Original subtitles

0 Hello once again to all of you in this lecture, where I will explain two more of my favorite candlestick 1

formations. Before I begin, I want to remind you guys that the candlestick patterns that you're studying 2

in this lecture are in no particular order. 3

So every pattern carries equal significance in my trading and therefore there is no pattern that I regard 4

superior to any other. 5

So guys, the patterns we are studying here in this lecture are called the signal top 6

and the signal bottom, which consists of one candle. A signal top is defined as a candle 7

where market posts a higher-high than the previous candle and then closes much lower than the opening 8

price of the candle. 9

It is a very powerful indicator of a top formation and indicating sellers entering in large numbers. 10

Guys, a signal top 11

is very different from a shooting star. 12

Firstly, the real body of the signal top is much bigger than that of a shooting star. 13

Secondly, it is possible for a signal top to have a very small upper tail or upper wick compared to a 14

shooting star. On the other side, 15

as the name suggests, a signal bottom candle appears after a clear downtrend in price. 16

Then the candle posts a lower-low when compared to the previous candle and by the end of the session 17

it closes well above the opening price of the candle. 18

A signal bottom is a sign of buyers taking control of the market by the end of the session and is a 19

strong indicator of bullish sentiment entering the market. 20

Please use the same guidelines as we studied above in this lecture to differentiate a signal bottom 21

from a hammer formation. 22

Let us quickly study signal top and signal bottom using illustrations. 23

Please remember that signal top candle's real body must be bearish in color and signal bottom candle's 24

real body must be bullish colored. 25

Guys, with both of these patterns, you will always analyze them while keeping the below guidelines 26

in your mind: 27

1. Whether signal top or signal bottom appeared after a clear uptrend or downtrend, respectively. 28

This means that the importance of the pattern increases when they have come after a prolonged move in 29

terms of both price and time. 2. Whether these points are also associated to key support and resistance 30

zones on the trading chart. 31

If this happens, you are able to trade them with more confidence. 32

Now, let us go through some examples of signal top and signal bottom. First example is of USDCAD 33

and we are seeing a signal top candle on daily charts starting from here. 34

This forex pair enjoyed a sharp rally for more than 60 trading days. 35

And then we saw a signal top at a major level which acted as price resistance. 36

Notice the size of the tail and real body of the candle. 37

Both are almost equal in price. 38

These are the key differences you will notice when comparing a signal top to a shooting star. 39

Price declined sharply for more than 70 trading sessions on this pair. 40

Let's study another example of Signal top. 41

Once again, this signal top appeared after a prolonged trend in price and time. 42

It was once again associated to major resistance, the real body is larger than the tail, and candle 43

posted a strong bearish close after opening higher than previous day's close. 44

And following the signal top, price declined sharply in a bearish trend. More often than not, a signal top 45

formation linked to key level presents a highly profitable opportunity on larger timeframes. 46

Let's continue studying next example of EURUSD but this time we're focusing on a signal bottom 47

which appears after a clear downtrend. The signal bottom candle has a large real body with a small, 48

lower and upper wick and presented a major buy set up on this support zone after a sharp decline, 49

as you see here. 50

And what followed was the retest of the support zone multiple times in this period before price advanced 51

in a bullish trend. 52

The next example of a signal bottom is of Crude oil daily Chart 53

Notice once again, the size of real body of this candle guys. Larger the real body, bigger the 54

preceding price action will be. 55

Before this signal bottom, price was moving in a sideways trend, and then it rallied sharply once the 56

bullish sentiment was confirmed by this formation. Guys, the final example is of 57

USDJPY. 58

The criteria remains the same to test the strength of the signal bottom, as I show you here. 59

Please remember that a signal bottom or a signal top which is not associated to clear market trend 60

is not as effective when compared to those associated to clear market trends. 61

This also concludes this lecture, and I will see you in the next lecture in this section.