How to ACTUALLY Read Trading Charts (Without Indicators)

You probably know that most traders lose money. The question is, how do you read a candlestick chart correctly? It starts with knowing the simplest models in depth. Point 1: In this video, I'll explain exactly what advantage you have when you understand a candlestick chart correctly. Point 2: You'll understand what a shooting star, an engulfing pattern, or even a hammer really shows you. And point 3, you'll understand that these images sometimes provide different signals depending on where and how they occur. And I can tell you this: you have to start with the simplest things. You have to understand where the market opens, where the market closes, where its maximum extension is, and where its absolute low point was. And many people aren't even familiar with these 4 factors. So let's examine the whole thing, and I promise you, it'll open your eyes to what you can do with it.

Look, it's essential to understand why a candlestick chart gives you different information than, for example, a line chart. These are the absolute basics that you, as a trader, have to internalize for yourself. You have to understand in depth what advantages you have in the market because of it. What kind of patterns give you an overview and an indication that a market is now stopping and turning? Which patterns give you an indication that the probability is higher that the market is turning now? And these are the simplest logical consequences that we need as traders to get a picture first. If you only look at a line chart, you don't have this information. And that's why we're going to examine the whole thing in detail now and see what advantages we can get with it. Let's really start at the absolute base and see what kind of information this candlestick chart provides us. Look, a line chart would look like this. And now the question is, how can I recognize on this line chart where the market is likely to give me certain structures that help me to recognize whether a market can go up further or whether a market will rather run down? And that's exactly what we're doing now, step by step. But first of all, we're going to break down such a candle where we want to see what kind of information it gives us at all. Look, this is the candlestick chart, for example. What does it show us? Here the market opened its trade, here it ended its trade. Let's define the whole thing as a line so that you have an idea of it. The time period for such a candlestick chart always refers to what I said. Now I can say, for example, this morning at 8:00 the market starts to open here, goes up here. Now it spends quite a while in this area, goes to the maximum low, and ends the day here at 10:00 PM, for example. So this image of this candlestick chart would have started here at 8:00, would have run up to the maximum here, would have spent its time within this— it's called the candle body— gone down here at the maximum low, and would have ended its trade here now. What information does that give us, first of all? Well, first of all, just that the market is falling. The second piece of information, which is very, very crucial, is to know exactly where the market opening was, because you just have to know that many market participants have to open and enter their positions within usually 40 to 45 minutes of the market opening. There are simply reasons for this, because that is the way they invest in the markets. And now, the closing price is also a very important point, for example, because what many people don't know is that ETFs in particular have to give up all their positions in this closing auction, in these last minutes of the trading day, which they may not have managed to do during the day. Therefore, the opening phase and the closing price phase are incredibly important and give us information. The absolute high and the absolute low of this candlestick simply show us where the market was. But let's look further at what other information we can get with it. We know, for example, now where the trading opening is, where the closing price is, that this was the maximum extension upwards and this was the maximum extension downwards. But what information does such a long wick upwards give me? That up here the traders pushed the market down again quickly and aggressively with a high probability. And when I see that, for example, the market has such a rejection above it and has found its end here again, then that gives me the first hint. This is a typical pattern, a pattern where you can see that there are many sellers at the start. Now I have as the next candle— let's assume that this is again a period of time, in this case, for example, 5 minutes. Now I have the trading opening in this period with the next candle here, maximum extension, lowest point, and closing price. So I see there was really a lot of selling here, and the selling also continued until the end of this period. That means I have the information A, Alpha, up here. The market looked strong but then found its end again very deep down. And B, and that is always very decisive for candlestick patterns, which is why these are always coherent patterns, so that I can immediately recognize, okay, here after the market had so much rejection up here, it was also sold off heavily. So it gives us a further indication that these sellers are apparently also really dominant because it has continued here. And so It is very important to just look at something like that over longer periods of time, again and again, and you get great information from that, of course. Now I can also look at these patterns over a longer period of time and see here, for example, many negative candles, and here suddenly a so-called inside bar. What does that mean? This is a candle that has never been above or below within a previous period. And an inside bar like that is a very valuable piece of information because it shows me that the market currently doesn't know which way it's going to go. And whenever you don't know which way it's going to go, there is often a reaction. It's like a rubber band where things build up a bit and then comes something bigger. And you can see that here too, that the market then hopped over here took another look down. And please remember, exactly the opposite of what we saw above happened here. The market has a long wick down here. So here the market was quickly pushed back up again, and it also found its end within these previous periods again. That's what's called a reversal. And a reversal like that with additional information is always valuable. Because you can see very clearly that the market then moved up from its closing prices, and so a trend was established, which we could see very clearly through the corresponding candlestick patterns. And up here you could see where the market found its end. Let's look at other patterns that a candlestick like this can provide us with, and that wouldn't work at all with a line chart. For example, 3 in a line, which means 3 candle bodies of the same color, they give us a hint, namely that there is impulsive selling. And that's one of the few candlestick formations where I can say it has a very high added value, even if many people use it. This is because a liquidity flow on one side simply has a strong overhang. And what you can see is when a 3 in a line like this— 1, 2, 3 negative candles then continues downwards, a dynamic impulse often follows. You can also see right here, for example, how something like that develops. The market has moved up strongly and has now established 3 candle bodies, often of roughly the same size. On the negative side, and when I see something like that, I know the probability is relatively high that the market will do this. Namely, it might move up a bit again briefly, and then it goes down very quickly again. You'll recognize that too. These 3-in-a-line patterns, if they continue, are often an aggressive signal. But I also just told you about an inside bar. It's always dangerous if, for example, an inside bar follows a 3-in-a-line on the third candle. Because then it can happen that the market says, no, I can't decide yet, I have to wait and see first. And if you then see it going back above this point, then there's a good chance again that it'll make a trend reversal. So you always have to build connections. You can't just mindlessly and blindly start trading. But let's take a look at something else interesting. Look, what can you achieve as a trader with these, well, let's say, candlestick patterns for ourselves. We can, for example, go and say, here was the market open today at, say, 9:00 in the DAX, or at 15:30, the cash session, which is where the big money enters the markets. In America, in this case, that's the S&P 500. And here, for example, was yesterday's closing price. This is where the market ended for yesterday. And now we know that, for example, a lot of trading usually took place here, and these traders usually have an ambition. And if the market now runs down here and shows us a pattern which is, for example, a trend reversal pattern, it could look like this. For instance, the market has its candle body here, has its low point here, so a long wick a so-called hammer. And up here it has its closing price. Then it gets exciting when the market goes above the candle body of the closing price. Why? Because a hammer like that is a typical trend reversal setup. And if you combine that with a price range that you've predefined, for example, yesterday's closing price, then that's information that there was a rejection down here, and the market probably wanted to decide to go higher here yesterday. And so with that kind of information, it can run to the next interesting price range where we want to go. But now you can also do the following and say, here I have a 3-in-a-line at our market open, so I know right at the start market participants are striving to sell off strongly and ideally evenly. Then I can assume that if there's not much in the way on the left side, like smart patterns that would help us, the market will probably move down dynamically in the short term. That's how, for example, a trend-following trader who has now opened a sell position here can set up his trades perfectly. And then there are other patterns. Let's take a look at one or two more. Here we have, for example, a nice situation where you can see quite well that the market is giving us information, which we'll now look at more closely. I'm talking about this situation at the top. What happened here? Specifically, the market had moved upwards before. I'll draw the picture here. It used a relatively small candle to form a high, and then the next candle traded above this level and closed below it. This is a so-called outside bar, or also a bearish engulfing in this case, and that is a typical reversal formation. And when you see something like that, you can assume that there's simply a probability which is greater than it continuing straight up, that the market will make a turn. And whenever you combine something like that with a clever pattern, for example, a closing price, an opening price, or other technical patterns that refer to clever support or resistance levels, then you can derive the combination. This here is then the technical proof that your price range, which you pre-localized, is also showing an effect. And so candlestick patterns are a wonderful thing to narrow things down accordingly. And what I've built from that, I'd like to show you that as well. I've built so-called PB concepts using these candlesticks. And here you can see that quite well. For example, this is a typical PB concept where the market has moved strongly upwards and suddenly it makes lower closing prices. That shows me it's starting to form something. And when it then forms a sideways phase, that shows me the markets are currently in balance here. But if I see there was strong, impulsive buying before, then I wait, for example, for such a candlestick that shows me it wants to go further up. Why does it want to go further up? It looked down and then found its end at the top again, above such a consolidation phase. And that then gives me the opportunity to better and more easily define when a trend continues., and there are some patterns that are simply exciting. Up here you see exactly the same thing, right? And those are simply possibilities for information that you can never have with a line chart. I hope you enjoyed that. I hope this simply gave you a little bit of context as to why candlestick patterns are valuable and more valuable than line charts, that they can show you a hint here, a hint there, that a market could decide more in one direction or the other than you you could plan beforehand that these candlestick patterns, when combined with smart price ranges, are a great help to simply gain an edge in the market. And professionals love doing that, especially in stock analysis for long time frames, but also in trading approaches if you have smart concepts. So I really enjoyed explaining this to you, and I hope you enjoyed it.