Quick background — I'm a XAUUSD trader, day trading, and I've got a 9-5 job so I'm not someone who can sit and watch screens all day. I've lost money for the last 6-8 years doing this, and I recently rebuilt my whole approach to trading — since then I'm finally seeing better results.
So I figured I'd share what I've learned along the way — what works, what doesn't — one topic a week for the next 52 weeks.
Week 4 : Understanding Candlestick Pattern - Part 1
I'm sure you've seen the online content out there that says "follow this candlestick pattern and you'll be a millionaire" as the flashy headline. While they're giving you eye-catching content to get famous, they're not actually covering the core of it — the reality behind candlestick patterns.
Good news: they're not wrong. There are candlestick patterns that work — many of them. The bad news is, without understanding the meaning behind them, you're not likely to make them work for you.
Here's a hard fact worth thinking about. On a 1-hour timeframe, a year gives you roughly 2080 candles. Within those 2080 candles, you're going to see almost every possible candlestick pattern play out — and each of those patterns will have led to an uptrend at some point, and a downtrend at another. The same shape, opposite outcomes, multiple times over.
So if you're trading purely off "I saw a doji here, therefore price goes up" — that isn't going to make trading work for you. Because the pattern alone was never telling you the full story.
Imagine Warren Buffett walking into a press conference and saying "NVIDIA is about to form a hammer in a few minutes, so I'm placing a buy there." How silly would that sound? If the biggest players in the world aren't trading off candlestick patterns, why would you treat them as some kind of holy grail?
Candlestick patterns should only be used to refine your entries and exits — not relied on as the only building block in your entire strategy.
On Part 2 , we will focus more on how should we best use candlestick pattern, and what works need to be done on best utilising that to form a startegy.
That's all i want to cover for this week's topic. Cheers