www.thesteadytrader.

com
 This course is designed and intended strictly for educational purposes only. It
does not recommend, advocate or urge the buying, selling, or holding of any
financial instruments.
 The presenter does not assume any responsibility whatsoever for the actions of
any person viewing or reading the contents of this course. The presenter may or
may not hold positions in the financial instruments discussed.
 Trading and investing involve high levels of risk. Future results can be dramatically
different from the opinions expressed in this course. Past performance does not
guarantee future performance.
 This presentation is provided for informational and educational purposes only and
does not constitute any type of investment advice.
 There are no implied guarantees for the accuracy of information or warranties
associated with any representations made in this course and the presenter shall
not be held liable for any inaccurate or incomplete information or for any
improper or incorrect use of the information contained in this course.
 Anything can happen in the markets

 …especially when one is not prepared

 Traders need a plan, and stick to it

“When dealing with people, remember you are
not dealing with creatures of logic, but
creatures of emotion” – Dale Carnegie

“Fear doesn’t exist anywhere except in the

mind” – Dale Carnegie
 Active trader since 1998

 Sell-side fixed income world, JPMorgan

 Buy-side equity world, Family Office

 Active trading of client accounts

 Trade alert service–www.thesteadytrader.com

 Why Swing Trading?
 What are candlesticks?
 Why use candlesticks?
 Candlesticks &Technical Analysis Tools
 Primary Setups
 Secondary Setups
 Candlesticks & Stops/Targets
 Many candlesticks and formations exist. My
focus on the most consistently profitable
ones
 Hundreds of ways to use candlesticks as part
of strategies
 No stress, no boredom

 Comfortable Timeframe: 2 days – 4 weeks

 Sweet spot: Too long for day traders, too

short for institutional investors

 Plethora of setups every month

 Clear and defined stops and profit targets

 To capture the initial or middle 4% - 5% of a
swing

 Only capture part of the swing, no need to be

greedy
 Apply candlesticks in the direction of the
broader trend

 Increases probability of success per trade

 Increases overall profitability

 Patience Is A Virtue

 Trading with candlesticks is about patience

 Lurking and pouncing on clear signals

 Cut out emotions and impulse trades

 Simply another way to display
intraday/daily/weekly/monthly price action

 Similar to bar charts – yet so much more

powerful
 Originates from Japanese rice traders

 Proven success since 18th century

 Very visual – hence easy to spot

 More expressive information than other
chart types

 Candlesticks tell a story…

 …of investor sentiment & emotions

 Much more (visual) information than bar or
line charts.

 Visual representation is easier for many

 Displays price action and investor sentiment
& footprints

 …Footprints that can otherwise only be

difficult to detect with a series of indicators
of momentum and sentiment
 Candlesticks are about visual learning and
thinking

 Using the right brain:

◦ Color, images, intuition, creativity

 Seeing words as a series of pictures –

common in roughly 60% of the general
population
 Formations are key – and easy to spot with a
little training

 Decision making without emotions

 Defined risk – clear stops

 I focus on the visually most obvious candles
and formations

 The more dramatic the candle the more

important it likely is
 Indecision Candle

 Open and closing prices the same

 Confirmation: Needed
 Bonus: The more dojis forming in a row, the
more important the eventual breakout/break
down
 Prices have been trending down

 Bullish reversal candle

 Small body on top of long tail

 Bears fail to keep price down

 Confirmation: Wait for follow-through

strength
 Bonus: The longer the tail and the more
vicious the confirmation buying, the more
important the signal

 Important: Highest probability hammers

occur at or near bottoms

 V-shaped recoveries not uncommon on

charts
Bullish Engulfing Bearish Engulfing
 Prices have been trending up or down

 Small body candle followed by large body

candle

 Body fully covers previous day’s

 Bullish or bearish, depending on location

 Confirmation: None needed

 Bonus: The more the open price gaps
up/down from the previous candle, the more
significant the chances for a strong trend
change
 Prices have been trending up

 Bearish

 Long tail with small head at bottom

 Bulls fail to keep price up

 Confirmation: None needed

 Bonus: The following increase the strength of
the signal

◦ A gap up from the previous close

◦ A long tail atop the head
◦ Big volume
 Upon formation of a significant candle…

 …after a prolonged up/down trend

 The steeper the slope the higher the

likelihood of a successful setup

 Mean-reversion trade
 The longer the line, the more forceful the
eventual breakout/break down

 Watch candles leading up to

resistance/support

 Watch candles after the breakout

 Use them as reference areas

 …not defined levels to lean against

 Each stock has its own personality and

responds differently to the various moving
averages
 I use: 8, 20, 50, 100, 200 day/week simple
moving averages

 Watch how candlesticks react around the

moving averages

 Bonus: Often a series candles around

important moving averages build important
formations
 Tons of oscillator varieties exist

 I focus on divergence between oscillators and

price.

 i.e, using oscillators as a leading indicator

 Bonus: The longer the divergence, the more
pronounced the resulting move
 Divergences take time to develop

 Watch for visually loud candles

 I keep it simple:
◦ Slow Stochastics
◦ Moving average convergence/divergence (MACD)
 Fibonacci support/resistance levels often
coincide with significant candle developments

 Retracements to watch: 23.60%, 38.20%,

50%.00, 61.80%
 The Rocket Launch

 The Gravity Pull

 The Confluence Zone

 Focus on investor sentiment, through candles

 Strong price reversal, hammer or bullish

engulfing candle….

 …after a consolidation phase with clear

borders
 Stochastics oscillator is oversold, or shows
positive divergence

 Wait for follow-through buying…

 …which must arrive within a handful of

trading days
 Stop: Automatically at bottom of the signaling
candle, a drop below which would prove us
wrong

 First Target: 4% - 5%

 …this keeps emotions out of the trade

 ‘What goes up must come down’ – Sir Isaac
Newton (English physicist and mathematician)

 It’s all about the slope of the line (steepness)

 The steeper the slope, the better the setup.

 Best case: steep slope goes vertical

 Strong price reversal, shooting star or bearish
engulfing candle….

 No follow-through selling necessary, but

adds layer of confirmation

 Stochastics oscillator is overbought or

flashing negative divergence
 Stop: Automatically at top of the signaling
candle, a pop above which would prove us
wrong

 First Target: 4% - 5%

 …this keeps emotions out of the trade

 As an alternative to shorting stock:
◦ Sell far out of the money (10% - 20%) calls or call
options
◦ Expiration, at least 2 months out
◦ Implied volatility usually spikes, allowing for juicy
entries
 Stops are placed on the other side of the
confluence areas

 Best of all: A break of support/resistance

often opens up a trade in the opposite
direction

 First Target: 4% - 5%
 Strong resistance/support zones, marked by
a multitude of technical indicators

 The more signals and time-frames converge,

the stronger resistance/support

 Traders can lean against these areas

 Example of a setup:
◦ 50% or 61.80% Fibonacci retracement of previous
swing higher

◦ Support at 100 day simple moving average

◦ Oversold stochastics, or positive divergence

◦ Bullish candlestick: strong hammer or outside day

 Sideways-Channel Breakout

 Wedge or Flag-Pattern Breakout

 Lateral Breaks and Trending Gaps

 Markets move sideways roughly 80% of the
time

 The longer the sideways trading channel, the

better its ultimate breakout/ break down

 Top and bottom of range should be tested at

least twice, each
 Watch out for tight consolidation patterns at
the top/bottom of the channel

 An eventual strong candle, out of the channel

is the signal.

 The signaling candle sends a clear message:

investors are ready to buy/sell
 Flags and pennant formations are
consolidation patterns…

 …that usually lead to a sharp

advance/decline on increased volume

 They often mark the mid-point of a swing

 Closely watch the candles within the pattern.
Are they bullish? Bearish?

 The breakout candle must be significant,

preferably on a gap-up/gap-down

 No confirmation needed
 Similar to sideways-channel breakouts

 Focus on strong breakout candles…

 …and breakaway or runaway gaps

 Such gaps are strong statements

 A signaling candlestick immediately defines
our risk

 Stops for longs: Bottom of signaling candle

 Stops for shorts: Top of signaling candle

 Q&A
serge@thesteadytrader.com