Vital Trade Management Strategies Handout · Steve Nison’ Candlestick Special Topic: Vital Trade Management Strategies to Improve Success For your next steps visit and use code

Steve Nison’ Candlestick Special Topic: Vital Trade Management Strategies to Improve Success

For your next steps visit www.candlecharts.com and use code TM50 for your $50 discount.Or contact [email protected] for a customized educational package or candlestick recognition software 1

www.candlecharts.com

open close

open

RealBody

high

low

Real Bodies / Shadows Doji

ANATOMY OF THE CANDLESTICK LINE

close

Shadow

SpinningTops

Basic Criteria• Market in a downtrend

• Small real body (either color) at, ornear, top of range.

• Lower shadow at least 2x height realbody

SupportThe low of the pattern



Basic Criteria:• Market in up trend

• Small real body (black or white) at,or near, bottom of session

• Upper shadow at least twice heightof the real body

ResistanceThe high of the pattern

Basic Criteria• Market in down trend

• White real body wraps around priorsession black real body

Market ImplicationBottom reversal

SupportThe lowest low of the two sessionsof the pattern

Basic Criteria• Market in up trend

• Black real body wraps around priorsession opposite color real body

Market ImplicationTop Reversal

ResistanceThe highest high of the two sessionsof the pattern



CandlestickCharting

Techniques

WesternIndicators

Trade Management


East + West Confirmation

Where a candle

signal confirms a

Western technical

signal




East + West = Increased Confidence

Both these signals are at a support area

Bear Engulfing at Fib Resistance

Candles in Context: East + West

Two doji, but….



CandlestickCharting

Techniques

WesternIndicators

Trade Management


3

• Protective Stops

• Time Stops

• Price Targets

• Risk/Reward

• Prevailing Trend

• If … Then Principle

• Market Chameleon

• Trading Journal

TradeManagement




© Steve Nison’s Candlecharts.com© Steve Nison’s Candlecharts.com

Basic Criteria• Market in down trend

• White real body wraps around priorsession black real body

Market ImplicationBottom reversal

SupportThe lowest low of the two sessionsof the pattern



Candles as Protective Stops

Candles as Protective Stops

Why stops




The Importance of Protective Stops: 1 of 4










Protective Stops



How NOT to use candlesticks

Oh my goodness! Themarket rallied after theshooting star!



If the market does not act asexpected within about fivesessions then considerexiting


Don’t Stay Around

Hammer and Bull Engulf

What are you doing hangingaround! You’re wastingprecious resources.

Chart courtesy of Genesis FT



Time Stops

BearishEngulfingPattern

Bearish crossover

Candlesticks do not give price targets


Support and Resistance/Recent Highs and Lows

R1

R2

S1

S2




Box range Breakout

Price Targets

All closesnear highs

Boughttarget

Stop


Bull Flag



Candles for reversals and Western for targets

Bearish engulfingpattern at top of bullchannel

target



Same Signal- but how different the strategy!

A candle signal – even if itconfirms other indicators – is notenough of a reason for a trade.You must always considerrisk/reward



Why I went long:

1) Bullish engulfing at

support

2) Trend line breakoutof price

Was this a good tradethat just didn't work outor did I make a mistakein judgment that I can'tsee?

Thank you,Gary B

Nison Insider Access - Sample Question

Support

Bullish engulf

What do you say? Did hemake a mistake? If so what?



Which is a Better Buy?

Or

Hammer Morning Star

Now let’s look at these in context!

[email protected] USA

Bearish Engulfing Pattern but R/R?

Weekly




Importance of Education

Hammer


Candles in Context

www.candlecharts.comwww.candlecharts.com

BASIC CRITERIA• Trend not important

• Black candle followed by white candle that opens at(or above) prior open. Then closes over black candleopen.

STRICT CRITERIA• Both long real bodies (rare)

• White real body closes at, or near, its highs

PATTERN PSYCHOLOGYWhile the bears may be surprised to see the market

gapping sharply higher from a prior weak session,

imagine their fear (and the bulls happiness) as the

market continues its advance without hesitation the

next session. The tide of the market has changed

from one to which the bears were in control to one

where the bulls are now calling the shots.

SUPPORT/MOMENTUM TRADING

• Lowest low of both candles assupport

• Consider selling on move under lowof pattern 147




Easy way to remember this pattern isthe opens are the about the same (orthe 2nd candle open gaps away from)1st candles open.

Since the market has to gap higherthis pattern not applicable to FX.

Major challenge with this pattern issince it is completed after substantialmove, it usually means poorrisk/reward.

Opposite of Bear Separating Pattern

If open of white candle is within priorblack real body, it is a Bull SashPattern.

148


Bull Separating Line

Basic Criteria• Market in a downtrend

• Small real body (either color) at, ornear, top of range.

• Lower shadow at least 2x height realbody

Market Implication“A chance to buy at the bottom “



Risk/Reward/Momentum

DTE – poor R/r. 4/1520 over 50

Buy

Buy


A candlestick line or patternrequires two criteria:

• The shape of the line or pattern• The preceding trend




BearishEngulfingPattern

Hi Steve,I love your analysis but I have a question.Wouldn’t the next candle after the bearish engulfing pattern be a bullishengulfing pattern and negate the bearishness of the first candle? - Bob

Candles and Trend


Candles and Trend: 1 of 2


Candles and Trend: 2 of 2





Going with longer term trend

Longer Term Trend

20 day m.a over50 day m.a




Prevailing trend

20 day m.a under50 day m.a and bothsloping down

Short term rally


Prevailing Trend

20 day m.a over50 day m.a

If shorting just lookfor a small move


Trend and Battle of windows

Rising windowas support

Falling window asresistance




Based on the market holdingabove this 30 period movingaverage the odds favor abreakout to the upside

Trend

The If…Then Principle:

• If the market does not act asforecasted then exit the position (Protectiveand Time Stops)

• Initiate a position when the marketjustifies your potential trade (i.e. If themarket breaks above resistance, then buy.


If… Then

H&S confirmed

Near support,any clues bearslosing force?



Trading Journal

Goal: Keeping emotionsout of your trading

Date, market, $ amount committed Why did you do (or not do) the trade Entry Price Risk Initial Target Exit Price Analyze Trade

Print out (or cut and paste) chart and make notesWhat did you do right/wrong

Date, market, $ amount committed Why did you do (or not do) the trade Entry Price Risk Initial Target Exit Price Analyze Trade

Print out (or cut and paste) chart and make notesWhat did you do right/wrong


Entry Price

Risk

Initial Target (resistance)

Why did you do thetrade?

Trading Journal - Setting up the Trade


Trading Journal - Analyzing the Trade

Entry Price

Risk

Initial Target

Why did you do the trade

Exit Price

Analyze the trade

18.42

18.34




Trading Journal - Setting up the Trade

Entry Price

Risk

Initial Target (resistance)

Why did you do(or not do) the trade?


Trading Journal - Analyzing the Trade

Entry Price

Risk

Initial Target

Why did you do the trade?

Exit Price

Analyze the trade




As market changes we must adaptour market outlook and tradingstance


Adapting


The low of thebullish engulfingpattern assupport. Oncehammer is formed(at the arrow) wethen adjust oursupport

Adapting



Adapting to the Market 1 of 3

s.t trend: down


s.t trend: down/neutral


s.t trend: bullish



3. New stop

2. At support

1.Sold short Stop

Target

Exited

Adapting to the market


What we learnedWhat we learned

Protective Stops

Time Stops

Price Targets

Risk/Reward

Prevailing Trend

If … Then Principle

Market Chameleon

Trading Journal

Go to www.candlecharts.com for moretraining and save $50 with special code: TM50

For a customized educational package orcandlestick recognition software [email protected]

Vital Trade Management Strategies Handout · Steve Nison’ Candlestick Special Topic: Vital Trade Management Strategies to Improve Success For your next steps visit and use code

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