This is the lesson that ties everything together. A candle pattern is a word; context is the sentence.
A three-question framework
- Where are we? Is price at support, resistance, the middle of a range, or in empty space? Patterns in empty space are almost always weak.
- Where is the main trend going? Continuation patterns in the direction of the trend have better odds than reversal patterns against a strong trend.
- What does the next candle say? Confirmation (a follow-through candle in the same direction) reduces the risk of entering on a false signal.
An example flow
H4 uptrend → price pulls back to support that used to be resistance → a bullish engulfing / pin bar appears → the next candle is bullish → enter with the trend, stop below the wick, target the previous swing high.
Key points
- Location > pattern name.
- With the trend > against the trend.
- With confirmation > without confirmation.
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