The best candlesticks PDF guide will teach you how to read a candlestick chart and what each candle is telling you. Candlestick trading is the most common and easiest to understand form of trading. The Strategy Patterns outlined in this guide will reveal to you the secrets of how banks trade in the Fx market.
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When you first begin your trading journey, you will be bombarded left and right with new concepts. It can be daunting and confusing to assimilate everything. This trading guide will show you how to read candlestick charts for beginners.
We will interpret candles in a way that you will remember. If you are a more advanced trader, this candlestick PDF guide is also for you. We will share with you a powerful candlestick pattern strategy.
Stay tuned, because we will show you some of the best candlestick patterns that only institutional traders know.
Let’s start with the basics of candlestick trading first and how to read candlestick charts properly.
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Understanding candlestick charts for beginners
If you remove everything you have on your chart, you will be left with a simple candlestick chart. What you are seeing on the chart below is raw price data which in Forex terminology is also referred to as a ceiling price action chart.
Note #1: Unlike the Renko chart , which we covered in our previous chart trading tutorial, the candlestick chart incorporates the element of time.
The most important information you need as a trader is current and historical prices. Candlestick prices will tell you exactly what price is doing at any given time. Candlestick price charts also give you a unique insight into market sentiment.
A candlestick chart is made up of lots of individual candles of different shapes, forming different candlestick patterns.
There are three types of candlesticks :
- Bullish Candles – These are green candles and it shows that the price has increased over the selected period. In other words, the closing price was higher than the opening price.
- Bearish Candles – These are red candles and it shows that the price has fallen over the selected period. In other words, the closing price is lower than the opening price.
- Neutral Candles – These are candles with no body and the opening price is equal to the closing price.
Besides opening and closing prices, candlestick charts also provide us with information on the highest and lowest prices over the selected period.
The bars above and below the body are called balls. In Forex terminology, they are also known as ‘wicks’ or ‘tails’.
In technical analysis, Japanese candlesticks can show different price formations that lie at the base of many candlestick pattern strategies. If you want to explore the most popular chart patterns, please check out our step-by-step trading guide here: A step-by-step guide to chart pattern trading strategies .
For now, we will focus on the “best candlestick patterns” that many banks use against retail traders.
Candlestick pattern strategy
If you want to make the most of what the candles are showing, explore the best candlestick patterns you can use. We will show you some candlestick patterns explained with examples. If you understand the psychology behind what the candles are showing, it can make your life as a trader a lot easier.
Not only that, you get a possible insight into the battle between buyers and sellers. Chart patterns can also be used to trigger your trades.
In this best candlesticks PDF guide , we will reveal a secret candlestick pattern used among bank traders. This forex candlestick pattern we are talking about is the ORB Nr4 pattern developed by hedge fund manager Toby Crabel.
Toby Cable is probably one of the lesser known profitable traders. Although in 2005, Toby Crabel was described by the Financial Times as the most famous trader in terms of countertrends, he is still an unknown name in the retail industry.
The reason why we mention Toby Crabel working is because he is the father of the ORB pattern, aka the Opening Range Breakout pattern. The ORB pattern is considered the most powerful trading instrument of the past 25 years.
This powerful trading technique helped legendary trader Larry Williams turn $10,000 into $1 million in less than a year.
Step #1 How to Determine ORB Nr4
The ORB pattern is defined as a transaction executed at a fixed value of the open range.
Breakout Breakout trades are more effective if executed after a day inside whose daily range is smaller than the previous 3 days. This is what Nr4 stands for. You have three candles followed by another, with a narrower daily range than the previous three.
Note #2: The 4th day doesn’t have to be a day of the day, it just needs to have a daily range smaller than the previous 3 days. However, the days tend to produce higher success rates.
This is how an actual ORB Nr4 pattern looks like on a Forex candlestick chart:
The ORB Nr4 pattern can be one of the best candlestick patterns for day trading. You simply apply the same rules outlined in this tutorial on your favorite intraday chart
What if we told you that 40% of the time, the first hour of trading can tell you the highs and lows of the day. Our candlesticks strategy incorporates this price behavior so you can better manage your risk and set your goals.
Basically, you can become a proficient trader.
As with all of our trading strategies, we will first give you the trading rules by going through a real live trading example using the best candlestick patterns. covered through this PDF guide.
Step #2: Identify the best candlestick patterns and mark the high and low of the 4th candle
As you search for the ORB Nr4 candlestick chart pattern, keep two things in mind:
- The daily range of the 4th candle needs to be narrower and smaller than the previous 3 candles.
- The price range of the 4th candle also needs to be within the 3rd candle.
The ORB Nr4 pattern in the chart above is a bullish candlestick pattern as it resulted in a bullish move.
The narrow daily trading range indicates a contraction. And contraction always leads to expansion. This is a general rule as the market moves from contraction to expansion.
This is why this ORB Nr4 candlestick pattern is so powerful.
Step #3: Switch to 1h TF and Buy if we break the high, Sell if we break the low of the Nr4 candle.
Our transaction was made the next day after the Nr4 pattern appeared. To get a clear view of the short-term price action, we need to shift our focus to the one-hour timeframe.
Note #3: Only buy or sell if the breakout occurs in the first 5 hours of a new trading day.
We use the Opening Range Breakout technique to time the market and have an effective trade entry.
Trades based on the ORB – Nr4 candlestick chart pattern will show you instant profits.
Now, if the trade doesn’t show you immediate profit, then your trade will become more vulnerable. As a general rule, if after the first trading hour your trade is not green, you can safely close your trade at the market.
Of course, you can only do that if your stop loss is not triggered during that time. Now let’s outline where to place our protective stop loss and where to exit our profitable trade.
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Step #4: Place SL below NR4 intraday low, Take Profit using SL below every 1h low candle
For a buy trade, hide your stop loss below the Nr4 day low. ORB – Nr4 pattern tends to precede strong trend day activity, so your stop loss is rarely hit.
Our take profit strategy is quite easy and it is slightly tweaked from the original strategy highlighted in Day Trading with Short Term Price Patterns and Breakout Break opening book written by Toby Crabel .
Although the ORB nr4 pattern tends to lead to trend trading days, we are more cautious and want to take profits quickly. We would rather watch our SL below every 1h candle low and wait for the market to reverse to take a profit.
Conclusion – Best candlestick pattern
The Best Candlestick PDF Guide is the result of a series of studies that led us to find tradable market trends The price of any market follows a number of mechanical laws that can be observed through patterns candlestick chart. There are several identifiable entry rules based on candlestick patterns that can really help aspiring traders. Some of the best candlestick patterns are more predictable when you have a framework that develops around these chart patterns.