WEBVTT 0 00:08.860 --> 00:14.380 This is a bonus lecture that I decided to record and put in this course after replying to a question 1 00:14.380 --> 00:20.500 from a student. We have Euro - New Zealand dollar on a 15 minute chart and you can see that in the 2 00:20.500 --> 00:27.160 first part of the chart, we have a downtrend, but then we have a congestion phase, with the price ranging 3 00:27.160 --> 00:33.170 between 1.7070 and 1.7170. 4 00:33.340 --> 00:37.420 If we go on, we have a super-strong bearish candlestick. 5 00:37.450 --> 00:38.640 Let me also zoom in, 6 00:38.650 --> 00:43.470 so it will be clearer. If we analyzed the single candlestick, 7 00:43.480 --> 00:50.710 we would say that it is almost a bearish Marubozu, strong sign of a continuation of the previous trend. 8 00:50.860 --> 00:54.120 But this is what I call a false candlestick. 9 00:54.130 --> 01:02.880 This is a candlestick on the 15 minute chart that covers 150 pips in just 15 minutes. 10 01:02.890 --> 01:09.070 Definitely an unusual movement that is probably created from speculating on an important news on 11 01:09.070 --> 01:10.840 the New Zealand dollar. 12 01:10.870 --> 01:15.060 This is not a candlestick that can be compared to the others and 13 01:15.080 --> 01:17.400 it may be a bit misleading. 14 01:17.410 --> 01:22.730 Let me give you an example of what in statistics is called truncated mean or 15 01:22.750 --> 01:28.050 trimmed mean. We are trying to calculate the average salary in the United States. 16 01:28.090 --> 01:35.110 So I call 10 random people and ask them if they can share with me the exact figure of their salary. 17 01:35.200 --> 01:39.230 Let's say that the average is $2000 per month. 18 01:39.340 --> 01:45.580 I do it another time, calling other 10 random people and I happen to digit the number of Bill 19 01:45.580 --> 01:50.730 Gates. This time, the average is $50000 per month. 20 01:50.740 --> 01:55.930 Is this a good representation of the average salary in the United States? 21 01:55.930 --> 01:56.820 Not really. 22 01:56.830 --> 02:03.210 That's why in statistics they invented something called truncated mean or trimmed mean. 23 02:03.400 --> 02:11.020 You call the 10 people, ask for their salary and then you cut the lowest and the highest value before 24 02:11.020 --> 02:12.770 performing the average. 25 02:12.820 --> 02:18.390 In this case, Bill Gates' salary is going to be cut before performing the average, 26 02:18.430 --> 02:23.540 so you avoid to include this kind of exceptions in your sample. 27 02:23.560 --> 02:31.330 Now here, on EURNZD, we have a candle of 150 pips, where all the others are about 10 28 02:31.340 --> 02:32.060 pips. 29 02:32.080 --> 02:35.510 I believe that this is a false representation of what 30 02:35.530 --> 02:42.730 usually this kind of candlestick tells you. This is a fast action, probably on an important news, 31 02:42.800 --> 02:46.490 it shouldn't be treated as a normal candlestick. 32 02:46.510 --> 02:52.720 The question was: "should I take my profit after this candle or should I expect the downtrend to 33 02:52.720 --> 02:53.890 continue?". 34 02:54.190 --> 02:57.130 I would take my profit to be honest. Here, 35 02:57.190 --> 02:59.830 we can't really talk about trend. 36 02:59.890 --> 03:04.360 This is just speculation, pushing the price down very fast. 37 03:04.390 --> 03:10.300 So I wouldn't analyze this candle to look for a sign of continuation of the downtrend. 38 03:10.300 --> 03:16.370 I believe that these other candles that follow are more important to evaluate the trend. 39 03:16.390 --> 03:23.420 We have several attempts by buyers to push the price back up, but we have two reactions forming two 40 03:23.470 --> 03:25.750 bearish engulfing patterns. 41 03:25.930 --> 03:32.800 Then we have a shooting star, with a very good upper shadow that shows that sellers are reacting on this 42 03:32.800 --> 03:33.650 level, 43 03:33.790 --> 03:40.260 and then another candle with another upper shadow that shows a great reaction by sellers. 44 03:40.390 --> 03:46.870 I believe that this group of candlesticks is more important than this one to evaluate a possible 45 03:46.870 --> 03:49.090 continuation of the downtrend. 46 03:49.360 --> 03:55.540 So when you have a candlestick like this on the market, extremely different from all the others, like 47 03:55.540 --> 04:03.850 15 or 20 times bigger, consider to analyze next candlesticks to evaluate the trend and don't trust a 48 04:03.850 --> 04:06.250 false candlestick like this.