Learn
Trading concepts, explained on real charts
Candlestick patterns, price action, indicators, smart-money concepts, risk management and psychology. Each one is shown on a real chart found automatically, with what it is, why it works and the mistake everyone makes.
Smart money concepts
CommonHigher-timeframe trendThe direction of the 4-hour chart: is price making a sustained move up, down, or going nowhere?CommonMarket structureThe sequence of swing highs and lows. Higher highs + higher lows (HH/HL) = uptrend. Lower highs + lower lows (LH/LL) = downtrend.CommonBreak of Structure (BOS)A candle closes beyond the last swing in the direction of the trend: an uptrend makes a new higher high, a downtrend a new lower low.RareChange of Character (CHoCH)The first break of structure against the trend: in a downtrend, price closes above the last lower high.RareFair Value Gap (FVG)A three-candle pattern where the middle candle moves so fast that the wicks of candles 1 and 3 do not overlap, leaving a gap of untraded prices.RareOrder blockThe last opposite candle before a strong move that broke structure: the last red candle before a rally, the last green candle before a sell-off.EpicLiquidity poolsAreas where many stop losses and pending orders sit: equal highs, equal lows, the previous day high/low, the Asian range.EpicLiquidity sweepA wick that pokes beyond a liquidity level and closes back inside: the stops were taken, but price did not accept the new level.CommonPremium & discountSplit the current swing range in half. Above the 50% line is "premium" (expensive), below is "discount" (cheap).CommonKillzones & sessionsThe London open and the London–New York overlap are the hours with the most volume and the cleanest moves.CommonRisk & rewardRisk 1% or less per trade, place the stop where the idea is wrong (not where it hurts less) and aim for at least twice what you risk.EpicNews & volatilityHigh-impact releases (US jobs report, Fed decisions) move the market violently at a known, scheduled time.
Candlestick patterns
Candlestick patternsDoji candlestickA candle that opens and closes at almost the same price, with wicks on one or both sides: neither buyers nor sellers won the period.Candlestick patternsHammer candlestickA candle with a small body near the top and a long lower wick (at least twice the body), appearing after a decline.Candlestick patternsShooting star candlestickA candle with a small body near the low and a long upper wick, appearing after a rise.Candlestick patternsBullish engulfing patternA green candle whose body completely covers the previous red candle’s body, after a decline.Candlestick patternsBearish engulfing patternA red candle whose body completely covers the previous green candle’s body, after a rise.Candlestick patternsInside bar patternA candle whose high and low stay inside the range of the previous candle (the “mother bar”).Candlestick patternsMorning star patternThree candles after a decline: a big red candle, a small indecision candle, and a strong green candle that closes above the middle of the first.Candlestick patternsEvening star patternThree candles after a rise: a big green candle, a small indecision candle, and a strong red candle that closes below the middle of the first.Candlestick patternsMarubozu candleA large candle with little or no wick: it opens at one extreme and closes at the other.Candlestick patternsTweezer tops and bottomsTwo consecutive candles that make almost exactly the same high (tweezer top) or the same low (tweezer bottom).Candlestick patternsThree white soldiers and three black crowsThree consecutive strong candles in the same direction, each closing beyond the previous one with small wicks.Candlestick patternsPin bar strategyA candle with a long wick (“nose”) and a small body at the other end. It is the general name for hammers and shooting stars.
Price action and chart patterns
Price action and chart patternsSupport levelA price area below the market where buying interest has stopped declines before, so price bounced at least twice.Price action and chart patternsResistance levelA price area above the market where selling has stopped rallies before, so price turned down at least twice.Price action and chart patternsBreakout tradingPrice leaves a range or crosses a key level with a candle that closes clearly beyond it.Price action and chart patternsFalse breakout (fakeout)Price pokes beyond a range or level, triggers breakout traders and stops, then closes back inside and reverses.Price action and chart patternsBreak and retestAfter price breaks a level, it comes back to test it from the other side: old resistance acts as new support (or the opposite).Price action and chart patternsDouble top patternPrice makes two highs at roughly the same level and then breaks below the low between them (the neckline).Price action and chart patternsDouble bottom patternPrice makes two lows at roughly the same level and then breaks above the high between them.Price action and chart patternsFibonacci retracement levelsLevels drawn over the last impulse (38.2%, 50%, 61.8%) that show how deep a pullback is.Price action and chart patternsRound numbers (psychological levels)Prices ending in 00 or 50 (like 1.1000 or 1.0950) where many orders, stops and take profits cluster.Price action and chart patternsPrevious day high and lowThe highest and lowest prices of the previous trading day, two of the most watched levels on any intraday chart.Price action and chart patternsOpening range breakoutThe high and low of the first hour of a session (for example the London open). A break of that range often sets the direction of the day.Price action and chart patternsRange tradingPrice moves sideways between a clear ceiling and floor, touching both several times without breaking out.Price action and chart patternsTrendline tradingA line connecting at least three higher lows in an uptrend (or lower highs in a downtrend).Price action and chart patternsPullback tradingA temporary move against the trend before it continues: in an uptrend, a dip that does not break the last higher low.
Indicators
IndicatorsMoving average (EMA)The exponential moving average smooths price over a number of candles (here 20), giving more weight to recent ones.IndicatorsMoving average crossoverA fast moving average crossing a slow one: fast above slow is bullish (a “golden cross”), fast below slow is bearish (a “death cross”).IndicatorsRSI overbought and oversoldThe Relative Strength Index measures the speed of recent moves on a 0–100 scale. Below 30 is oversold, above 70 overbought.IndicatorsRSI divergencePrice makes a lower low but RSI makes a higher low (bullish divergence), or price a higher high and RSI a lower high (bearish).IndicatorsBollinger Bands squeezeBands drawn two standard deviations above and below a 20-period average. When they narrow, volatility is unusually low (a “squeeze”).IndicatorsMACD indicatorThe difference between a 12 and a 26-period EMA, with a 9-period signal line. Crosses and the zero line show changes in momentum.IndicatorsVWAP (volume-weighted average price)The average price of the day weighted by volume, reset every session. Institutions use it as a benchmark for fair price.IndicatorsAverage True Range (ATR)The average size of recent candles, including gaps. It measures volatility in price units (pips or points).IndicatorsVolume in tradingHow much was traded in each candle. In forex it is tick volume: the number of price changes, a good proxy for activity.
Risk and trade management
Risk and trade managementWhere to place your stop lossThe stop loss is the price where your trade idea is proven wrong and you exit with a small, planned loss.Risk and trade managementTake profit targetsThe price where you close the trade in profit, decided before entering.Risk and trade managementPosition sizingChoosing how many lots or units to trade so that hitting the stop costs a fixed percentage of the account.Risk and trade managementTrailing stopA stop that you move in the direction of the trade as price advances, for example below each new higher low.Risk and trade managementMoving the stop to break-evenMoving the stop loss to the entry price once the trade is in profit, so the worst case becomes zero.Risk and trade managementPartial take profit (scaling out)Closing part of the position at a first target and leaving the rest running to a further one.Risk and trade managementLeverage and marginLeverage lets you control a position larger than your account; margin is the part of your money the broker blocks as a deposit.Risk and trade managementSpread and slippageThe spread is the gap between the buy (ask) and sell (bid) price; slippage is getting filled at a worse price than requested.
Trading psychology
Trading psychologyFOMO in tradingFear of missing out: entering late because price is moving fast and you do not want to miss it.Trading psychologyOvertradingTaking too many trades, often in choppy markets, out of boredom or to recover losses.Trading psychologyRevenge tradingJumping back into the market right after a loss to win the money back, usually with a bigger size.Trading psychologyWaiting for confirmationLetting price come to your level and show a reaction before entering, instead of predicting it.