Trend Day

Double distribution trend day

Typical day
The expanded typical day

The trading range day

Sideways day

THE WICK REVERSAL SETUP

The wick reversal setup is one of the most visually compelling
candlestick patterns due to its long price tail,which helps to
highlight major reversal opportunities in the market.

In my opinion, there are three factors to consider when reviewing a

reversal wick candlestick: thebody, the size of the wick in relation to the
body, and the close percentage, which is where price closes in relation
to the range of the candle

Traditionally, you would like to see a wickthat is at least two times the size
of the body. Therefore, if the range of the body of a candlestick is 10 ticks,
thenthe wick has to be at least 20 ticks to arrive at the traditional 2:1 ratio.
While technically you only need a 2:1 ratiofor a candle to be considered a
reversal wick, I usually like to see a higher ratio from 2.5:1 to 3.5:1.
PATTERN SUMMARY
1. The body is used to determine the size oftlle reversal wick. A wick
tllat is between 2.5 to 3.5 times larger than
the size of the body is ideal.
2. For a bullish reversal wick to exist, tlle close ofthe bar should fall
witllin tlle top 35 percent of the overall range of the candle.
3. For a bearish reversal wick to exist, the close of the bar should fall
within the bottom 35 percent of the overall
range of the candle.
One easy methodto help further confirmation for this type of setup, which
may be a necessity in your early trials with this pattern,is requiring the
close price of the bar following the reversal wick candlestick to be lower
than the low of thewieking candle (reverse for longs).
The extreme reversal setup looks to capitalize 011 over-extended
situations in the market, as responsive buyers and sellers will enter the
market to push price back in the opposite direction.
Extreme reversal setup
This figure will vary, however, depending on the volatility of the given
market that you are trading. If you are trading a market with extremely low
volatility, then you will likely need to see a larger extreme candlestick to
properly qualify this candle. Conversely, in markets with high volatility,
you may need to downward adjust the size ofthe extreme bar.

PATTERN SUMMARY
1. The first bar of the pattern is about two times larger than the average size
of the candles in the lookback
period.
2. The body of the first bar of the pattern should encompass more than 50
percent of the bar's total range, but
usually not more than 85 percent.
3. The second bar of the pattern opposes the first. If the first bar of the
pattern is bullish (C > 0), then the second
bar must be bearish (C < 0). If the first bar is bearish (C < 0), then the
second bar must be bullish (C > 0).
THE OUTSIDE REVERSAL SETUP

The outside reversal setup takes advantage oj the market's tendency to

test price levels beyond current value before a reversal can occur.

A bullish outside reversal condition to exist, the current bar's low must be
lower than the prior bar's low and the current bar's close must be higher
than the prior bar's high (L < LD] and > HD]). Along the same lines, for a
bearish outside reversal setup to exist, the current bar's high must be
greater than the prior bar's high and the current bar's close must be lower
than the prior bar's low (H > HD] and C <LD]). There are several
variations of this type of setup, but this is the one that I find to be
particularly useful and predictive when playing key reversal situations.
PATTERN SUMMARY

1. The engulfing bar of a bullish outside reversal setup has a low that is
below the prior bar's low (L < L[l]) and a
close that is above the prior bar's high (C > H[l]).
2. The engulfing bar of a bearish outside reversal setup has a high that is
above the prior bar's high (H > H[l])
and a close that is below the prior bar's low (C < L[l]).
3. The engulfing bar is usually 5 to 25 percent larger than the size of the
average bar in the lookback period.
 THE DOJI REVERSAL SETUP
The doji candlestick is one of the most easily recognizable candlestick
patterns in the market. Thiscandlestick embodies indecision, which can
help to predict an upcoming reversal in price, especially when the
pattern forms above or below value. This pattern has been widely
documented by many prominent traders and authors and remains a
powerful method for spotting important reversal opportunities.

The doji reversal setup pinpoints indecision in the market, which can
highlight profitable reversal opportunities.