How can we miss something that big and helpful?

When price action is mentioned, people instantly think of a pattern with one or two candlesticks which will immediately signal to buy or sell. Such an entry pattern is only part of the picture, but this is not everything! 

Take a look at the following charts

We begin with the daily chart of USDCAD

Then Platinum

Here comes the Euro (EURUSD, if you are a Forex trader)

and Gold

What about the 5-minute chart of Crude Oil below zero? 

Do you see anything in common between all those charts?

So far in this course, we focused mostly on the higher short-term lows or lower short-term highs. How to read the chart there, find the signal, measure the target and so on. 

But do we need to completely ignore the first top/bottom?

If we do that but we’ll miss a crucial message the chart is telling us.   

Let’s go back to the charts above and this time focus on the ultimate top or bottom. If we do that we’ll notice a distinctive pattern which signals the end of the previous move and most of the time marks the absolute high or low.

Have you found it?

Yes, the largest candlestick. In those examples, all prior moves ended after there was an enormous candlestick, the biggest one in the move so far.

Here it is in the USDCAD chart.

Down candlestick in Platinum

Again in a bottom configuration in the Euro

Will it be the same in Gold?

If it doesn’t work with negative prices it won’t work at all?

Such candlestick means huge buying or selling. In other words, all who wanted to sell have sold and all who wanted to buy – bought. It is panic or euphoria. And when there are a lot of emotions in play, they tend to be on the wrong side. So next time when you see a very large candlestick have in mind that this might be the end of the movement. 

Now you tell me why I closed this trade here? 

After the target level was hit the exit is signaled by a very big up candlestick.

Next lesson #10 will be the last one from this price action mini-course. I suggest you go back and read the other lessons again. And if you have questions ask them right away.