The sellers took over. All right. How about a candle with a long wick up and a small body? Buyers tried to push higher, the sellers rejected, hard, and that wick is not deterioration. It's evidence. It's evidence of who showed up and fought back. So, who won? The sellers. So, stop memorizing pattern names. You're never going to memorize them all. Start asking what actually happened inside this candle. Start thinking about the story, the psychology, and who won.
All right, so the wick can be the most important part, and this is where traders leave money on the table. They focus on the body. Body tells you where price opened and closed. That's cool. But, the wick tells you where price was rejected. The rejection at key levels is one of the most powerful signals in trading. So, here's how to read it. A long upper wick at a resistance level, sellers are defending that zone aggressively. Now, notice I said at a resistance level. One of the biggest mistakes that candlestick traders make, and again, I love candles, but they've got to have context. And if you've been watching any of the videos at this channel, you know market structure, or context, is everything. So, if I'm looking at a bearish candle pattern, I'm looking at something that should be confirming at resistance, or a selling zone. The opposite is true of a buy pattern.
So, when I look at the candles, the price tried to break through a level, and institutions, or other buyers, or sellers, said no. So, think about where things got rejected, because those rejection levels should be either creating support or resistance, or confirming support or resistance. So, if the price tried to break through and institutions said no, that long wick to the upside was the rejection. How about the opposite way? How about a long lower wick that hits a buy zone, or support level, or a demand level? Buyers stepped in hard. In fact, I like to think of it as the low woke them up. The low was like an alarm, and buyers said, "Yep, that's the level we were waiting for." Someone with size did not want price to stay down there. In fact, their buy orders were there. In fact, buy orders are support. Buy orders can also be the momentum back to the upside. So, the stronger the rejection is, the more vehement, the more active that level was.
Sometimes these wicks, by the way, can come with hot zones or scheduled high impact events. So, keep an eye on the calendar, keep an eye on the clock cuz sometimes these things are going to be happening because non-farm payroll or GDP or JOLTS or the Federal Reserve, things like that, right? So, when this re- rejection happens at levels you already know are important, levels that you already marked, previous session close, previous day high, support level, Fibonacci level, market structure zone, that's not a random candle. That is confirmation. That's your setup, that's your signal. So, again, it's not always going to be the body, sometimes it's the wick.
By the way, if you want the exact levels I mark every morning before the open, in the description, I put in the levels that I mark based on time of day, and also I'll share with you what I look at to make sure I'm aware of the hot zones. So, when these wicks are more likely to happen, I'm ready, right? I know that there's more likely to be a wicky market where there could be exhaustion at a level I'm looking at because of a an event that's already scheduled on the calendar. So, check out the description below.
All right, one candle doesn't mean anything. Location means everything. That's context. So, here's the mistake I see constantly. And again, I used to make it, too. Traders spot a hammer candle, for example. They enter long immediately cuz after all, it's a hammer candle, right? And then they get stopped out and they blame the pattern or the algos or the market makers or whomever, the dog, they blame something. The pattern wasn't wrong, the location was. A hammer in a random spot on the chart, stuck in the middle of a zone, or just floating around in space, during a low volatility time, during an off hour during the of the market. So, maybe you're trading between 4:00 and 7:00 a.m. and really nobody's home, right? So, look at the clock, too.
That hammer, though, take that same pattern at the previous session close after sale liquidity sweep on elevated volume, that's context. And that is a completely different story. Same candle, completely different meaning. Context is what separates signal from noise.
Before you read any candle, ask three questions. Here's what I ask myself all the time. Where is it forming? Not is it forming? Don't get excited because you see a three crows pattern, or which is also, by the way, a fair value gap, or a doji, or a harami. Don't get excited about the candle. Where is the candle forming? Is there a support or resistance level there? What time of day is it? Is there a hot zone coming? If price is, at, for example, a level that institutions are known to defend, are we at the top of the initial balance range? Or at the bottom of the initial balance range? And a rejection candle that forms there, now you have something real. Without that context, you're just memorizing shapes and hoping. With it, you're reading price the way, well, I have for 40 years, which has served me very, very well.
And by the way, here's one tip. I typically use candle patterns to recognize where there's going to be a shift, not continuation. So, a doji at a support level, I would expect a shift in a support level to hold, setting it up a buy. If I get an inside candle or a minor high at resistance, I'm looking for it to show me the exhaustion, not momentum. Very different approach.
All right, so here's how candles reveal institutional footprints. And this changed a lot for me, right? I I didn't really start this way, but I evolved to recognizing the pattern. Institutions can't hide. They're like elephant footprints in damp sand. They're too big, they leave a mark, and when large players enter the market, price is going to react. And that's how reaction shows up. You guessed it, in the candle.
So, here's what to look for. A strong, full-bodied candle. It sounds like I'm describing a wine. With almost no wicks. That is called a marubozu. Clean open, clean close. Little to no rejection, little to no battle. That is commitment. That's usually an institution entering with conviction. Let me warn you all, though. If you see a marubozu in the 9:30 to 9:35 candle, be careful, right? Don't overreact to that one. If you see a large candle during an economic event, once again, be careful. So, timing does matter. But, overall, what is that telling you? No hesitation, no fight, just directional conviction and size.
In fact, if you want to add one more layer to this, if you're a TradingView fan, they have something called volume candles. If you want to add some really cool context to your candlestick pattern recognition, use the volume candles on TradingView. They're very cool, because now you can see whether or not there's size that's participating inside that pattern.
Now, contrast that with a candle that has a tiny body and long wicks on both sides. That is indecision, right? That's two forces fighting each other. Nobody's winning. That's not an entry. That's a signal to wait. There's no conviction. Right? Again, if you want to use that volume candle, a lot of times, you'll see there's very little volume on that, unless there's an economic event, which case it's wide, and it's still telling you the same thing. Nobody won. Nobody made any progress.
The candles that matter most are the ones right before a big move. So, in a downtrend, look for strong up closes before price dropped hard. In fact, sometimes those up closes will be on lower volume. The drop will be on larger volume. The zone is where institutions built short positions. Hence, the climb up was retail, narrow volume, and the drop was institution, big volume. When price comes back to retest it, they're still there. That's your order block. That is your trade. You're trading with size. You're not becoming the other side of the trade to the institutions. That's what a sweep is.
All right, so if this is clicking for you, if you're having a lightbulb moment, subscribe to the channel. It helps me keep making content like this for you. Thanks so much.
Read candles in sequence, not in isolation. Nothing happens on an island. This is the last piece, and this one ties everything together. The pros, they don't read one candle. They read the market structure. They read the sequence. Again, think of it like a conversation. One sentence doesn't tell you the whole story. You know, the punchline of the joke doesn't work unless you heard the rest of the joke. But three or four sentences in a row, now you understand what's being said. Same with candles. A small indecision candle followed by a strong rejection candle, followed by a full-bodied candle in the opposite direction, that's a complete sentence. That's the market saying, "We tested this level, we got rejected, and now we're moving." And the moving you can see with a volume candle. So, check those out. That sequence at a key level, higher probability. That sequence in a trend, higher probability. Clear story, clean trade, market context. But you only see it if you're reading the entire story. If you're seeing the entire sequence, not hunting for that one magic candle to appear. Not waiting for the pattern name to appear, but reading the whole conversation as it unfolds.
So, the candle context is, is it happening in a trend or chop? Is it happening in a key level like support or resistance? You look at it candle by candle, level by level, and that's how I've been reading price and teach traders how to do it in the sector secrets mastery.
All right, so here's what it comes down to. Every candlestick pattern, every candlestick is a data point, open high low close, the wicks, all of it is information. But information without context is just noise. With the right candle in the right zone and in that right sequence and the market stops feeling random. It starts telling you exactly what's happening, who's in control, where the traps are, where the rule where the real move begins. Add some volume candles to that, tells an even better story. Stop hunting the shapes, start reading the story. That's the difference between retail and everybody else who's doing well in the market.
But reading candles is only one piece of the puzzle. The next step is understanding how to combine them with key levels, right? It's the levels that give those patterns context to build a complete entry process, a complete framework. And that's exactly what's next. The next video is going to cover candles in context. Go watch it and I'll see you there.