Candlestick Patterns 3 Simple Tricks That Improve Winrate

When we had started trading, we didn’t pay much attention to candlestick patterns. We thought candlestick patterns are not that important. Today after 3 years of trading, we give a lot of importance to each candlestick especially that is formed on higher timeframes like the weekly, daily and the 4 hourly. In the last post we showed you how a simple candlestick pattern confirmed a buy trade on EURUSD that made more than 400 pips. Now if you haven’t read this post, we suggest you read it as it explains a simple 1-2-3 pattern that has a very high probability of success. Keep your trading simple. Don’t bother too much about other indicators. Most of them are just combinations of moving averages and are lagging in nature. Depending on them will always keep you confused. Start focusing on candlesticks. Watch the video below that explains 3 simple trick that you can use with candlestick patterns to improve the winrate.

As you can see in the above video, you can see it is always a good idea to combine the candlesticks to see what the market is doing.

How To Construct An 8 Hour Candle?

It is a good idea to combine two 4 hour candles into a single 8 hour candle. 8 hour candle encompasses 8 hours of price action. The shape of an 8 hour candle is very important. If it is a bearish candle than the market is going to go down and if it is a bullish candle, the market is going to go up. A daily candle encompasses 24 hours of price action. If you break that down into 4 hour candle, it means a daily candle encompasses six 4 hour candles. If you break it into 8 hour candles then it encompasses only three 8 hour candles. So if you trade with 8 hour candles you just need to check the market after every 8 hours. We have shown you how easy it is to build an 8 hour candle. Just combine two 4 hour candles and you got your 8 hour candles. You don’t need any special indicator to do that.

Why Trading Naked Is Important?

Trading naked is very important. Trading naked doesn’t mean that you get naked. It only means that you remove all the indicators from your chart and only focus on price action. This means only look at the candlestick patterns. This is what pro traders do. They trade naked. They don’t use indicators. If you are still confused how to trade naked than you should watch this recorded webinar that explains in detail how to trade naked.

How To Do Candlestick Maths?

Now you must have got the point by now. A daily candle is a much more important candle than an 8 hour candle. An 8 hour candle is much more important candle as compared to a 4 hour candle. Why? Because it encompasses 8 hours of price action. We have just shown you how easy it is to make an 8 hour candle. Since MT4 does not show an 8 hour candle, you will have to construct an 8 hour candle using two 4 hour candles as explained above. Just use the high made by the two 4 hour candles. Use the high that is greater in the same manner use the low that is more low and similarly for the open and the close. You can also combine 2 daily candles and make a 2 day candle to see what the market is planning in the next few days.Combining candlesticks is also know as Candlestick Maths. Doing Candlestick Maths can be a powerful thing and help improve your winrate. You can read this post in which we have explained in detail a trade that made 1200 pips. This was a USDJPY trade that got triggered by a doji daily candle. A doji candle is formed when the open and the close price are almost equal. If you are still confused, you can watch this candlestick math webinar recording!

This video gives you an important tips about candlesticks. The most important is that you don’t need to stare at the charts all the time. Just look at the 4 hour candle and then again check after 4 hours. If you want you can combine these two 4 hour candles into an 8 hour candle and get a better picture of what the market is doing. So it is important for you to stop looking at the charts again and again once you have made your buy/sell decision. Just focus on 2 things when you enter into a trade. What is the risk of the trade and what you expect to make which is also known as reward. Keep the risk low something like 20-30 pips. Always go for a trade that makes at least 100 pips. So if your risk is 20 pips and you expect to make 100 pips, the reward to risk is 5:1.

Your strategy should have a winrate of at least 70%. What this means is that in 10 trades, you are going to win 7 trades on average and lose 3 trades. So on average you make 700 pips and you lose 60 pips. So your net profit is 640 pips. Practice your strategy again and again so that you have confidence in it. This is what we do. When we open a trade, we just close our computer and then go away and check again next day. Since our stop loss is always something like 20-30 pips and we always target on trades with 100-200 pips potential our reward to risk is always good. So even if we lose we don’t get stressed. We know we will recover the loss in the next trade. Now if you want to make these high reward to risk trades than you should know how to catch the trend. Read this post that explains in detail how you can correctly identify a trend start and end.

So once you have a good strategy, you should stick with it. As we have explained in detail in this post, candlestick patterns are very important especially on the higher timeframes of weekly, daily and 4 hourly. Just focus on the candlestick patterns that form on these timeframes and use H4 as your entry and exit timeframe. That’s it. Keep your trading simple and you are going to become a successful trader.