Candlestick Patterns And Their Life Cycle

The past few days were fantastic. It really does help to have a trading plan. My demo account is growing once again, and most importantly I had many Eureka moments. Just want to share three of them here.

1. One of the revelations I had recently was that it is absolutely super important that a PA bar has to be taken at a supply/demand zone. Actually I knew that before but because I thought hey its just a demo account, I went berserk last week and took PA bars everywhere. It taught me a lesson I'll never forget. The best looking PA bars will slap you in the face and stop you out if they're not at a supply/demand zone. Additionally, the best looking PA bars will also fail if there is an opposing zone just above/below it. Never trade into a zone. Sadly this is something most PA traders will never realize. 


2. I also realized how I'm missing out so much by limiting myself to the two core price action bars that I was used to - Outside Bars and Pin Bars. After reading the Price Is Everything thread I learned about Engulfing Bars. I then thought to myself, if the reason price turns at a zone is because of a supply/demand imbalance and not a candlestick pattern, why the heck should only outside bars and pin bars work?! I had the opportunity to do some homework, check out the screenshot below, notice how effective engulfing bars and stars are? And these are only two patterns! I'm shocked at how blinded I've been all these while. Opportunities were dangling everywhere but I couldn't see them because I was only looking for outside bars and pin bars. I'm committed to re study the candlestick patterns and will do even more homework and train my eye to spot them more. One of my goals for now is this: Spot better zones, identify more candlestick patterns. Put those two together and we have a potent combination
   

   

   Engulfing Bars and Stars

3. I further convinced myself why lower time frames is the way to go. You see, once you've correctly identified a good zone, you basically know that you're going to take a trade there. Aggressive traders will touch trade the zone, conservative ones like me will want confirmation, if even the slightest. So how do you get confirmation? Through candlestick patterns. On which time frame? Well if you think about it, if the zone is really good, wouldn't a confirmation even on a low time frame suffice? Say the zone of interest is a 4H one, wouldn't a candlestick pattern on a M15 chart be enough? It already beats touch trading right? Lets look at this amazing example of the life cycle of candlestick patterns across different time frames:

   

   Candlestick Patterns Life Cycle

   That is so wow isn't it??!! Picture this scenario: Trader A - Trader E all saw the supply zone that is of interest. Trader A saw the bearish engulfing on the M30 and took it. Later on Trader B saw the Pin Bar on the H1 and took it. Yet later on Trader C saw the Bearish Engulfing on the H4 and took it. You get my point. Suppose, just suppose that we do end up getting a weekly pin and price proceeds to drop a few hundred more pips. Can you imagine how much Trader A would have made if he saw the PA bars forming on the various time frames and as such had the confidence to hold on to his trade made from the M30 Bearish Engulfing? Now imagine an ace trader who took the trade on the M1 time frame, how tight his stop can be... Imagine if he added to his position as price continued to exhibit price confirmation. Imagine a few such trades... Double an account within a few weeks? I say it is possible. So many traders are doing it, not with unrealistic leveraging but with pure skills. I make it sound simple but I still lack the experience and expertise to do this. However I'm trying, and I'm devoting every single day to hone my craft to such levels.