WEBVTT

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Do you remember when we have studied how to read supply and demand on a chart?

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I have submitted a question: "how can we know when the trend is changing and when it is confirmed?".

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Traders watch for price clues alerting them that the trend is changing. Reversal patterns are these clues.

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The term "reversal" may lead you to think of a strong trend ending and then reversing to a new trend.

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This hardly ever happens.

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That's why I don't like the name reversal patterns,

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because I think it is misleading.

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A trend reversal signal implies that the trend may change but not necessarily reversing.

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Steve Nison is considered an expert about candlesticks and in his book Japanese candlestick charting techniques

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he gives a very good example to explain how reversal patterns work. Compare a trend to a car traveling

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forward. The car's red brake lights go on and the car stops. The brake light was the reversal indicator

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showing that the prior trend, that is the car moving forward, was about to end.

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But now the car is stationary, will the driver then decide to put the car in reverse?

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Will he or she remain stopped?

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Will he or she decide to go forward again? Without more clues,

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we don't know.

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Most of the candlestick that we are going to analyze in this course will be reversal patterns.

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But we also have another category: the continuation patterns. A continuation pattern is one in which the

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market should continue to follow the same direction,

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so should confirm the power of the current trend.

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For instance, a continuation signal following a rally means that the trend remains up and we should

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expect that the buyers will continue to push the price up.

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With this introduction about reversal and continuation patterns, we can finally study the candlestick signals,

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starting from the single candlestick patterns.