Hello Traders,
Here I am again with an interesting but extremely helpful lesson. I’ve given you plenty of time to go over Lesson 1 and Lesson 2. This lesson is going to be a little longer as I have tried to be as simple as possible in my explanation. So, let us get straight to it. Get a pen and a paper if you want to make notes. It’ll be helpful. I learned this great strategy from a course long time back, and I found it very helpful, and it changed the way I used to trade. Knowledge is power and I love spreading it.
Note: Here we will be ignoring the main chart, instead focus on the charts in between the post.
We all know of indicators such as MA, EMA, MACD, RSI, DMI, Stochastic RSI, etc. but we all know that as much as the indicators are very helpful, they don’t always work. In fact, nothing working perfectly as we want. What if we can use the indicators as a first step, and along with that use some amazing shortcut tricks that will position us better and give us an advantage to be in that trade? That is what we are going to try and work on today. Lets develop some great skills. I will mainly focus on the logic that we can use once we have determined a trade position after using the indicators. We will be working on understanding the logic of trends once we determine a specific pattern using indicator triggers. I have so much material to cover, so forgive me if somewhere I make any mistakes. Enough of the intro. Lets begin.
Indicators and What to look for before you can use the price-action logic (You do not have to use all the indicators for a signal):
MACD:
- Crossover over/under the signal line
- Crossover over/under the zero line
DMI (Directional Movement Index):
Look for the +DI line and -DI chart cross each other. This will tell us whether the price action is going down or up.
EMA (Exponential Moving Average):
- Shorter term moving average crossing over or under longer term moving average.
- Closing prices of the candles crossing over or under a single moving average.
Note: The length of the moving averages depends on you. For shorter term, we can use 30 or 50, and for longer term 100 or 200 is preferred.
So, now we have these 3 indicator which we will go over first to confirm the trend of the price chart. This lesson is not a tutorial for the above three indicators. I will have separate lessons for each indicators. Once we figure that the chart looks bullish that is when we move on to the below logic tricks I am about to explain. I hope you understood whatever I told you so far. Basically, we will have two steps, the first one being using the above indicators to make sure it is looking bullish, and then comes the second part which would be using our logic to get an entry and look for a possible move out. Got it? If not just ask me in the comments. I am here for you. So now we know what indicators we can look for and assuming we want to enter the trade after all the indicators giving bullish signals, we now move on to the logic before entering the trade.
THE TRICK
I want to remind you to have your complete attention on this now. Really want you to understand this very well.
We will be going over the following patterns as a part of our strategy after the preliminary analysis using the above indicators:
- Swing High Pattern (For Buying / Long)
- Swing Low Pattern (For Selling / Short)
- Inside Intervals
- 1 Candle / 2 Candle Pullbacks
- Inside Intervals + 1 Candle/ 2Candle Pullbacks
- Using it all together
- Risk Control ( Will have a separate lesson for it later on)
We have lots of topic to cover people, and this is going to be long, so bear with me. Lets go over it one by one, and don’t move on to the next topic unless you have understood the previous one completely. Remember information is powerful but wrong information is dangerous.
I will be updating this in sections, so see below to continue reading this.
Here I am again with an interesting but extremely helpful lesson. I’ve given you plenty of time to go over Lesson 1 and Lesson 2. This lesson is going to be a little longer as I have tried to be as simple as possible in my explanation. So, let us get straight to it. Get a pen and a paper if you want to make notes. It’ll be helpful. I learned this great strategy from a course long time back, and I found it very helpful, and it changed the way I used to trade. Knowledge is power and I love spreading it.
Note: Here we will be ignoring the main chart, instead focus on the charts in between the post.
We all know of indicators such as MA, EMA, MACD, RSI, DMI, Stochastic RSI, etc. but we all know that as much as the indicators are very helpful, they don’t always work. In fact, nothing working perfectly as we want. What if we can use the indicators as a first step, and along with that use some amazing shortcut tricks that will position us better and give us an advantage to be in that trade? That is what we are going to try and work on today. Lets develop some great skills. I will mainly focus on the logic that we can use once we have determined a trade position after using the indicators. We will be working on understanding the logic of trends once we determine a specific pattern using indicator triggers. I have so much material to cover, so forgive me if somewhere I make any mistakes. Enough of the intro. Lets begin.
Indicators and What to look for before you can use the price-action logic (You do not have to use all the indicators for a signal):
MACD:
- Crossover over/under the signal line
- Crossover over/under the zero line
DMI (Directional Movement Index):
Look for the +DI line and -DI chart cross each other. This will tell us whether the price action is going down or up.
EMA (Exponential Moving Average):
- Shorter term moving average crossing over or under longer term moving average.
- Closing prices of the candles crossing over or under a single moving average.
Note: The length of the moving averages depends on you. For shorter term, we can use 30 or 50, and for longer term 100 or 200 is preferred.
So, now we have these 3 indicator which we will go over first to confirm the trend of the price chart. This lesson is not a tutorial for the above three indicators. I will have separate lessons for each indicators. Once we figure that the chart looks bullish that is when we move on to the below logic tricks I am about to explain. I hope you understood whatever I told you so far. Basically, we will have two steps, the first one being using the above indicators to make sure it is looking bullish, and then comes the second part which would be using our logic to get an entry and look for a possible move out. Got it? If not just ask me in the comments. I am here for you. So now we know what indicators we can look for and assuming we want to enter the trade after all the indicators giving bullish signals, we now move on to the logic before entering the trade.
THE TRICK
I want to remind you to have your complete attention on this now. Really want you to understand this very well.
We will be going over the following patterns as a part of our strategy after the preliminary analysis using the above indicators:
- Swing High Pattern (For Buying / Long)
- Swing Low Pattern (For Selling / Short)
- Inside Intervals
- 1 Candle / 2 Candle Pullbacks
- Inside Intervals + 1 Candle/ 2Candle Pullbacks
- Using it all together
- Risk Control ( Will have a separate lesson for it later on)
We have lots of topic to cover people, and this is going to be long, so bear with me. Lets go over it one by one, and don’t move on to the next topic unless you have understood the previous one completely. Remember information is powerful but wrong information is dangerous.
I will be updating this in sections, so see below to continue reading this.
Comment:
NOTE (IMPORTANT): The swing high and swing low patterns, are corrective patterns, and do not indicate reversal. We need to make sure that the pattern suggests a continuation in the direction of the indicator signals. If after the pattern has formed, we see that the indicator signal is flashing reversal, move on and find a different trade. We do not want to see more than TWO lower lows AFTER the swing high/ low pattern if we are looking to buy. That’s the most important rule to it. Read it again please and make a note.
This was a quick one. So now you know what a Swing high pattern is and what a Swing low pattern is. This is awesome stuff, isn’t it?
Time to go look and find some of these intervals on your favorite coins and see how the price is behaving. Most of the time, this is works. Check it out. Of course, sometimes it may not work as there are a lot of factors effecting this market. Bitcoin being one of them.
But we shall continue. I have a lot to catch up.
Now that we know how to determine the Swing High and Swing Low patterns, we can further examine the price chart using some more tricks before we get an entry or think of exiting a trade.
INSIDE INTERVALS:
This is simple to understand. These occur very rarely when it comes to Swing High and Low patterns. Inside Intervals usually indicate a continuation in the direction a price has been following before the Swing High / Pattern. We are looking for an inside interval right after the Swing High or Low candles in this topic.
Look at the below chart:
This is the previous example we looked at. We know that the MACD and DMI have crossed over and is moving in a bullish direction. We have a Swing High Candle in Point A. If we look closely at Point B, we see that it is an inside interval, meaning that the price of Point B does not cross above or below the Point A candle, and is right after Point A. Sometimes you can see TWO inside intervals. Meaning, you will have Point A as swing High / Low, and then Point B will be an inside interval to Point A, and then you will have a Point C which will be an inside interval to Point B. Clear enough? Whenever we see this in addition to the indicator signals, swing high/low patterns, the price trend is likely to continue.
This was a short and easy topic. Let’s move on to 1 Candle / 2 Candle pullbacks. This one is interesting and kind of common as well compared to the inside intervals.
Continue reading below...
This was a quick one. So now you know what a Swing high pattern is and what a Swing low pattern is. This is awesome stuff, isn’t it?
Time to go look and find some of these intervals on your favorite coins and see how the price is behaving. Most of the time, this is works. Check it out. Of course, sometimes it may not work as there are a lot of factors effecting this market. Bitcoin being one of them.
But we shall continue. I have a lot to catch up.
Now that we know how to determine the Swing High and Swing Low patterns, we can further examine the price chart using some more tricks before we get an entry or think of exiting a trade.
INSIDE INTERVALS:
This is simple to understand. These occur very rarely when it comes to Swing High and Low patterns. Inside Intervals usually indicate a continuation in the direction a price has been following before the Swing High / Pattern. We are looking for an inside interval right after the Swing High or Low candles in this topic.
Look at the below chart:
This is the previous example we looked at. We know that the MACD and DMI have crossed over and is moving in a bullish direction. We have a Swing High Candle in Point A. If we look closely at Point B, we see that it is an inside interval, meaning that the price of Point B does not cross above or below the Point A candle, and is right after Point A. Sometimes you can see TWO inside intervals. Meaning, you will have Point A as swing High / Low, and then Point B will be an inside interval to Point A, and then you will have a Point C which will be an inside interval to Point B. Clear enough? Whenever we see this in addition to the indicator signals, swing high/low patterns, the price trend is likely to continue.
This was a short and easy topic. Let’s move on to 1 Candle / 2 Candle pullbacks. This one is interesting and kind of common as well compared to the inside intervals.
Continue reading below...
Comment:
1 Candle / 2 Candle Pullbacks:
1 Candle Pullback is when you have a Swing High / Low candle and then you have a pullback candle, so basically, a candle which has lower lows and lower highs when you are trying to buy, and higher lows and higher highs when you are trying to short.
Let’s look at the chart below:
So, the above chart is bearish as you can see. We have a Swing Low in Point A, and then if you look closely to Point B, we see it is has Higher High and a Higher Low than Point A. This is a 1 Candle Pullback. You can that if the indicator is pointing down, we see the rest of the candles after that moving downwards. Working so far right? These patterns are hard to find, but once you get used to it, you will be an expert at finding them.
Let’s look at a Bullish 1 Candle Pullback bars Below is the chart:
So, if you look very closely, Point A is the first candle after the crossover, and Point B is the subsequent candle. We see that Point A is the Swing High candle. See how Point B candle retraces below the Point A candle. That is a 1 candle pull back. Got it? Make sure you do.
1 candle pullbacks usually hint that the price is to be continued in the same direction of the indicator. But make sure we follow the steps from the beginning.
Now that we know the 1 candle pullback trick, we shall look at the 2-candle pullback strategy. It is simple and like the 1 candle pullback.
2- Candle Pullback is when you have a Swing High / Low Candle and then you have TWO pullback candles following the swing high/low candle. Remember, the second pullback candle has to be a pullback for the previous pullback candle.
Let’s look at an example:
I was not able to find a 2-candle pullback pattern, with the indicators crossovers, and the Swing high/low candles, so I am just going to pick candles from random places on the chart, but make sure when you use it you connect it with the indicators crossing over, and the swing high / low pattern. You know it. You can relate to it by now if you have been reading carefully.
First let’s look at the bullish pattern.
Bullish Pattern:
Here lets see we see a Swing High candle in Point A, Point B we can see is the first pull back candle, and then Point C becomes the Second Pull back candle. Watch the price movement after that. See how there is an inner candle between Point B and Point C. If we do not have that this pattern is still valid, and if we have an inner candle in between, still it is valid. We will learn about the in later in this lesson.
Bearish Pattern:
Here, assume we have a swing low candle when the indicator crossovers at Point A, we see the subsequent candle Point B making a bearish pull back, and then we see Point C candle making another bearish pull back. See how price drops after that, until we see another pattern reversal indicator?
This is the 2-candle pullback. It is very simple people. Just look at some charts and try to find it. I was in a hurry, so couldn’t find an example with the indicator crossing over at the same time.
We will come across the 1-candle pullback + 2-candle pullback + inside candle all in one at sometimes as well. So now you know how you can mix then with our previous Swing High/Low patterns. Sometimes you will see Swing High/Low candle + Inside Candle + 1 candle pullback / 2 candle pullback in order. Everything goes together.
Continue reading below...
1 Candle Pullback is when you have a Swing High / Low candle and then you have a pullback candle, so basically, a candle which has lower lows and lower highs when you are trying to buy, and higher lows and higher highs when you are trying to short.
Let’s look at the chart below:
So, the above chart is bearish as you can see. We have a Swing Low in Point A, and then if you look closely to Point B, we see it is has Higher High and a Higher Low than Point A. This is a 1 Candle Pullback. You can that if the indicator is pointing down, we see the rest of the candles after that moving downwards. Working so far right? These patterns are hard to find, but once you get used to it, you will be an expert at finding them.
Let’s look at a Bullish 1 Candle Pullback bars Below is the chart:
So, if you look very closely, Point A is the first candle after the crossover, and Point B is the subsequent candle. We see that Point A is the Swing High candle. See how Point B candle retraces below the Point A candle. That is a 1 candle pull back. Got it? Make sure you do.
1 candle pullbacks usually hint that the price is to be continued in the same direction of the indicator. But make sure we follow the steps from the beginning.
Now that we know the 1 candle pullback trick, we shall look at the 2-candle pullback strategy. It is simple and like the 1 candle pullback.
2- Candle Pullback is when you have a Swing High / Low Candle and then you have TWO pullback candles following the swing high/low candle. Remember, the second pullback candle has to be a pullback for the previous pullback candle.
Let’s look at an example:
I was not able to find a 2-candle pullback pattern, with the indicators crossovers, and the Swing high/low candles, so I am just going to pick candles from random places on the chart, but make sure when you use it you connect it with the indicators crossing over, and the swing high / low pattern. You know it. You can relate to it by now if you have been reading carefully.
First let’s look at the bullish pattern.
Bullish Pattern:
Here lets see we see a Swing High candle in Point A, Point B we can see is the first pull back candle, and then Point C becomes the Second Pull back candle. Watch the price movement after that. See how there is an inner candle between Point B and Point C. If we do not have that this pattern is still valid, and if we have an inner candle in between, still it is valid. We will learn about the in later in this lesson.
Bearish Pattern:
This is the 2-candle pullback. It is very simple people. Just look at some charts and try to find it. I was in a hurry, so couldn’t find an example with the indicator crossing over at the same time.
We will come across the 1-candle pullback + 2-candle pullback + inside candle all in one at sometimes as well. So now you know how you can mix then with our previous Swing High/Low patterns. Sometimes you will see Swing High/Low candle + Inside Candle + 1 candle pullback / 2 candle pullback in order. Everything goes together.
Continue reading below...
Comment:
Using it all together:
So now we have all the patters we will be using to trade. It’s just the matter of putting it all together to work. You know it all at this point. Remember we need to use everything that I mentioned above for this to be effective. You will have to follow it in the order.
We will go over it once more, but be sure you get everything up till this point.
Note (IMPORTANT): Do not trade on the Swing High/Low candle, always wait for the reaction candle after it, and once you get the signal, then enter the trade using this method.
So let’s revisit the steps again:
1. Firstly, we will look for one of our indicators (MACD, DMI, or EMA) to get a crossover signal in up or down direction. Up direction being bullish, and down being bearish.
2. Secondly, we will wait for the first candle after the crossover to close.
3. Next, we will wait for the second candle after the crossover to close. This will let us determine, whether the first candle is a Swing High/Low candle or not. If it is then we continue for the reaction candle, and plan on our entry if the indicator is still pointing in the bullish direction. If not, we look for another trading opportunity. Remember Swing High is Bullish and Swing Low is bearish. If you forgot what the difference is, then scroll back up and read it again.
4. Remember the second candle after the crossover could be an inside candle, or a 1 candle pullback as well.
5. Once we have the first two candles after the indicator crossover, we will get an idea whether the trade is going to be bullish or bearish. But for the confirmation, we can still wait for the third signal to see if we get a third candle as an inside candle or a 2-candle pullback. If we get that, then we have a confirmation, and we can enter a trade for long if we have a swing high pattern, and for short if we have a swing low pattern.
That’s it.
I have used this method successfully many times, and I bet once you practice enough using this method, it will improve your trading strategies significantly. I would suggest, just watching a couple of trades when you try using this method. I am always here for you all if you have any questions.
We also can use risk management effectively using this method, which I will go over in one of the future lessons. But for now, if you enter a trade using this method, look for signs of reversals to sell or get out of it.
I really hope I did well in explaining it to you. I know it is a lot of material to study, and it will take time to follow this and get use to this. You have all the time in this world, so take it but do not go wrong with this. Make sure you understand this very well. If not, ask any questions in the comments, and I will try my best to get back to you whenever I can.
There are many more lessons to come. I am very excited to put it all out there.
Till then have fun, read carefully and happy trading.
Also for any questions/suggestions please join the telegram groups below in the signature. It will be easier to answer there, and interact with other members. Lets learn and earn together!
So now we have all the patters we will be using to trade. It’s just the matter of putting it all together to work. You know it all at this point. Remember we need to use everything that I mentioned above for this to be effective. You will have to follow it in the order.
We will go over it once more, but be sure you get everything up till this point.
Note (IMPORTANT): Do not trade on the Swing High/Low candle, always wait for the reaction candle after it, and once you get the signal, then enter the trade using this method.
So let’s revisit the steps again:
1. Firstly, we will look for one of our indicators (MACD, DMI, or EMA) to get a crossover signal in up or down direction. Up direction being bullish, and down being bearish.
2. Secondly, we will wait for the first candle after the crossover to close.
3. Next, we will wait for the second candle after the crossover to close. This will let us determine, whether the first candle is a Swing High/Low candle or not. If it is then we continue for the reaction candle, and plan on our entry if the indicator is still pointing in the bullish direction. If not, we look for another trading opportunity. Remember Swing High is Bullish and Swing Low is bearish. If you forgot what the difference is, then scroll back up and read it again.
4. Remember the second candle after the crossover could be an inside candle, or a 1 candle pullback as well.
5. Once we have the first two candles after the indicator crossover, we will get an idea whether the trade is going to be bullish or bearish. But for the confirmation, we can still wait for the third signal to see if we get a third candle as an inside candle or a 2-candle pullback. If we get that, then we have a confirmation, and we can enter a trade for long if we have a swing high pattern, and for short if we have a swing low pattern.
That’s it.
I have used this method successfully many times, and I bet once you practice enough using this method, it will improve your trading strategies significantly. I would suggest, just watching a couple of trades when you try using this method. I am always here for you all if you have any questions.
We also can use risk management effectively using this method, which I will go over in one of the future lessons. But for now, if you enter a trade using this method, look for signs of reversals to sell or get out of it.
I really hope I did well in explaining it to you. I know it is a lot of material to study, and it will take time to follow this and get use to this. You have all the time in this world, so take it but do not go wrong with this. Make sure you understand this very well. If not, ask any questions in the comments, and I will try my best to get back to you whenever I can.
There are many more lessons to come. I am very excited to put it all out there.
Till then have fun, read carefully and happy trading.
Also for any questions/suggestions please join the telegram groups below in the signature. It will be easier to answer there, and interact with other members. Lets learn and earn together!
Have a look at the below chart first:
You can use only one indicator, but 2 are always great to use. In the chart above we see that the MACD has crossed the signal line on an upside, and DMI is also giving us a bullish crossover. That is our first signal, now if we look at the chart, We see Point A which is the first candle stick after the crossover, and Point B, which is the candle after Point A.
The Strategy or trick here for the Swing High Pattern is that the interval high for Point B which is the subsequent interval to Point A, should be LOWER than the interval where the trigger occurred, which is Point A in this case. Read this one more time. In the chart we see that once the candle at Point A closes, candle at Point B immediately retraces and it has a lower high than Point A. This makes a successful Swing High Pattern. It is important that the subsequent candle is lower than the first candle after the crossover, otherwise this pattern will be invalid. Also, this will be invalid if there is no crossover on the indicators and you are just looking at the candles. Won’t work.
See how the price rallies after that point? Got it? Easy enough? It is not over yet.
So here is a summary of the Swing High Pattern:
- We see a crossover bullish signal in one of the indicators (MACD, DMI, EMA)
- We confirm that the first candle (Point A) after the crossover is the Highest price in the pattern.
- We confirm that the second candle (Point B) after Point A has LOWER HIGH (is lower) than the first candle.
- Finally, we confirm that the indicator still looks bullish.
Just get this part, and I assure you, you will get everything once your join all the pieces of this puzzle.
Let’s move on to the next topic.
SWING LOW PATTERN (Short / For Selling):
So, you have understood the Swing High Pattern now. This will be easy to understand. It is complete inverse of the swing high pattern. For this similar as above, price should be moving lower steadily until we see a crossover signal from the indicators.
Look at the chart below:
What do we see here?
We see that the price has been going down steadily, and we have a bearish crossover on the indicators. The first candle after the crossover point is Point A.
For a Swing Low Pattern to be valid, the subsequent candle after Point A, has to have Higher Lows that the previous candle. See in the chart how Point B has a higher low than Point A, and Point C has a higher low than both Point A and Point B. This makes Point A the Swing Low Pattern point.
Let’s Summarize:
- We see a decline in the price chart as the indicator is about to cross over.
- We confirm that the first candle after the crossover is the lowest price in the pattern.
- We confirm that the subsequent candle after the first candle has a higher low that the previous one.
- We make sure that the indicator is still showing the bearish direction.
Continue reading below....