Hey guys, new to trading, just started learning the ropes, candlestick patterns etc. This currency trade is USDCHF by the way… Anyway, I have a demo account just to mess around and practice on, and I got into this situation:
I believed the circled part was showing a Railroad Track pattern so I bought up (went long I think you say?). But the pattern actually went the opposite way as shown below.
I placed my stop just below what I believed were Railroad Tracks and it eventually hit this. What happened here? Was this just chance, or did I get something wrong in my analysis?
P.S. Another one… I bought up here thinking this was a Morning Star pattern (I think it’s called, when it’s like railroad tracks with the small bump with a big wick in the centre (hammer is it called? Or the “star” in this situation).
I’m actually pretty sure now that I see it that the buy signal didn’t emerge because the wick went a lot further down? Am I right?
Thanks for your help guys!
In short, yea you messed up the technical analysis a bit.
In more lengthy post, don’t use the railroad tracks pattern. Just call it a 2 bar reversal or tweezer top. and no candle pattern has a high win rate.
In my opinion and hopefully the in the opinion of more experienced traders, don’t get caught up in learning all the candle patterns, especially especially the ones that aren’t popular. All dojis and pinbars [pretty much any candle that has a large wick(s)], the three inside up/down patterns (more commonly known as inside bar with confirmation), occasionally tweezers and engulfing bars are all you really need in terms of candle patterns, and a lot would argue even these are useless.
The candle pattern is one part of the story. Where the candle pattern occurs is the second and more important part of the story.
Your railroad tracks (i’m just going to call it a tweezer from now on) are in the wrong place. Another way of saying this is that your highlighted box isn’t really a tweezer to begin with. This is a reversal indicator, which need to be in obvious places. The more obvious, the better. If you look at your chart, the trend is up. This means if you trade such a pattern, you’re only looking to short, and if you DO long, you’ll want to do so on a pullback so that at least the short term trend is down. But lets pretend the trend is in fact down. This is still an incorrect place to long because you want the pattern to be obvious, or stick out. The left side of the chart has a better bullish reversal than what you’ve highlighted.
Here is kind of how you want your chart to look for this pattern:
I can go over the other pattern with you but 1) remember candle patterns are nowhere close to 100% accuracy, and 2) location location location
You’re doing a good job of buying straight into resistance. On your first chart, look to the left and you can see long upward wicks (inverted hammers, dojis, whatever, but basically there is resistance) at the level you bought at. You would have been better off going short on the inverted hammer that came two candlesticks after your entry.
And as for the bottom chart, if you’re going to have moving averages on your chart you should use them. It’s in a downtrend and you bought at the moving average.
If you’re going to just have ONE tool, you should forget about candlesticks and go with support and resistance.
If a technical data states that price will do something, it does not mean it will happen.
You can’t always rely on candle patterns alone, and any successful trader will tell you that you need some other form of analysis to go with them such as a trendline or some other kind of support/resistance. Also a lot of candle patterns are very subjective, no candle pattern is ever 90% even 80% right most of the time. Good luck on your next trade.
