How To Find High-Probability Bullish Candlestick Patterns To Trade
To be able to have a complete trading strategy or a fully functioning trading business…
It’s essential to have these three things identified:
- Trading methodology
- Trading setup
- Trade management
Let me ask you…
Where do bullish candlestick patterns come into these three?
Know the answer?
The bullish candlestick patterns come under trade management.
That’s right; bullish candlestick patterns are meant to be used to time your entries and exits to get into the trade.
On the other hand, if you spend too much time knowing your entries and exits but don’t know who you are as a trader…
Then you can expect to have inconsistent results no matter how bullish your candlestick patterns are.
What do I mean?
It means that bullish candlestick patterns should only be a small part of the equation and shouldn’t be traded in isolation.
So, let me help you out and break down how you can go about trading bullish candlestick patterns from top to bottom.
1. Trading methodology
Knowing what you want to get out of the markets is a crucial first step towards consistency.
So, if you’re the type of trader who wants to capture one leg of the move or prefers to have fixed targets…
Swing trading might be for you.
On the other hand, if you’re the type of trader who wants to capture long-term trends and prefers to trail your stop loss…
Then trend following might be for you.
I’m sure there are a lot more trading methods out there, so if you want to learn more, you can check this article out: 5 Types of Forex Trading Strategies That Work
Nonetheless, there are no “best” trading methods out there, but the best one for you.
So how to know the best one, you may ask?
Try out a lot of them, of course!
Only by knowing what you don’t want will you know what you truly want!
It will take time and effort, but that’s what trading is all about — a journey.
Next, what is your trading setup?
2. Trading setup
Whether you use indicators or zodiac signs to enter your trade, it usually only comes down to these two:
- Pullback setup
- Breakout setup
Let me explain…
Trading breakouts means that you’re looking for confirmation.
Breakout on USDJPY 8-hour timeframe:
However, the downside is that it can turn into a “false breakout.”
False breakout on USDJPY 8-hour timeframe:
And there’s less flexibility on how you want your risk to reward ratio to be.
Poor risk to reward ratio breakout setup on GBPAUD 8-hour timeframe:
On the other hand, buying on pullbacks means that you’re waiting for the price to come to you before you enter a trade.
It’s like waiting for fuel prices to go down first before you chug in a full tank on your car!
Pullback setup on AUDUSD 8-hour timeframe:
But then again, the downside is that the pullback that you entered may not move for a long time.
Long pullback setup on NZDUSD daily timeframe:
Worse, there’s also a chance that a pullback can even go against you almost immediately!
Failed pullback setup on AUDUSD 8-hour timeframe:
You should notice already that I don’t only show you the pros but also the cons.
It’s because, in truth, every concept out there has them!
There’s no such thing as a strategy or chart pattern that works all the time!
So how you weigh in those pros and cons to decide which one you’d use consistently is different from mine.
That’s why I’m giving you the privilege to decide which setup you should use.
3. Trade management
It’s is the part you’ve been waiting for, as this is where bullish candlestick patterns come in!
So, determining how to use bullish candlestick patterns as entries will depend on your trading setup.
Let me give you an example.
If you trade breakouts, then you’d want to make sure that the candlestick at the breakout is bullish relative to the previous ones.
Strong breakout on USDZAR daily timeframe:
You can say that the candlestick is a variation of the three soldiers’ candlestick patterns.
But the main highlight here is that the third breakout candle stands out than the rest!
This concept couldn’t be more critical if you’re trading pullbacks.
Because if you’re willing to enter trades at the lows, you want a bullish candlestick pattern present before you enter a trade.
Here’s an example.
Pullback setup on USDCNH daily timeframe:
Now for exits.
The key here is that how you exit your trade should depend on your chosen trading method.
So if you’re a swing trader, then consider taking your profits before the area of resistance.
Swing trading setup on USDCNH daily timeframe:
And as a trend follower, using a trailing stop loss would be much more relevant than taking fixed target profits.
Trend following setup on USDZAR daily timeframe:
I know it didn’t have any bullish candlestick patterns in it.
But it wouldn’t be fair if I taught you how to enter trades and not how to exit them, right?
Nonetheless, the bottom line is this:
Bullish candlestick patterns should never be traded in isolation because bullish candlestick patterns aren’t a complete strategy in itself.
You’re probably thinking right now:
“Okay, so if bullish candlestick patterns aren’t a strategy in itself, how about you show me a strategy!”
In the next section, I’ll finally share with you a couple of complete strategies that utilize the power of bullish candlestick patterns.
So keep reading, and let’s get right into it…