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This Ebook Specially made for

BINARY OPTION TRADERS.

What is a Japanese Candlestick?


• A tool to describe the price movement during the given
time frame.

What is a Japanese Candlestick Pattern (JCP)?


• A candlestick graphic formed by the movement in the
market prices and contains predictive power in next
market
direction.
How is a Japanese Candlestick formed?
• By using the opening price, closing price, highest price
and
lowest price of the given time period.
What are the two types of candlestick?
• Bullish candle and Bearish candle. Bullish candle is
formed
when the closing price is above the opening price. Bearish
candle is formed when the closing price is below the
opening
price.
How to interpret a bullish and a bearish candle?
• A bullish candle indicates buying pressure while a
bearish
candle selling pressure.
What is the difference between a long and a short candle?
• A long candle signifies high market volatility and a short
candle low market volatility.
What are the advantages of JCPs?
• Contain unprocessed and raw data about the market
sentiments.
• Provide unique insights on the relationship between the
buyers and sellers.
• Give early signals of potential market turns.
Bears - Market participants who expect the market to
decline
and attempt to profit from it.
Bearish - The expectation of market going down.
Bulls - Market participants who expect the market to rise
and
attempt to profit from it.
Bullish - The expectation of market going up.
Downtrend - The tendency of price moving downward.
Gap-down - The scenario of a financial asset that opens at
a
price that is below the price it closed at in the previous
trading session.
Gap-up - The scenario of a financial asset that opens at a
price that is above the price it closed at in the previous
trading
session.
Long position - Buying a financial asset with the
expectation

that it will rise in value.


Resistance - The price level that sell force is strong to
prevent
prices from rising higher.
Uptrend - The tendency of price moving upward.
Short position - Selling a borrowed financial asset with
the
expectation that it will drop in value and buying it back at
a
lower price to make a profit.
Stop-loss - An order to sell a financial asset at a specific
price
in order to limit losses.
Support - The price level that buy force is strong to
prevent
prices from falling further.
SINGLE CANDLESTICK PATTERN

A. How to recognise it?


• There must be a preceding downtrend.
• It looks like a T letter.
• The opening, highest and closing price are same.
• It has no real body but a long lower shadow.
B. What is the psychology behind?
• When the market opens, the bears drag the price all the
way down, resulting in a long lower shadow.
• The bulls fight strongly and eventually manage to push
the
price back up to the opening level.
• The longer the lower shadow, the more effective the

bullish signal. It tells us that the bulls are strong


enough to
conquer the bears who once dragged the price so low.
C. How do we trade it?
• Look for the Dragonfly Doji at the bottom of a
downtrend.
• Wait for the next candle to close above the high of the
Dragonfly Doji to confirm the existence of bullish force.
• Open a long position upon confirmation.
• Place a stop-loss below the low of the Dragonfly Doji.

A. How to recognise it?


• There must be a preceding downtrend.
• It looks like a square lollipop with a long stick.
• The closing price is above or near the opening price,
forming a tiny body.
• The real body could be green or red.

• It has no or little upper shadow.


• The lower shadow is at least twice of the length of the
real
body.
B. What is the psychology behind?
• Similarly to Dragonfly Doji, when the market opens, the
bears continuously drag the price down during the
session,
resulting in a long lower shadow.
• The bulls fight strongly and conquer the bears by
pushing
the price above or near the opening level, forming a little
square body.
• The longer the lower shadow, the more effective the
bullish signal. It tells us that the bulls are strong enough
to
conquer the bears who once dragged the price so low.
C. How do we trade it?
• Look for the Hammer at the bottom of a downtrend.
• Wait for the next candle to close above the high of the
Hammer to confirm the existence of bullish force.
• Open a long position upon confirmation.
• Place a stop-loss below the low of the Hammer.
A. How to recognise it?
• There must be a preceding uptrend.
• It looks like an inverted T letter.
• The opening, lowest and closing price are same.
• It has no real body but a long upper shadow.

B. What is the psychology behind?


• When the market opens, the bulls push the price all the
way up, resulting in a long upper shadow.
• The bears fight strongly and eventually manage to drag
the price back down to the opening level.
• The longer the upper shadow, the more effective the
bearish signal. It tells us that the bears are strong enough
to conquer the bulls who once drove the price so high.
C. How do we trade it?
• Look for the Gravestone Doji at the top of an uptrend.
• Wait for the next candle to close below the low of the
Gravestone Doji to confirm the existence of bearish force.
• Open a short position upon confirmation.
• Place a stop-loss above the high of the Gravestone Doji.

A. How to recognise it?


• There must be a preceding uptrend.
• It looks like a flying meteor carrying a long tail.
• The closing price is below or near the opening price,
forming a tiny body.
• The real body could be green or red.
• It has no or little lower shadow.
• The upper shadow is at least twice of the length of the
real body

.
B. What is the psychology behind?
• Similarly to Gravestone Doji, when the market opens,
the
bulls continuously push the price up during the session,
resulting in a long upper shadow.
• The bears fight strongly and conquer the bulls by
dragging
the price below or near the opening level, forming a little
square body.
• The longer the upper shadow, the more effective the
bearish signal. It tells us that the bears are strong enough
to
conquer the bulls who once drove the price so high.
C. How do we trade it?
• Look for the Shooting Star at the top of an uptrend.
• Wait for the next candle to close below the low of the
Shooting Star to confirm the existence of bearish force.
• Open a short position upon confirmation.
• Place a stop-loss above the high of the Shooting Star.
DOUBLE CANDLESTICK PATTERN

A. How to recognise it?


• There must be a preceding downtrend.
• A shorter red candle followed by a longer green candle.
• The green candle opens lower and closes higher than
the
red candle, completely engulfing it.
B. What is the psychology behind?
• The red candle implies the control of the bears

following a prolonged downtrend.


• In next session, the market opens below the low of the
red
candle, suggesting continuation of the bearish forces.
• The bears then lose momentum, the bulls take charge
and
lead the price up during the session, and eventually
manage
to close above the high of the red candle.
• The bulls have now fully overridden the bears.
C. How do we trade it?
• Look for the Bullish Engulfing at the bottom of a
downtrend.
• Wait for the next candle to close above the high of the
green candle to confirm the existence of bullish force.
• Open a long position upon confirmation.
• Place a stop-loss below the low of the green candle.

A. How to recognise it?


• There must be a preceding downtrend.
• A red candle followed by a green candle.
• The green candle opens with a gap-down and closes at
50% or above of the real body of red candle.
B. What is the psychology behind?
• The red candle implies the control of the bears
following a
prolonged downtrend.
• In next session, the market opens below the low of the
red
candle, suggesting continuation of the bearish forces.
• The bears then lose momentum, the bulls conquer and
lead the price up during the session, and eventually
manage
to cover 50% losses or more from the previous session.
C. How do we trade it?
• Look for the Piercing at the bottom of a downtrend.
• Wait for the next candle to close above the high of the
green candle to confirm the existence of bullish force.
• Open a long position upon confirmation.
• Place a stop-loss below the low of the green candle.
A. How to recognise it?
• There must be a preceding downtrend.
• A red candle followed by a green candle.
• Both candles have the same low.
B. What is the psychology behind?
• The candles in both sessions form the same low,
suggesting that the market refuses to go below that price
level. Once the price touches the floor, it bounces back.
That
price level may be viewed as a short-term support.
• The closing price of the green candle shies away from
the low further than the red candle does. It shows that the
bullish forces are getting stronger.
C. How do we trade it?
• Look for the Tweezer Bottom at the bottom of a
downtrend.
• Wait for the next candle to close above the high of the
two candles to confirm the existence of bullish force.
• Open a long position upon confirmation.
• Place a stop-loss below the low of the two candles.

A. How to recognise it?


• There must be a preceding uptrend.
• A shorter green candle followed by a longer red candle.
• The longer red candle opens higher and closes lower
than the shorter green candle, completely engulfing it.
B. What is the psychology behind?
• The green candle implies the control of the bulls
following
a prolonged uptrend.
• In next session, the market opens above the high of the
green candle, suggesting continuation of the bullish
forces.
• The bulls then lose momentum, the bears take charge
and
send the price down during the session, and eventually
manage to close below the low of the green candle.
• The bears have now fully overridden the bulls.
C. How do we trade it?
• Look for the Bearish Engulfing at the top of an uptrend.
• Wait for the next candle to close below the low of the
red
candle to confirm the existence of bearish force.
• Open a short position upon confirmation.
• Place a stop-loss above the high of the red candle.
A. How to recognise it?
• There must be a preceding uptrend.
• A green candle followed by a red candle.
• The red candle opens with a gap-up and closes at 50%
or
below of the real body of green candle.
B. What is the psychology behind?
• The green candle implies the control of the bulls
following
a prolonged uptrend.
• In next session, the market opens above the high of the
green candle, suggesting continuation of the bullish

forces.
• The bulls then lose momentum, the bears conquer and
send the price down during the session, and eventually
manage to wipe out 50% gains or more from the previous
session.
C. How do we trade it?
• Look for the Dark Cloud Cover at the top of an uptrend.
• Wait for the next candle to close below the low of the
red
candle to confirm the existence of bearish force.
• Open a short position upon confirmation.
• Place a stop-loss above the high of the red candle.

A. How to recognise it?


• There must be a preceding uptrend.
• A green candle followed by a red candle.

• Both candles have the same high.


B. What is the psychology behind?
• The candles in both sessions form the same high,
suggesting that the market refuses to go above that price
level. Once the price touches the ceiling, it retreats. That
price
level may be viewed as a short-term resistance.
• The closing price of the red candle shies away from the
high further than the green candle does. It shows that the
bearish forces are getting stronger.
C. How do we trade it?
• Look for the Tweezer Top at the top of an uptrend.
• Wait for the next candle to close below the low of the
two
candles to confirm the existence of bearish force.
• Open a short position upon confirmation.
• Place a stop-loss above the high of the two candles.
TRIPLE CANDLESTICK PATTERN

A. How to recognise it?


• There must be a preceding downtrend.
• Three consecutive long green candles observed.
• The second and third candle opens within the body of
the preceding one but closes higher than the preceding

one.
B. What is the psychology behind?
• The first long green candle signals that the bears are
exhausted after the prolonged downtrend and the bulls
start to take over. The bulls continue the rally with the

subsequent two candles closing higher.


C. How do we trade it?
• Look for the Three White Soldiers at the bottom of a
downtrend.
• Wait for the fourth candle to close above the high of

the third candle to confirm the reversal.


• Open a long position upon confirmation.
• Place a stop-loss below the low of the first green
candle.

A. How to recognise it?


• There must be a preceding downtrend.
• The first candle has a long and red body.
• The second candle opens with a gap-down and has a

tiny green or red body.


• The third candle opens with a gap-up and closes at 50%
or above of the first candle.
B. What is the psychology behind?
• The first long red candle implies the dominance of the
bears in the downtrend.
• The gap-down of the second candle further confirms
the
bearish force but the tiny candle body tells us that the
bears
start to lose momentum.
• The gap-up of the third candle indicates that the bulls
are
overriding the bears and eventually manage to make up
50%
losses or more from the first long red candle.
C. How do we trade it?
• Look for the Morning Star at the bottom of a
downtrend.
• Wait for the fourth candle to close above the high of
the
third green candle to confirm the existence of bullish
force.
• Open a long position upon confirmation.
• Place a stop-loss below the low of the second candle.
A. How to recognise it?
• There must be a preceding uptrend.
• Three consecutive long red candles observed.
• The second and third candle opens within the body of
the
preceding one but closes lower than the preceding one.
B. What is the psychology behind?
• The first long red candle signals that the bulls are
exhausted after the prolonged uptrend and the bears
start to
take over. The bears continue the slump with the
subsequent
two candles closing lower.
C. How do we trade it?
• Look for the Three Black Crows at the top of an uptrend.
• Wait for the fourth candle to close below the low of the
third candle to confirm the reversal.
• Open a short position upon confirmation.
• Place a stop-loss above the high of the first red candle.

A. How to recognise it?


• There must be a preceding uptrend.
• The first candle has a long and green body.
• The second candle opens with a gap-up and has a tiny
green or red body.
• The third candle opens with a gap-down and closes at
50% or below of the first candle.

B. What is the psychology behind?


• The first long green candle implies the dominance of
bulls
in the uptrend.
• The gap-up of the second candle further confirms the
bullish force but the tiny candle body tells us that the
bulls
start to lose momentum.
• The gap-down of the third candle indicates that the
bears
are overriding the bulls and eventually manage to
eliminate
50% gains or more from the first long green candle.
C. How do we trade it?
• Look for the Evening Star at the top of an uptrend.
• Wait for the fourth candle to close below the low of the
third red candle to confirm the existence of bearish force.
• Open a short position upon confirmation.
• Place a stop-loss above the high of the second candle.

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