Momentum - Bootcamp Ep.8

Okay. Hello and welcome to episode 8 of

my technical boot camp. Today we are

going to be talking about momentum. So

momentum is a concept that is incredibly

useful and no one ever really talks

about it. It's how we read the battle

between buying and selling inside of the

candlesticks. Okay. So, in this class,

you're going to learn how to do that,

why candlesticks give you invaluable

information that you were probably

missing before, and how you can use this

understanding of momentum to read

markets deeper and have more clarity

around the positions you're looking to

take. So, today we're focusing on

individual candle momentum. And with

that said, let's head over to the charts

and make that happen. Okay, momentum.

So, in this class, we're going to talk

about momentum on an individual candle

basis. And what I want to do really is

get you thinking about what these

candles are actually showing us. All

right, so for reference, a candlestick

is made up of two parts. We have bodies

and we have wicks. The body is the main

block part and the wicks are the little

sticks that come off either side. Now,

these show confirmed and rejected price

action within a given time frame. All

right. So, if we're focusing, let's call

them hourly candles, that means that

basically one candle, so all of this is

showing us price movements that have

been created within one hour. Okay? And

the candle body has an open price and a

close price. The open price is where the

market was when the hour began. The

close price is where the market was when

the hour ended and the new hour began.

So this shows confirmed price because it

shows the confirmed piece of movement

that the market made or the price change

that the market made between the start

and the end of the same hour. The wicks

show rejected price. So these things

here because what these show is

attempted price movements. Basically

price levels that the market went to but

then was pushed back from and didn't

manage to close at. So when we see wicks

like the ones we've just covered, all

that means is at some point the market

attempted to go this high and was

rejected. And it also means at some

point within this same hour, the market

actually went down here. So for a phase,

it was a bearish candle before we saw a

push back and a close up here. So we're

going to do a little exercise and what

we're going to do is break down what

this candle would look like as an actual

standalone piece of price action. All

right, this is obviously a really good

way to visualize what candlesticks are

actually showing us because this is

truly what it is when you scale down to

a more refined view of it. So rather

than looking at candlesticks as just a

pattern, right? So when you look at a

candlestick chart and you see these,

rather than just looking at it as an

arbitrary pattern, you want to read into

what the candlestick there is actually

telling you and what it's showing you if

you were to really consider the battle

between buyers and sellers that's taking

place behind the candle. So for a candle

like this with an open price here, a

close price here, and a small wick above

and below, if we were to refine that to

a standalone piece of price action, tick

by tick, it would look pretty much like

this. We would have our open price, and

then the market traded a little bit

lower and then we saw rejections from

buyers all the way up to here. And then

we see a bit of exhaustion at the top

before we close here. Now, if you take a

look at that, that obviously looks like

a very bullish market and something we

would be happy to buy into because it

shows a little bit of seller attempt to

go lower and then clear buyer control

all the way throughout the candle and

then a small bit of exhaustion and a

close considerably higher than where we

opened. Now, that is literally what this

candle is showing us if we were to look

at it tick by tick. That is what it is.

Okay, obviously this next candle is a

bearish candle, meaning the open price

is higher than the close price. So

within this 1 hour of price action, the

market actually traded lower. And to

visualize this one, it's simply an open

price here, an attempt to go higher, and

then a rejection, which brings us all

the way down here, and then a little bit

of alleviation at the end to close us

around here. Again, obviously, when we

visualize it in this way, it looks like

a reasonably bearish market, something

we would be focused on selling into. Now

all candlesticks can be read in this

same way because what candlesticks are

are just a compressed version of the

tickby tick price action that we've just

explained. Okay. So when you start to

read and understand candles in this

manner, you can derive a lot of

information from them. Right? So just to

quickly clarify before we move into

talking about how to read this momentum

and the different types of candles that

we can actually uh identify in a market.

A bullish candle will have an open price

lower than the close price and that just

shows confirmed bullish price action

within that time frame. A bearish candle

will open here and at the end of the

hour or whatever specified period of

time it is will close considerably lower

with basically confirmed downward price

action. And then the wicks give us

different information depending on the

size and which side has larger size and

smaller size and all of the above. Okay,

so that is how candlesticks work. That's

what they look like. They're made up of

bodies, wicks, open and closed prices

and they give you that confirmed and

rejected information. Now, when it comes

to reading the momentum from these

candles, there are really only two types

of candles. There are low momentum

candles and there are high momentum

candles. A low momentum candle is a

candle that really doesn't show too much

price action or too much movement. So,

it can be a candle like this where

nothing really happened at all. Or it

can be a candle that kind of has some

movement but doesn't end up creating

directional flow. Okay? So, it goes up,

it goes down, but it closes pretty much

around where it opened. A high momentum

candle is just like what we've been

looking at where we have kind of

uninterrupted buyer control or

uninterrupted seller control within that

given time frame. And what this shows us

is that there is a lot of momentum

behind the selling in this example and a

lot of momentum behind the buying in

this example. And when we say the word

momentum, what we're really saying is

buying or selling control. Okay? So a

low momentum candle shows no control.

High momentum candle is either showing

control from buyers or control from

sellers. So that is really at the core

what we're talking about when we say

momentum. Now let's talk about then how

these candlesticks can actually indicate

high or low momentum. And for this we're

going to remove the bearish one for now

and we're going to focus on the bullish

one. There's a few ways that we can

derive this low or high momentum

information from candles. First off

through candle bodies.

And really when it comes to an isolated

individual candle, the pure way that we

determine the momentum of the candle

from the body is simply the size. Okay?

So a candle body like this, which is

rather large and we have small wicks and

a large candle body, indicates high

momentum. It's a phase of clear buyer

control as we've just discussed cuz it's

showing us price action like this. If we

were to have a small candle body, so

let's say like this. Well, the candle

body itself has only opened here and

closed here. So if we were to for a

moment disregard the wigs, all this is

showing is basically bit of price action

like this. So that's low momentum,

right? Doesn't show clear control from

buying. Doesn't show clear control on

the side of selling either. Now, we can

even get candle bodies that are so small

that they look like that. And obviously,

this is basically just a flat line if we

were to disregard the wicks for now. So

this shows we open there, we closed

there, no ground was covered. Therefore,

this is a low momentum candle. So the

bigger the candle, the higher the

momentum generally in terms of candle

bodies. Okay? So we derive candle body

information from purely the size of the

candle. Now candle bodies of course are

not the only thing that matter. We also

want to consider the wicks. Now wicks

are a little bit more nuanced. Generally

we can derive from wicks information

from the size but also the context. So

the candle bodies are a lot more simple

and can find if a candle body is big

momentum is high. If it's small momentum

is low but wicks are a little bit more

nuanced because the context around maybe

which side of the candle has a large

wick or whether either side of the

candle has a large wick. This basically

gives us extra context which can give us

kind of information on the momentum in a

market in a different more nuanced way.

All right. So, let's say then that we

have the exact same candle body with an

open price here and a close price here.

Except in this example, we have a wick

that's very big at the top. So, what is

this showing us? Well, let's visualize

it real quick. We've got our open price,

a little bit of downside for the lower

wick, then we have very uninterrupted

clear upside, but when we reach the top,

we have a big drive back down, and then

we close around here. Well, this candle

suddenly tells us a slightly different

picture to what we were seeing before.

Because this candle is showing that

although the buyers were in control,

we've definitely seen some control from

sellers coming in at the top cuz we've

reversed around 50% of the movement that

was made by the buyers initially. So, if

we focus in on the candle, what this is

showing is open buyer control pretty

much all the way throughout. But then

some point up here we saw sellers

kicking in with massive selling pressure

and they drove the market all the way

back down to this level. So we have to

basically be aware of this selling

pressure that's commenced here and try

and read into the information that might

give us. Now in a candle like this where

the candle body is still very large and

the close price is a lot higher than the

open price. It is still a bullish

candle. But if this was happening at a

potential point of interest, like a

supply zone or an area of interest where

a market could be beginning to reverse,

then we could actually use this as a

cautionary sign to maybe not rush into

trades on the buy side because we may

potentially be at a reversal point in

the market where selling pressure is

coming in. And at the minimum, we just

have to consider that there are sellers

up here that are willing to push back at

the buying and drive this market a lot

lower. Cuz at one point in time, the

candle looked like this. But with a

rejection this big, we definitely have

to consider the implication of what took

place up here to bring this candle all

the way back down. Okay, so now let's

take a look at a different example using

the same candle. What if then the candle

body was the same again, but this time

we had a small wick at the top and a

large wick at the bottom? Well, now this

one is more favorable of clear buying

control. What this candle looks like, it

opens here, it trades lower, gets down

to this point. So at this point it's

looking like a very bearish candle. But

some point here we see clear buying

control take over which drives us all

the way up to here. This tells obviously

pretty much the opposite story as before

where before we saw considerable selling

pressure coming in and driving back

against the buyers. This time we already

saw the selling pressure at the

beginning and we had a pretty notable

downward move. In fact a very large

downward move about the same size as the

candle that's closed. But at some point

down there, so after the selling

pressure in this area, we saw notable

levels of buying pressure coming into

the market, which not only drove the

market back to the open price, but drove

us all the way past the open price and

all the way up to here before closing

with again little to no wick at the top.

This wick is tiny, showing buyers were

not pressed down by sellers at the top.

Basically, this is a incredibly bullish

situation because not only have we

closed considerably higher than we

opened, we've also seen a huge rejection

from buyers after an attempt to go

notably lower. So, this would be pretty

much the ultimate in the ways of what we

want to see for bullish candles, right?

It shows attempt to go lower and then a

massive influx of buying which drives us

all the way up to close considerably

higher than we opened. Basically, when

we read this candle, we see information

that buying pressure is very well alive

in this market and has followed the

market up to continually push this

higher until we close with a lot of

momentum and pretty much no push back

from the sellers. All right. Now, let's

pair candle wicks with smaller candle

bodies then. Well, if we were to see

this setup, so we have the open price

and the close price reasonably close

together, but a huge wick either side.

This shows us that we have opened here.

We've attempted to go considerably

lower. We've attempted to go

considerably higher and then we've come

back down and we've closed here. So,

realistically, if we were to average out

this range, we haven't made a whole lot

of ground at all. We're pretty much

ranging. We see an attempt to go higher,

an attempt to go lower, but these

movements are both completely rejected,

which basically only tells us that this

is a phase of indecision, and there is

no clear buying or selling intent or

control in this market. Okay? So, we

call this an indecision candle, right?

So it does factor in the fact that the

candle body is small. If the candle body

was like this big, you know, we would

see of course at this point that well

buyers are somewhat in control. If the

candle body was this big to the

downside, we'd see that okay, sellers

have made ground. But when we have these

small candle bodies and large wicks

either side of around equal size or

similar, that shows basically a phase

of, you know, no clear intent from

buying or selling parties. Now, if we

were to have then the same candle body,

but instead of a large wick either side,

we only have a large wick beneath. Well,

this changes the story slightly. This

shows that we opened here. We tried to

go lower and then we pushed back, but we

still closed where we opened. So, this

isn't a clear buying intent candle just

yet. But it definitely shows willingness

to go higher because it shows selling

pressure was wiped out down here by

considerable buying pressure and the

market managed to get back up to around

where it opened. So what we can derive

from this kind of candle is that this

could be potential foreshadowing of a

reversal. So this is a potential

reversal candle. Okay. Now, it doesn't

confirm that just yet, but it gives us

the first signs that well, we're

starting to see a shift in control from

selling parties to buying parties, and

we are managing to close slightly

higher. Now, we will note on this one

that really, even if the candle body was

this big, it's showing the same thing,

okay? It's still showing a clear attempt

to go lower, taken over by a clear

attempt to go higher, but we still close

around the open price. So whether we

closed, you know, here exactly where we

opened, tiny bit lower or around this

point, it doesn't really matter. All of

these candles give us the same bit of

information. All right, that potentially

we should definitely be cautious for a

reversal coming into this market because

we've started to see that candle

shifting with notable buying pressure

coming in here. And the same exact thing

would go for this candle if we were to

have an upper wick that was very big and

a lower wick that was very small or not

there at all. This shows basically we've

entered the market here. We've pushed

all the way up here, but we pulled all

the way. This pretty much shows that we

entered the market here. We attempted to

move higher and then we saw a rejection

back down towards this point, which

pretty much gives us indication that

this could be the first point where a

market is potentially leading into a

reversal. Okay. So again, at this point

in time, not confirmed, but when we read

into the selling pressure coming in in

mass at this high, and the fact that

this candle once looked like this and

now looks like this, we're definitely

seeing their clear rejections, clear

selling pressure coming in, which could

lead us into a potential bearish

scenario. Now, an additional point on

the topic of high momentum candles, we

obviously talked about how the candle

body size determines how strong the

momentum is, is also the wicks. Okay, so

wicks obviously show rejections. Now in

a market like this where we only have a

little wick on the downside and then we

have only a little wick on the upside,

we are pretty much seeing uninterrupted

buyer control. Now the larger the wick

gets on the side that the market is

moving. So in a bullish example, then

the more notice we have to put to this

like this, we're obviously seeing buyer

control, but we have seen a bit more of

a larger pullback. Okay, if we were to

have a larger wick as we've said, this

is start where we start to consider

possibility of, you know, reversals

maybe because we've seen quite a

reasonable amount of downside come out

of the rejections that the selling

pressure has created up here. So, when

it comes to large-siz candle bodies, we

should still consider the size of the

wick because the wick will give us

information as to whether there's any

cause for concern about potential

reversals or not. Now, in a case where

we have a candle body that's got no

wick, this is the cleanest thing we can

see to back a bias in this direction.

So, in a bullish candle, if we've got a

little lower wick and then we have an

impulse like this, which literally

doesn't reverse at all, this is

basically showing that from this point

through to where we are right into the

exact current moment where the candle

closed, we have direct very clear strong

buying pressure. So from these

situations, we can actually see direct

continuations in a higher frequency

basically than any other pattern that's

printed in the market. If we see a

candle close like this, it's reasonably

likely that the next candle starts and

runs in just the same way because with

no wick, we're basically seeing no push

back from sellers. So we have clean room

for continuation for buyers. All right,

so that's basically what we see there

when we have these uninterrupted candles

with little to no wick. But it's always

worth considering basically the size of

the wick above and below the candles. If

you've got a large candle body, but

you've got a massive wick as well. Well,

this is actually point where reversals

could be coming in. If you've got a

large candle body with a little wick or

no wick, then that is the strongest

possible bias you can get behind clear

domination basically of the market

direction. Okay, just a quick

interruption from the boot camp for a

second. What you're learning here in

this boot camp about technical analysis

is necessary to become a good trader.

But technicals alone are not sufficient

to get you to where you want to go. See,

it's usually not the things that you see

on the charts that actually have you

stuck. Traders get stuck because of

habits, risk behavior, decision-making

under pressure, and self-sabotage

patterns that form that simply don't

show up on the charts. So, I've created

a small and easy to digest class. It's

around 15 minutes long, and it breaks

down all of the reasons that you're

losing and struggling to win that you

probably just haven't seen yet. Once

you've completed this class, head over

to the link in the description. Click

the top link and you'll be able to watch

this class. It's totally free and it

might change the game for you. So, let's

go back to the boot camp. All right. So,

what we're going to do is go through

some individual candles and we're going

to read these in the context of a

market. Okay. Now, I'm going to preface

by saying this is not how you should

look to trade the markets. You should

not trade based off of individual

candles, but you're going to see how

what we've just been through and broken

down actually correlates into what we

see in the markets and the information

we can get. So, if we look at this

chart, we can see initially we have

strong uninterrupted bullish buying

candles. It's looking pretty good. We

have some here as well, but we do start

to see some push back basically in this

price area here where we have some

pretty strong bearish candles. Okay, so

candle bodies wise, this is obviously

primarily bullish, but when we start to

see this push back, it's first sign that

maybe we watch up in the point where the

selling pressure began, which is pretty

much at this high just here. And we

watch this in the future because if we

see more selling pressure commencing,

this could be potential first signs of a

reversal. Okay, so what are we reading

from this candle? Well, we see this

candle here, this gray one. We opened,

we traded considerably higher, then we

traded considerably lower, and we

closed. The next candle, we opened, we

tried to go higher, tried to go lower,

and closed. The next candle was an small

attempt to go higher, and then a large

push to the downside. Right? And that's

this candle here. So, basically, this

series of candles has indicated that

somewhere up here, or correlating that

to the chart, up here, we have seen the

tide shift. We've seen selling pressure

come in in force and bring the market

down. Now, when we see the market start

returning up to that level, so this

drive higher like so. What we're

actually seeing here is again more

rejections coming in. These upper wicks

on these candles is large. And when we

get to here, we have a massive upper

candle. So, if we visualize that, it

looks like this. We open here, we

attempt to go a little lower, we attempt

to go considerably higher, and then we

reject and reverse, and we end up

closing about here. So again, we're

seeing at this point or this point, we

are seeing those rejections. We're

seeing the market coming back down. We

failed to get a candle body closure

anywhere in this range showing basically

all we get at that price level. So

above, call it 1.174.

Anything we get above there is only

rejections. We're not getting any solid

closures that's going to give us

confidence to buy. Let's take a look

then at the next candles that form. We

start to see more rejections again.

Okay, so we get small push above but

more rejections and then the market

comes down and creates these incredibly

strong bearish candles. So remember how

we said when we start to see these big

wicks and we start to see selling

pressure commencing at one price level.

This creates first indication of

potential reversal. Well, there that is.

We saw that and it foreshadowed the move

that followed. Now that we have this

strong bearish move, we obviously

understand that selling is now

controlling the market. We have a seller

dominated market. Unless we were to see

a very quick snap back by very strong

bullish candles, we would therefore

anticipate that this market is more

likely to continue trading lower given

the new direction that's been created.

What we've done is we've ended this

direction with selling pressure and

created a new direction. Okay, so we can

watch the next candles. Really at this

point, we're not seeing too much. What

do we see? A pullback here, reasonably

sized impulsive bullish candle, but

immediately followed by more selling

pressure and more indecision. Okay, now

we've had another push to the upside,

but as soon as we finish that bullish

move again, we get more selling

pressure, more indecision, and then a

bearish close pushing us back down. So,

we are seeing here buyers are not

cleanly in control. Okay, even though

they've had their small push back, every

bullish candle is followed by another

bearish one that is creating indecision

uh and removing decisiveness from the

market and driving us back lower. Now

this candle just here this gray one this

is a very strong bearish candle. You see

from the open to the close there is

pretty much no rejection which shows

clear uninterrupted seller control in

this market. Okay this helps to back the

idea that the market should continue to

trade lower. We then have indecision

slow buyer control. See these candle

bodies are much smaller and then again

after indecision we continue and trade

even lower and we just continue moving

in that fashion. So you can see that

what we gain from reading individual

candles is number one areas where

markets are kind of reversing and number

two areas where markets are clearly

buyer or seller dominated and then

number three we can even gauge

full-blown reversals from them in a

sharper fashion kind of like what we've

just seen with these two candles. If you

take a look at this, we have a

significant bearish candle, which would

lead us to believe continued selling is

likely. But immediately following that,

we get a very strong bullish candle,

which obviously gives us an idea that

maybe this point here, although it's not

a wick, is showing the same kind of

thing as a wick rejection would. Right?

If we visualize what we are seeing in

this price area, we're basically seeing

the market open around this point, trade

a little higher, trade a lot lower, and

then reject all the way back up. And

this is crossing over to the blue candle

now closing us there. So this kind of

two pattern candle uh formation shows

pretty much the same as what a wick

rejection would show us. That is then

followed by a small rejection lower okay

with the following blue candle. This one

and then a large drive higher which at

this point in time pretty much looks

like this. And we close just here. So

this is giving us first indication that

maybe the market could be moving higher.

If we take a look at what comes next we

have indecision, right? Note the buying

pressure that we see coming in down

here. So we have some selling pressure

pushing the market down. But then we

close higher than that indicating these

sellers are not strong enough to cap

price. When we attempted to go lower, we

saw buying pressure indicating that

sellers are not strong enough to keep

this market down. And although we now

start to see some bearish candles that

could maybe indicate some downside, they

are pretty immediately followed by these

candles here, which again, what are

these showing? These are showing

significant buying pressure entering the

market basically at this level and at

the following wick as well. So these two

points show very strong buying pressure

entering the market. Okay, that point

upwards every bit of price action that

came down here essentially foreshadowed

by the initial wick which saw buying

pressure coming in at that level there.

And now from this range we've built

enough buying pressure to send the

market back into uninterrupted buying

candles with little to no wick at the

top. see what follows from there. It's

just more continued buying. Okay, so

there we go. We've made some sense of

the market by reading individual

candles. Now, of course, when we are

trading, we're not going to look at

every single candle and try and read the

full story of every single candle that

prints in this format in order to take

trades. But what we can do is use them

to kind of see potential areas where

maybe the market is shifting direction

or clear areas where the market will not

be shifting direction because the

control and domination from buyers or

sellers is just so prominent at one

time. So that is how we read individual

candles. Now do not trade based off of

this information as it stands alone.

When we get into multicandle momentum,

you'll see how we bring these individual

pieces into a larger context to actually

create narratives around the market

reading the momentum so we can identify

those kind of points of control and

points of reversal and points of

indecision with more clarity. The next

class is all about that. We'll be diving

deep into it. And for now, this is

everything you need to go and study this

week. So, what I want you to do is head

over to your chart, choose a random

piece of price action, and go candle by

candle in the way that we just did to

identify areas of selling pressure,

areas of buying pressure, and try to

make sense of what is likely to happen

next. Remember, you don't have to

formulate trades with it. You don't have

to find the perfect entry with it. You

just need to have an understanding of

which direction the market is likely to

go next based on what has just occurred.

such as when we prepped this downward

move. We said the most likely outcome

from here due to the indecision we have

on the push back up is a selling move.

Okay, I would need to go to a random

point on a chart and do that identify it

and you'll start to see how you read the

story behind the candlesticks

themselves. And from there, we'll move

on to multi candle momentum in the next

episode. So, thank you for watching. Hit

the link in the description to watch the

trading diagnosis class, which is going

to fix the issues that you don't see on

the charts that are holding you back

from success. And with that, I will see

you in the next