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About Trading Concepts

Since 1994, Trading Concepts has provided investment education and personal mentoring, market analysis, online trading tools and portfolio management techniques to thousands of people from all over the world. Every day, our proven high-reward trading strategies help traders successfully navigate the markets and chart paths to financial security. In fact, we not only stand behind our pledge to provide the highest quality investment education and trading resources possible, We Guarantee lt.

Trading Concepts provides practical, step-by-step, easy-to use, high-profit, low-risk, low stress trading strategies. Avoiding overly technical or theoretical complicated material, Trading Concepts represents a practical, balanced approach to trading profitably in today’s markets. Since our inception in 1994, we have enriched the lives of an ever-expanding number of students in over 52 countries worldwide. Trading Concepts quickly established a reputation as one of the industries finest educational companies due to the powerful trading strategies that we’ve developed. Combining powerful futures, stock option trading strategies with sound trade and money management techniques, Trading Concepts has been able to help Individual at-home retail traders gain the power knowledge base that had previously only been available to professional institutional traders. Today, Trading Concepts teaches new and experienced (and everyone in between) traders worldwide how to succeed in today’s markets. We demonstrate step-by-step trading strategies in clear, concise terms, mixed with analogies and examples throughout all of our educational programs. You will therefore gain the correct mindset and money management techniques for trading whether you’re a beginner, intermediate or more experienced trader.

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Profiting From Price Action! A Step By Step Guide to Accurately

Trading the Markets with Precision Using PRICE ACTION Trade Set-ups

© Copyright by Trading Concepts, Inc.

All Rights Reserved

This training program, or parts thereof, may not be reproduced in any form without the prior written permission of Trading Concepts, Inc.

No claim is made by the Trading Concepts, Inc. that the trading strategies shown here will result in profits and will not result in losses. Trading may not be suitable for all recipients of this eBook. All comments, trading strategies, techniques, concepts and methods shown within this program should not be construed as an offer to buy or sell Stocks, ETFs, Foreign Currencies, Futures, and/or Options – they are opinions based on market observation and years of experience. Therefore, the thoughts expressed are not guaranteed to produce profits in any way. All Opinions are subject to change without notice. Each trader/investor is responsible for his/her own actions, if any. Your request for the Trading Concepts Profiting From Price Action! eBook constitutes your agreement to this disclaimer and exempts Trading Concepts, Inc. from any liability or litigation.

PRICE ACTION… Reality & Truth!



Table of Contents

PRICE ACTION… Reality & Truth! ............................................................... 5

Tech Talk (Technical Indicators) ............................................................... 9

Crowd Psychology ............................................................................... 12

The Economy .................................................................................... 13

Trading Is All About PRICE ACTION .......................................................... 14

Price Action Analysis (PAA) ................................................................... 15

How Price Action Analysis (PAA) Works .................................................... 16

Price Bar / Candlestick Analysis .............................................................. 17

Nine (9) Types of Vertical (Price) Bars / Candlesticks ................................... 18

Bullish Vertical Bar (BUVB) / Bullish Candlestick ......................................... 19

Bearish Vertical Bar (BEVB) / Bearish Candlestick ........................................ 20

Neutral Vertical Bar (NVB) / Doji or Spinning Top ........................................ 21

Outside Vertical Bar (OVB) / Engulfing Pattern ........................................... 23

Inside Vertical Bar (IVB) / Harami Pattern ................................................. 28

Expanded Range Vertical Bar (ERVB) / Candlestick ...................................... 31

Weak Range Vertical Bar (WRVB) / Candlestick ........................................... 34

Weak Inside Vertical Bar (WIVB) / Harami .................................................. 37

Reversal Vertical Bar (RVB) / Candlestick .................................................. 40

Vertical Bars / Candlestick Patterns ......................................................... 44

9 Price Bars / Candlesticks YOU Need To Know ........................................... 45



PRICE ACTION… Reality & Truth!

“You need to follow Price Action because everything known is reflected in Price. Markets are driven by human greed, fear, and panic, and all this is reflected in a

chart – Pure Price Action!” - Todd Mitchell

As you may or may not already know about me, I am a huge believer and strong advocate of Price Action – everything you use to make your trading decisions should be secondary to Price. You soon will discover that Price Action alone needs to be the cornerstone and foundation from which a successful and long lasting trading methodology is created. What I’m going to do here is prove to you time and time again that the closest thing to a ‘holy grail’ tool for trading the markets is pure Price Action – besides, of course, what’s going on in your head. I believe that once you go through this program, you will wonder how you ever got by without using Price Action as your foundational trading tool. But first, before I continue, let me give you… Key Phrases and Truths that will help solidify how important PRICE ACTION is to your overall success as a trader. Please read and learn them as if your financial future depended on it!

Price Action must always come first.

Price is never wrong – the market (Price) is right 100% of the time.

Price is the only reality and truth in the market.

The only indicator available to us that doesn’t lag is PRICE.

All technical indicators are derived from Price (i.e. open, high, low, and close) – so why not go straight to the source – PRICE.

All successful traders know how to read and how to interpret Price.

Pure Price Action of any market knows more than any Wall Street analyst or economist.

Good traders don’t have to know about what’s going on inside fundamentally of a stock, ETF, futures contract, commodity, forex currency pair – or any other market for that matter. A chart is a chart is a chart – period.

Price is everything, and areas where Price has turned in the past are likely to be areas where it will turn again.

Price is reality and intelligence is the appearance: We, as traders, are trading mob psychology. We’re not trading corn, soybeans, bond futures, stocks, options, or the forex market; we’re trading numbers reflected on a Price chart, and that’s all we’re doing.



“You don’t get any profit from fundamental analysis. You get profit from buying and selling. So why stick with the appearance when you can go right to the reality of

PRICE.” - Legendary trader Richard Dennis

Be In Sync With The Market Alright, after reading through everything mentioned above, it’s pretty obvious I’m a huge proponent of Price Action; I can’t deny that. One thing you just can’t argue with is that the market (Price) is right 100% of the time, right? I mean, think of it, it’s our job as traders to be in sync with the market, and when we’re not, we wind up losing money. It’s as simple as that. You must understand completely what I’m saying here; once you do, I can assure you that not only will you become a much better trader, but also you will see your trading completely turn around; that’s 100% of this program’s focus. You see, too many traders get mad at the market when they’re wrong – like the market is human or something. Let me be the first to tell you, if you haven’t been told this already, the market does not care about you one bit; it does what it does, and it’s our job as traders to listen, watch, observe it’s natural ‘ebb’ and ‘flow,’ and trade it accordingly, right? So, by now, I hope the concept of using pure Price Action for your decision-making is clear. I urge you to stop watching TV and to stop looking at the financial news. Instead, start keeping track of the open, high, low, and close – because they are the key data you need to make (most) all of your trading decisions. Take a look at the charts below; do you even know what these markets are by simply looking at them? I highly doubt it. You see, I’ve intentionally taken off the symbols and prices to prove a point; the point is, a chart is a chart is a chart – we’re doing nothing more than trading ‘mob psychology.’ The markets you decide to trade are irrelevant. Markets can only do one of three things at any one time – move UP, DOWN, or SIDEWAYS, right? Do you really need a bunch of indicators to tell you what they’re doing? The answer is NO. Take a look at the charts below, and you’ll see exactly what I mean:



UP, DOWN, or SIDEWAYS

A Chart Is A Chart



A Chart Is A Chart

A Chart Is A Chart Is A Chart



Tech Talk (Technical Indicators) As you can clearly see from the above charts, price action alone should be at the core of your overall trading plan, because everything you use (indicators, moving averages, trendlines, etc.) is based on price. In fact, the majority of charts in this program showing you the trade set-ups will be very similar to the charts above, one of the only differences will be the annotations on the charts showing the actual trade set-ups. Further along in the program I will duplicate those same examples by showing you which financial instrument the charts depicted. Alright, let’s talk about Technical Indicators and what I personally think about them. Before I go into anything specific, let me first start off by saying this: “The only indicator out there that doesn’t lag is Price, and while so many traders embark on this never-ending search for the ‘Holy Grail’ of trading tools, it just does not exist.” Now, I would like for you to read and re-read this statement until it completely sinks in before moving on, it is that important! A picture, a chart in this case, is worth a million words:

Do you really need Technical Indicators to see what’s going on in this chart?



What I Call A “Spaghetti” Chart… Paralysis of Analysis! You wouldn’t believe how many traders have come to me over the years and their charts look like the one directly above – what I like to call a ‘spaghetti chart’ (i.e. tons of indicators). They’re all over the place, and not surprisingly, so are their trading results. What they think will give them more clarity in their trading, actually multiplies their confusion. If the charts you are using right now even remotely resembles this, I highly recommend getting rid of this junk. Clear the slate. Clear your head and start over. I have yet to meet a trader that was consistently profitable for a significant amount of time by trading a barrel full on indicators thrown on a chart. Indicators by themselves are merely tools… they will not make you a good trader. There’s a lot more to successful trading than merely using technical indicators. Believe it or not the simplest trading methods work the best and are the most robust – and that’s what I’m going to show you here in this program. Too many traders, especially beginners, feel that by using more indicators will help make them more successful. Or stated another way, the more complex the trading strategy, the better they will do. That is simply NOT true. In fact I would say it’s exactly the opposite. I will prove to you throughout this entire program that SIMPLE IS BETTER.



Don’t get me wrong, there is nothing wrong with using technical indicators as long as you understand and accept that Price Action should come first. Therefore, the perfect blend is to be able to synthesize the natural ‘ebb and flow’ of the market (i.e. Price Action) with the use of a few carefully selected technical indicators, while knowing in which market environment to use them are absolutely crucial. Alright, that’s the end to my rant and rave on using technical indicators… take what you will from it and let’s move on.



Crowd Psychology Let’s talk briefly on Crowd Psychology and how that fits in here. Crowd psychology is what drives markets, and that’s all it really is. It’s herd mentality (crowd psychology) that drives price change, not fundamentals. It’s people’s belief of what’s going to happen in the future. And fortunately all these movements (up, down and sideways) are all reflected on a price chart. What you’re going to soon learn in this program will help give you kind of a ‘cheat sheet’ of what crowd psychological characteristics you would expect at each stage in the market sequence. Does it always work? Of course not, but it will give you a better feel for where we are in the natural ‘ebb and flow’ of the markets and how to go about trading more successfully by stacking the probabilities in your favor, which is what trading is all about anyways, right?



The Economy Let’s talk about the Economy and how you need to rationalize and think about it when it comes to your trading. Whenever you try to justify or correlate the economy with the market, it’s never a good thing, because it never makes any sense. You oftentimes see articles in the Wall Street Journal or Investor’s Business Daily saying, “Can this rally really be trusted?” You see, that makes absolutely no sense to me whatsoever. A rally is a rally – either the market is going up, or it is going down (or sideways of course)… it’s as simple as that. Just because it’s happening within a crappy overall economy doesn’t mean it’s not happening. Therefore, you really can’t successfully trade the markets by using this type of mentality. And of course the same statements are true in a big down trending market (i.e. the markets getting killed in an overall good economy). Remember, Price is never wrong – the market (Price) is right 100% of the time. Price is the only reality and truth in the market.



Trading Is All About PRICE ACTION Alright, I think you understand by now what my thoughts and feelings are about Price Action – and how very important it is to a successful long-term trading approach – so let’s move on. So, at the end of the day, no matter what financial market you ultimately decide to trade, trading is all about PRICE ACTION. It doesn’t matter if you’re trading wheat, oil, gold, e-mini futures, stocks, ETFs, options, or the forex market… it’s all about Price Action. You don’t have to look at volume, indicators, supply and demand, or fundamentals – the PRICE is what tells us what the fundamentals are. Remember that PRICE IS KING. Many successful traders believe price is the only thing that truly matters. News, complicated technical analysis, and depth of market screens (and much more) only serve to distract us from the only thing that truly matters to the markets: Price Action. Remember, a chart is a chart is a chart!



Price Action Analysis (PAA) Price Action Analysis is an important concept in trading, whether you’re a Day Trader, Swing Trader, or Position Trader. PAA is an in-depth Price Bar / Candlestick study (knowledge) that will help give you an “EDGE” over other Traders because most traders do not understand or take the time to learn what these trading principles mean. Price Action Analysis is what we like to call “Plain Vanilla Trading” - you do NOT need to use any indicators/oscillators when determining where the market is most likely going to go next or at what levels the market is most likely going to test. The three primary Time Frames that we suggest using this type of Price Bar / Candlestick Analysis on are the…

Weekly,

Daily, and

60 and/or 30 minute charts.

Smaller time frames than the 30 minute chart may not be worth the effort in analyzing because of the small magnitude of the move(s) from these charts. The Weekly and Daily charts are great for Swing and Position Trading.

What is Price Action Analysis (PAA)?

Price Action Analysis is an important concept in trading, whether you’re a Day Trader, Swing Trader, or Position Trader. PAA is an in-depth Price-Bar or Candlestick (trader’s choice) knowledge that will help give you an “EDGE.”

An “EDGE” over WHO? An “EDGE” over Other Traders - since most other traders do not take the time to learn what these trading principles mean, they don’t understand the impact PAA has on market price movement.

PAA is what we like to call “Plain Vanilla Trading” - you do NOT need to use any indicators/oscillators when determining where the market is most likely going to go next or at what levels the market is most likely going to test.

So, while many other traders wait for another indicator confirmation, you will be able to see the REALITY of what is going on, and more importantly, what is likely to happen NEXT!



If I don’t NEED any indicators or oscillators to show me where to trade, what do I watch? You will often hear experienced traders agree on one thing: “That a market is a market!” The Powerful Price Action Patterns taught in this series are based on the fact that markets are markets, and that LOW RISK, HIGH REWARD potential is available everyday simply by deciphering strength or weakness through Price Action Analysis. Since accurate Price Action Analysis clarifies market REALITY you will find that with a little practice you will want to take down some of the mind cluttering overlays often found on some struggling traders charts.

How Price Action Analysis (PAA) Works

To do what this course teaches do I have to watch EVERY bar or candle for an ENTIRE SESSION?

No - We teach you how to work smart because we only become concerned with Price Action Analysis IF the market has met specific criteria (i.e. if it occurs in a defined TREND at Key Support or Resistance - fully explained in the modules that follow). As trends change over the course of a session, use of Price Action Analysis reveals and confirms Support and Resistance which can open up many new trade opportunities lots of other traders simply don’t ever see. Major Price Action Analysis Categories

1. Single Price Bar or (1) Candlestick price patterns

Price Bars or Candlesticks with a RANGE that is notably SMALLER than average.

Price Bars of Candlesticks with a RANGE that is notable LARGER than average.

2. Double Price Bar or (2) Candlesticks price patterns

Price Bars or Candlesticks with a RANGE that is completely INSIDE the previous bar or candlestick’s range.

Price Bars or Candlesticks with a RANGE that is completely OUTSIDE the previous bar or candlestick’s range.



Price Bar / Candlestick Analysis Price Bar / Candlestick Analysis means to interpret what the OPEN, HIGH, LOW, and CLOSE did on a particular Price Bar / Candlestick and compare that criteria to the previous Price Bar / Candlestick in order to make intelligent conclusions about the market.

The Price Bar / Candlestick’s CLOSE helps confirm price action.

The Price Bar / Candlestick’s RANGE (HIGH minus LOW) confirms momentum. NOTE: Chart Illustrations and Diagrams are shown in both Price Bars and Candlesticks so as to appeal to different trader’s personal preference of charts. Price Bar / Candlestick Analysis also provides the Trader precise insight as to where the market is most likely going to trade next or at least what areas the market will most likely test. It will help you tremendously in zeroing in on what the market has done recently and what it’s most likely going to do next – with a HIGH PROBABILITY.

1) First… is the market TRENDING or trading SIDEWAYS?

2) Second… look at the current Price Bar / Candlestick,

3) Third… analyze the previous Price Bar / Candlestick.



Nine (9) Types of Vertical (Price) Bars / Candlesticks Each type of Vertical (Price) Bar / Candlestick taught here says something about the market and, when you know the meaning behind each one of them, you will be able to determine what the market is most likely going to do on the following Price Bar / Candlestick (the following week, day, or next few hours). By learning these 9 Types of Price Bars / Candlesticks, you will have a better understanding of what the market is trying to tell you and where it’s headed to next… thereby, ultimately, helping you become a more successful trader. The 9 Price Bars / Candlesticks that YOU need to know are:

1) Bullish Vertical Bar (BUVB) / Bullish Candlestick

2) Bearish Vertical Bar (BEVB) / Bearish Candlestick

3) Neutral Vertical Bar (NVB) / Doji or Spinning Top

4) Outside Vertical Bar (OVB) / Engulfing Pattern

5) Inside Vertical Bar (IVB) / Harami Pattern

6) Expanded Range Vertical Bar (ERVB) / Candlestick

7) Weak Range Vertical Bar (WRVB) / Candlestick

8) Weak Inside Vertical Bar (WIVB) / Harami

9) Reversal Vertical Bar (RVB) / Candlestick These 9 Price Bars YOU Need to Know are very reliable and predictable, offering high probability and low risk trading opportunities, when trading at logical SUPPORT in a defined UPTREND and/or at logical RESISTANCE in a defined DOWNTREND! In addition to intra-day (i.e. 3 Minute Charts), consider using the Weekly, Daily and 60 Minute (and/or even 30 Minute Charts) to conduct Price Action studies.



Bullish Vertical Bar (BUVB) / Bullish Candlestick The Bullish Vertical Bar (BUVB) / Bullish Candlestick is when the CLOSE closes ABOVE the OPEN and in the TOP QUARTER of the Price Bar / Candlestick’s RANGE.

The BUVB / Bullish Candlestick will make a HIGHER HIGH and a HIGHER LOW than the Previous Bar / Candlestick, while CLOSING in the TOP QUARTER of the Price Bar’s / Candlestick’s RANGE. This price action suggests the BULLS won and the likelihood of the market continuing up on the following price bar / candlestick is probable. The market should at least test the BUVB's / Bullish Candlestick’s HIGH on the next Price Bar / Candlestick, and, if, on the next Price Bar / Candlestick, the market opens lower and then moves up to TEST the HIGH of the BUVB / Bullish Candlestick and FAILS (or is unable to penetrate the HIGH by any substantial amount), then there is a good chance the market may reverse. If you choose to Swing Trade, the BUVB / Bullish Candlestick can also be very helpful in your analysis of the market. The BUVB / Bullish Candlestick:

Confirms the market is remaining strong:

IF you are LONG and…

the current Vertical Bar / Candlestick is Bullish and/or

the next Vertical Bar / Candlestick is also Bullish,

THEN there is no reason to exit the trade.

o Continue this process until the market says something different.

Provides warning signs the market may be changing directions:

If you are LONG and a Bearish Vertical Bar (BEVB) / Bearish Candlestick (discussed next) appears, you would then tighten up your stop to below the LOW of the highest BUVB / Bullish Candlestick.

Once you have six or more consecutive BUVBs / Bullish Candlesticks, trail your stop below the LOW of the highest BUVB / Bullish Candlestick, because a market can only go so far before reversing or before it starts to retrace.



Bearish Vertical Bar (BEVB) / Bearish Candlestick The Bearish Vertical Bar (BEVB) / Bearish Candlestick is when the CLOSE closes BELOW the OPEN and in the BOTTOM QUARTER of the Price Bar / Candlestick’s RANGE.

The BEVB / Bearish Candlestick will make a LOWER HIGH and a LOWER LOW than the Previous Bar / Candlestick, while CLOSING in the BOTTOM QUARTER of the Price Bar's / Candlestick’s RANGE. This price action suggests the BEARS won and the likelihood of the market continuing down on the following price bar / candlestick is probable. The market should at least test the BEVB's / Bearish Candlestick’s LOW on the next Price Bar / Candlestick, and, if, on the next Price Bar / Candlestick, the market opens higher and then moves down to TEST the LOW of the BEVB / Bearish Candlestick and FAILS (or is unable to penetrate the LOW by any substantial amount), then there is a good chance the market may reverse. If you choose to Swing Trade, the BEVB / Bearish Candlestick can also be very helpful in your analysis of the market. The BEVB / Bearish Candlestick:

Confirms the market is remaining weak:

IF you are SHORT and…

the current Vertical Bar / Candlestick is Bearish and/or

the next Vertical Bar / Candlestick is also Bearish,

THEN there is no reason to exit the trade.

o Continue this process until the market says something different.

Provides warning signs the market may be changing directions:

If you are SHORT and a Bullish Vertical Bar (BUVB) / Bullish Candlestick (discussed previously) appears, you would then tighten up your stop to above the HIGH of the lowest BEVB / Bearish Candlestick.

Once you have six or more consecutive BEVBs / Bearish Candlesticks, trail your stop above the HIGH of the lowest BEVB / Bearish Candlestick, because a market can only go so far before reversing or before it starts to retrace.



Neutral Vertical Bar (NVB) / Doji or Spinning Top The Neutral Vertical Bar (NVB) / Doji or Spinning Top is when the CLOSE of a Price Bar / Candlestick is EQUAL or within a few price increments of the OPEN of the same Price Bar / Candlestick AND the OPEN and CLOSE are near the MIDRANGE (50%) of the Price Bar / Candlestick. When a NVB / Doji or Spinning Top becomes an Inside Vertical Bar / Harami (discussed shortly) coupled with being a Weak-Range Vertical Bar / Candlestick (also discussed shortly), it makes the NVB / Doji or Spinning Top most neutral. This type of Price Action denotes uncertainty in the marketplace and may indicate a reversal and/or are found near a reversal in the market. NVBs / Dojis or Spinning Tops may also indicate that a Trending Market may be stalling just before resuming in the direction of the original TREND. If you’re a Day Trader, the NVB / Doji or Spinning Top can also be very helpful in your analysis of the market. Identifying a NVB / Doji or Spinning Top on the Daily Chart will help a Day Trader recognize that he/she should be both cautious and more alert as to what may happen with a high probability on the very next Day. For example…

Volatility usually increases after the NVB / Doji or Spinning Top. Knowing this will alert a Day Trader to be more careful if he/she is attempting to BUY near the LOW or SELL near the HIGH of the NVB / Doji or Spinning Top. Many Day Traders look to trade off of the previous Day’s HIGH and LOW. However, a Day Trader should be on the lookout for a large potential move following the penetration of the HIGH or LOW of the NVB / Doji or Spinning Top.

The NVB / Doji or Spinning Top does not give a strong bias to either side of the market (like the BUVB / Bullish Candlestick or BEVB / Bearish Candlestick).

The NVB / Doji or Spinning Top may also indicate that the market is attempting to enter into a Trading Range (Sideways Market). The more NVBs / Dojis or Spinning Tops that are near one another, the greater the probability that the market has already begun a Trading Range on the Smaller Time Frame Chart.



If you choose to Swing Trade, the NVB / Doji or Spinning Top can also be very helpful in your analysis of the market because it may indicate one of two possible market scenarios:

A potential Trend Reversal or

A potential start of a Trading Range. For example,

If you are LONG and the market is making consecutively higher BUVBs / Bullish Candlesticks confirming Bullish Price Action and a NVB / Doji or Spinning Top develops in order to protect profits, you may want to Trail your STOP UP to just below the LOW of the NVB / Doji or Spinning Top or just below the LOW of the Vertical Bar / Candlestick preceding the NVB / Doji or Spinning Top. This will help enable you to protect any profits that you may have.

The NVB / Doji or Spinning Top will help a Trader determine when the market may be trying to change directions or trying to enter into a trading range. Swing Traders should consider TIGHTENING up their STOPS when a few NVBs / Dojis or Spinning Tops form on the Larger Time Frame Charts.

NVBs / Dojis & Spinning Tops at BOTTOMS, TOPS, & CONTINUATIONs



Outside Vertical Bar (OVB) / Engulfing Pattern The Outside Vertical Bar (OVB) / Engulfing Pattern is when the HIGH is Higher than the Previous Bar’s / Candlestick's HIGH and the LOW is Lower than the Previous Bar’s / Candlestick's LOW. The OVB / Engulfing Pattern usually occurs after an IVB / Harami Pattern, WRVB / Weak Range Candlestick, or WIVB / Weak Harami (discussed very shortly) due to the volatility of the market. The OVB / Engulfing Pattern typically has the largest RANGE (RANGE = HIGH minus LOW) within the last few bars / candles. The OVB’s / Engulfing Pattern’s price action suggests one of two things:

1) some news event affected the market or

2) the market is beginning to TREND in the direction of the CLOSE of the OVB / Engulfing Pattern, unless the market is trading inside of a Trading Range.

It’s especially important to note where the OVB / Engulfing Pattern CLOSED and what extreme of the Previous Price Bar / Candlestick was exceeded first (the HIGH or LOW). It is very unlikely for a market to take out the opposite extreme of a Price Bar / Candlestick (HIGH or LOW) on the following Price Bar / Candlestick when that market CLOSES in the TOP or BOTTOM QUARTER of the OVB's / Engulfing Pattern’s RANGE. Since OVBs / Engulfing Patterns do not happen too frequently, you must be aware of their tendencies in order to take advantage of their predictability.



BULLISH Outside Vertical Bar (BUOVB) / BULLISH Engulfing Pattern If the OVB / Engulfing Pattern CLOSE is in the TOP QUARTER of the RANGE while the LOW of the Previous Price Bar / Candlestick was penetrated first, this indicates the market should take out the HIGH of the OVB / Engulfing Pattern or at least try to test it on the following Price Bar / Candlestick. Therefore, the LOW of the OVB / Engulfing Pattern should now act as SUPPORT for the next few Price Bars / Candlesticks.

In order for a BUOVB / Bullish Engulfing Pattern to occur - the LOW of the Previous Price Bar / Candlestick MUST BE EXCEEDED FIRST before reversing to take out the HIGH of the Previous Price Bar / Candlestick. You can determine with incredible accuracy how far the second penetration will travel by analyzing the first penetration.



BEARISH Outside Vertical Bar (BEOVB) / BEARISH Engulfing Pattern If the OVB / Engulfing Pattern CLOSE is in the BOTTOM QUARTER of the RANGE while the HIGH of the Previous Price Bar / Candlestick was penetrated first, this indicates the market should take out the LOW of the OVB / Engulfing Pattern or at least try to test it on the following Price Bar / Candlestick. Therefore, the HIGH of the OVB / Engulfing Pattern should now act as RESISTANCE for the next few Price Bars / Candlesticks.

In order for a BEOVB / Bearish Engulfing Pattern to occur - the HIGH of the Previous Price Bar / Candlestick MUST BE EXCEEDED FIRST before reversing to take out the LOW of the Previous Price Bar / Candlestick. You can determine with incredible accuracy how far the second penetration will travel by analyzing the first penetration.



Outside Vertical Bar (OVB) / Engulfing Pattern If you’re a Day Trader, the OVB / Engulfing Pattern can also be very helpful in your analysis of the market: Identifying an OVB / Engulfing Pattern on the Daily Chart will definitely help a Day Trader enhance their predictability in the market they are trading the next Day. For example…

IF the Prior Day’s HIGH was penetrated first before the market reverses and penetrates the Prior Day’s LOW, you can simply subtract the amount of the first penetration from the Prior Day’s LOW to arrive at the minimum price target. This price level is where the market will most likely travel to if the market moves down and penetrates through the Prior Day’s LOW.

IF the Prior Day’s LOW was penetrated first before the market reverses and penetrates the Prior Day’s HIGH, you can simply add the amount of the first penetration to the Prior Day’s HIGH to arrive at the minimum price target. This price level is where the market will most likely travel to if the market moves up and penetrates through the Prior Day’s HIGH.

Knowing that the LOW of a Bullish OVB / Engulfing Pattern becomes SUPPORT for a few days, a Day Trader can use the HIGH and LOW of the BUOVB / Bullish Engulfing Pattern to calculate Bullish Fibonacci Retracements.

Knowing that the HIGH of a Bearish OVB / Engulfing Pattern becomes RESISTANCE for a few days, a Day Trader can use the LOW and HIGH of the BEOVB / Bearish Engulfing Pattern to calculate Bearish Fibonacci Retracements.



If you choose to Swing Trade, since OVBs / Engulfing Patterns do not happen too frequently, you can use the OVB / Engulfing Pattern to your benefit: OVBs / Engulfing Patterns give warning signs of two possible market scenarios:

1) IF you are in a TRADE and an OVB / Engulfing Pattern (BULLISH or BEARISH) develops, THEN…

IF you are LONG… tighten up your stops to slightly BELOW the LOW of the OVB / Engulfing Pattern in order to protect any profits; the LOW of a BUOVB / Bullish Engulfing Pattern should act as SUPPORT for a few Price Bars / Candlesticks, and the HIGH of a BEOVB / Bearish Engulfing Pattern may act as RESISTANCE. You can always look to re-enter a trade at a different price level.

IF you are SHORT… tighten up your stops to slightly ABOVE the HIGH of the OVB / Engulfing Pattern, in order to protect any profits; the HIGH of a BEOVB / Bearish Engulfing Pattern should act as RESISTANCE for a few Price Bars / Candlesticks, and the LOW of a BUOVB / Bullish Engulfing Pattern may act as SUPPORT. You can always look to re-enter a trade at a different price level.

2) IF you are in a TRADE and an OVB / Engulfing Pattern (BULLISH or BEARISH)

develops, THEN…

IF you are LONG… and notice the HIGH of the Previous Price Bar / Candlestick is penetrated, you should therefore probably move your stop up to slightly BELOW the LOW of the Previous Price Bar / Candlestick – but not until the HIGH is penetrated first. A BEOVB / Bearish Engulfing Pattern would have to occur on the Current Price Bar / Candlestick in order for you to be stopped out of a trade. Continue repeating this process until you are stopped out of your trade. The OVB / Engulfing Pattern is very helpful in gauging what a market is most likely going to do next.

IF you are SHORT… and notice the LOW of the Previous Price Bar / Candlestick is penetrated, you should therefore probably move your stop down to slightly ABOVE the HIGH of the Previous Price Bar / Candlestick – but not until the LOW is penetrated first. A BUOVB / Bullish Engulfing Pattern would have to occur on the Current Price Bar / Candlestick in order for you to be stopped out of a trade. Continue repeating this process until you are stopped out of your trade. The OVB / Engulfing Pattern is very helpful in gauging what a market is most likely going to do next.



Inside Vertical Bar (IVB) / Harami Pattern The Inside Vertical Bar (IVB) / Harami Pattern is the opposite of the OVB / Engulfing Pattern. The HIGH and LOW both must be INSIDE the Previous Bar’s / Candlestick’s RANGE; therefore, the HIGH must be Lower than the Previous Bar’s / Candlestick’s HIGH and the LOW must be Higher than the Previous Bar’s / Candlestick’s LOW. The IVB / Harami Pattern price action is similar to the NVB / Doji or Spinning Top Pattern, which warns of three potential patterns in the market:

1) when a market is near a major HIGH or a major LOW, this may suggest a Reversal,

2) a potential Continuation or Resumption of Trend if the market is trading at SUPPORT in an UPTREND or at RESISTANCE in a DOWNTREND, and

3) the IVB / Harami Pattern occurs roughly 10%-15% of the time and suggests indecision in the marketplace, whether a market is Trending or Non-Trending. Volatility usually increases within a few Price Bars / Candlesticks following an IVB / Harami Pattern. Chances favor that an OVB / Engulfing Pattern is more likely to occur after an IVB / Harami Pattern because of the typically smaller range of the IVB / Harami Pattern.



Having observed many IVBs / Harami Patterns on most markets, when a market penetrates either up through the HIGH or down through the LOW on the Price Bar / Candlestick following an IVB / Harami Pattern, this represents a lot of Buying Pressure / Selling Pressure. If a market fails or penetrates the HIGH or LOW marginally AND then reverses and penetrates the opposite extreme LOW or HIGH on the same Price Bar / Candlestick (an OVB / Engulfing Pattern would occur), the second penetration will typically be a more powerful breakout. If you’re a Day Trader, the IVB can also be very helpful in your analysis of the market. Identifying an IVB / Harami Pattern on the Daily Chart will allow a Day Trader to be on guard for a potential breakout the following day – either up through the HIGH of the IVB / Harami Pattern or down through the LOW of the IVB / Harami Pattern and/or possibly both the HIGH and the LOW, which would form an OVB / Engulfing Pattern. For example…

Attempting to BUY a market near the LOW of the IVB / Harami Pattern the following day would be foolish because of the potential breakout to the downside. Instead, look for a breakout up through the HIGH of the IVB / Harami Pattern.

Attempting to SELL a market near the HIGH of the IVB / Harami Pattern the following day also would be foolish because of the potential breakout to the upside. Instead, look for a breakout down through the LOW of the IVB / Harami Pattern.

If you choose to Swing Trade, once you notice an IVB / Harami Pattern while in a trade, tighten up stops to protect profits and/or reduce risk. For example…

IF LONG and an IVB / Harami Pattern forms, move the stop UP to BELOW the LOW of the IVB / Harami Pattern. A more conservative approach would be to move the stop UP to BELOW the LOW of the Price Bar / Candlestick immediately prior to the IVB / Harami Pattern to give the market a little more room to move.

IF SHORT and an IVB / Harami Pattern forms, move the stop DOWN to ABOVE the HIGH of the IVB / Harami Pattern. A more conservative approach would be to move the stop DOWN to ABOVE the HIGH of the Price Bar / Candlestick immediately prior to the IVB / Harami Pattern to give the market a little more room to move.

The IVB / Harami Pattern represents indecision in the market; therefore, it’s better safe than sorry to begin tightening up stops once this particular Price Bar / Candlestick Pattern is observed.



BuOVBs / Bullish Engulfing Patterns and IVBs / Harami Patterns at SUPPORT

BeOVBs / Bearish Engulfing Patterns and IVBs / Harami Patterns at RESISTANCE



Expanded Range Vertical Bar (ERVB) / Candlestick The Expanded Range Vertical Bar (ERVB) / Candlestick is roughly 250% greater than the average range of the last ten or more Vertical Price Bars / Candlesticks.

The Expanded Range Vertical Bar (ERVB) / Candlestick is roughly 250% greater than the average range of the last ten or more Vertical Price Bars / Candlesticks. (Formula is ten period ATR, Average True Range, times 2.5 equals the minimum range to qualify as an ERVB / Expanded Range Candlestick) There will be times the ERVB / Expanded Range Candlestick will be…

an OVB / Engulfing Pattern,

a BULLISH Vertical Bar (BUVB) / BULLISH Candlestick,

a BEARISH Vertical Bar (BEVB) / BEARISH Candlestick, or

a Neutral Vertical Bar (NVB) / Doji or Spinning Top. The ERVB / Expanded Range Candlestick usually denotes that either a TREND is beginning or that a Trading Range is just starting; regardless, the following Price Bar / Candlestick or two usually will be dull with little volatility before really starting to move again. Some traders might believe a market is recovering after an extended move before resuming its original TREND, while others might believe that a market is just beginning to consolidate.



Since the ERVB / Expanded Range Candlestick is large in nature (in terms of RANGE), it’s completely normal for a market to trade within the RANGE of the ERVB / Expanded Range Candlestick for the next couple of Price Bars / Candlesticks. If you’re a Day Trader, you can take advantage of the ERVB / Expanded Range Candlestick. Identifying an ERVB / Expanded Range Candlestick on the Daily Chart will provide you with expectations of the next trading day.

If the ERVB / Expanded Range Candlestick is BULLISH, then expect the LOW of the ERVB / Expanded Range Candlestick to act as SUPPORT.

If the ERVB / Expanded Range Candlestick is BEARISH, then expect the HIGH of the ERVB / Expanded Range Candlestick to act as RESISTANCE.

Use the HIGH and LOW of the ERVB / Expanded Range Candlestick to calculate Fibonacci retracement levels to trade off of, since the RANGE (HIGH minus LOW) of the ERVB / Expanded Range Candlestick is so large in nature.

In the case of Swing Trading this will enable you to know what your boundaries are and what to expect the next trading day and/or even possibly the next couple of trading days. If you choose to Swing Trade, you should also use this knowledge in deciphering what a market is most likely going to do. For example…

IF LONG and a Bullish ERVB / Expanded Range Candlestick forms, this will indicate that there is nothing to worry about and that the market is doing what is expected, which is to move HIGHER. On the other hand, if a Bearish ERVB / Expanded Range Candlestick develops, this specifically will alert you either to GET OUT of the trade or to move your stop UP to slightly BELOW the LOW of the ERVB / Expanded Range Candlestick.

IF SHORT and a Bearish ERVB / Expanded Range Candlestick forms, this will indicate that there is nothing to worry about and that the market is doing what is expected, which is to move LOWER. On the other hand, if a Bullish ERVB / Expanded Range Candlestick develops, this specifically will alert you either to GET OUT of the trade or to move your stop DOWN to slightly ABOVE the HIGH of the ERVB / Expanded Range Candlestick.

The ERVB / Expanded Range Candlestick indicates that a market is either going to start TRENDING in the direction of the CLOSE or that a market is simply going to start moving SIDEWAYS. There is also the slight possibility that a news event caused the ERVB / Expanded Range Candlestick. Therefore, ERVBs / Expanded Range Candlesticks are good Price Bar / Candlestick Patterns to recognize for both Day Traders and Swing/Position Traders alike.



ERVB / Expanded Range Candlestick w/ LOW/HIGH defining SUPPORT / RESISTANCE



Weak Range Vertical Bar (WRVB) / Candlestick The Weak Range Vertical Bar (WRVB) / Candlestick is the smallest range (HIGH minus LOW) of the average range of the last ten or more Vertical Price Bars / Candlesticks. The Weak Range Vertical Bar (WRVB) / Candlestick typically will put a Trader in “breakout mode” because of the small size of the Price Bar’s / Candlestick’s RANGE. WRVBs / Weak Range Candlesticks typically will indicate one of two things:

potential indecision or a neutral reading in the market, or a

potential short-term change in trend The WRVB / Weak Range Candlestick has a very similar type of interpretation to the IVB / Harami Pattern and WIVB / Weak Harami (discussed next).

If a market is TRENDING, a WRVB / Weak Range Candlestick usually indicates the market will resume in the direction of the trend.

If a market is trading SIDEWAYS, a WRVB / Weak Range Candlestick usually indicates indecision in the market.

Either way, a market generally will make an explosive move in either direction, and an increase in volatility is likely to occur.



If you’re a Day Trader or a Swing Trader, you want to pay special attention to the WRVB / Weak Range Candlestick when it occurs because there is generally a large market move (of increased volatility) within the next few Price Bars / Candlesticks (if not the very next Price Bar / Candlestick). If you choose to Day Trade, you should be alert when WRVBs / Weak Range Candlesticks occur:

Day Traders should NOT be BUYING near the LOW of the WRVB / Weak Range Candlestick or SELLING near the HIGH of the WRVB / Weak Range Candlestick,

Day Traders should BUY the penetration of the HIGH of the WRVB / Weak Range Candlestick and/or SELL the penetration of the LOW of the WRVB / Weak Range Candlestick. A Breakout Trade is what you should be looking to do immediately following the WRVB / Weak Range Candlestick.

If you choose to Swing Trade, you should be alert when WRVBs / Weak Range Candlesticks occur:

Swing/Position Traders should tighten stops on the following Price Bar / Candlestick, since you can expect an increase in volatility to occur shortly after the WRVB / Weak Range Candlestick (if not the very next Price Bar / Candlestick).

WRVBs / Dojis & Spinning Tops at SUPPORT – Continuing TREND



WRVBs / Dojis & Spinning Tops at RESISTANCE – Continuing TREND



Weak Inside Vertical Bar (WIVB) / Harami The Weak Inside Vertical Bar (WIVB) / Weak Harami is the smallest range (HIGH minus LOW) of the average range of the last ten or more Vertical Price Bars / Candlesticks with the HIGH and the LOW both INSIDE the Previous Bar’s / Candlestick’s Range.

The Weak Inside Vertical Bar (WIVB) / Harami is a very powerful “breakout trade set-up” because of the small size of the Price Bar’s / Candlestick’s RANGE. WIVBs / Weak Haramis do not happen too frequently:

A Trader should pay special attention to the WIVB / Weak Harami because a market will generally make a large move through the HIGH and/or LOW (if not both) of the WIVB / Weak Harami on the following Price Bar / Candlestick (thus creating an OVB / Engulfing Pattern).

The more WIVBs / Weak Haramis a Trader gets in a row, the more powerful the “breakout trade set-up” becomes.

WIVBs / Weak Haramis are actually a stronger “breakout trade set-up” than the WRVB / Weak Range Candlestick because of the fact that WIVBs / Weak Haramis are INSIDE the RANGE of the previous Price Bar / Candlestick.



If you’re a Day Trader or a Swing Trader, you want to pay special attention to the WIVB / Weak Harami when it occurs because there is generally a large market move (of increased volatility) within the next few Price Bars / Candlesticks (if not the very next Price Bar / Candlestick). If you choose to Day Trade, you should be alert when WIVBs / Weak Haramis occur:

Day Traders should NOT be BUYING near the LOW of the WRVB / Weak Harami or SELLING near the HIGH of the WIVB / Weak Harami;

Day Traders should BUY the penetration of the HIGH of the WIVB / Weak Harami and/or SELL the penetration of the LOW of the WIVB / Weak Harami. A Breakout Trade is what you should be looking to do immediately following the WIVB / Weak Harami.

If you choose to Swing Trade, you should be alert when WIVBs / Weak Haramis occur:

Swing/Position Traders should tighten stops on the following Price Bar / Candlestick, since you can expect an increase in volatility to occur shortly after the WIVB / Weak Harami (if not the very next Price Bar / Candlestick).

WIVB / Weak Harami at SUPPORT



WIVB / Weak Harami at RESISTANCE



Reversal Vertical Bar (RVB) / Candlestick There are two types of Reversal Vertical Bars (RVB) / Reversal Candlesticks:

the Bearish Reversal Vertical Bar (BERVB) / Bearish Dark Cloud Cover and

the Bullish Reversal Vertical Bar (BURVB) / Bullish Piercing Line A Reversal Vertical Bar (RVB) / Reversal Candlestick should warn you that the market is trying to reverse – at least for the short-term. The Price Bar / Candlestick following the RVB / Reversal Candlestick should have at least some follow-through in the direction of the CLOSE of the RVB (BERVB / Bearish Dark Cloud Cover or BURVB / Bullish Piercing Line).



BEARISH Reversal Vertical Bar (BERVB) / Dark Cloud Cover The BERVB / Bearish Dark Cloud Cover is when a market makes higher HIGHs and higher LOWs than the previous Vertical Bar / Candlestick and CLOSES BELOW the OPEN of the same bar / candlestick in the LOWER QUARTER of the RANGE. The BERVB / Bearish Dark Cloud Cover should warn you that the market may be trying to reverse:

If a market is strong to the upside and a BERVB / Bearish Dark Cloud Cover occurs while the market is testing a Major HIGH followed by some follow-through to the downside, the market may be setting up for a potential double top. Thus, when a market is testing a Major HIGH combined with a RVB / Reversal Candlestick, we like to call this a Key Reversal Bar (KRB) / Key Reversal Candlestick. What’s even more significant is an OVB / Engulfing Pattern (either Bullish or Bearish) or IVB / Harami occurring at a re-test of Major HIGHs.



BULLISH Reversal Vertical Bar (BURVB) / Piercing Line The BURVB / Bullish Piercing Line is when a market makes lower HIGHs and lower LOWs than the previous Vertical Bar / Candlestick and CLOSES ABOVE the OPEN of the same bar / candlestick in the UPPER QUARTER of the RANGE. The BURVB / Bullish Piercing Line should warn you that the market may be trying to reverse:

If a market is weak (strong to the downside) and a BURVB / Bullish Piercing Line occurs while the market is testing a Major LOW followed by some follow-through to the upside, the market may be setting up for a potential double bottom. Thus, when a market is testing a Major LOW combined with a RVB / Reversal Candlestick, we like to call this a Key Reversal Bar (KRB) / Key Reversal Candlestick. What’s even more significant is an OVB / Engulfing Pattern (either Bullish or Bearish) or IVB / Harami occurring at a re-test of Major LOWs.



If you’re a Day Trader, pay special attention to RVB / Reversal Candlestick (BEARISH and BULLISH) set-ups coming into the next Trading Day – expect at least some follow-through the next morning, especially when a market is testing a Major HIGH or Major LOW (KRB / Key Reversal Candlestick).

A market could be setting up for a potential double top or double bottom.

If a market is not testing a Major HIGH or Major LOW, follow-through back to the previous CLOSE and HIGH or LOW may not be as predictable due to the potential strength or weakness of the market at that particular time.

If you choose to Swing Trade, you can also use this knowledge to your benefit. For example…

If you SELL SHORT and then you notice a BURVB / Bullish Piercing Line, immediately tighten up your stop.

If you BUY LONG and then you notice a BERVB / Bearish Dark Cloud Cover, immediately tighten up your stop.

The KRB / Key Reversal Candlestick should be a more significant alert, whereas RVBs / Reversal Candlesticks (BEARISH and BULLISH) are not as significant (but still should be considered when tightening up stops). RVBs / Reversal Candlesticks (BEARISH and BULLISH) and KRBs / Key Reversal Candlesticks will warn you of potential changes in a market’s trend – at least for the short-term. Those of you that are swing/position traders can use this very crucial price action information to help confirm or deny your current trade position.



Vertical Bars / Candlestick Patterns



Price Bars / Candlestick Patterns YOU Need To Know



About Todd Mitchell

I began reading about, studying and researching the mar-kets back in 1987, while I was still in college. Then, in 1988, I started to actively trade the markets with real money. My interest, which quickly led into fascination, in the futures and stock market began when I used to manually update my father’s charts on a daily basis. In 1990, when I graduated from college with a Business Finance degree, I decided to trade full-time because I had seen, firsthand, how much money could be made trading.

After a few successful trading years following college, I tweaked and perfected my trading strategies. I decided to use my knowledge and experience to launch Trading Concepts in 1994 to help fellow traders, just like yourself. Trading Concepts quickly established a reputation as one of the industries finest educational companies due to the powerful trading strategies that I developed. Combining powerful futures and stock trading strategies with sound trade and money management techniques, I have been able to help Individual at-home retail traders gain the power knowledge base that had previously only been available to professional institutional traders. Today, I teach new and experienced (and everyone in between) traders worldwide how to succeed in today’s markets. I demonstrate step-by-step trading strategies in clear, concise terms, mixed with analogies and examples throughout all my courses and personal mentoring program. You will therefore gain the correct mindset and money management techniques for trading whether you’re a beginner, intermediate or more experienced trader. I not only thank my dad to this day for introducing me to the markets, but for teaching me many Valuable trading lessons that I still use today.

Visit https://TradingConceptsInc.com/ to Learn More!



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