Candlestick pattern for merging candlesticks and simplifying your chart trading


hi traders we’re going to talk about a
candlestick pattern here ithat I don’t think it’s talked about enough and it
can give you a lot of insight into the past and more importantly the future of
how much the market actually respects a certain candlesstick so the subject we’re
talking about here is encompassing bars and we just have a random yes chart here
if you can open this up on literally almost any chart and you’re going to
find 20-30 examples in five minutes so an encompassing bar is when a bar
basically overshadows bars in front of or behind it making them somewhat
irrelevant I’ll highlight a few examples here so looking from left to right we
see this large candlestick encompasses the one prior to it we see this large
one no next one does break it so concern another big big example of this you’ll
see this a lot with bars like this like long big big bold candlesticks kind of
taking out all the information before it or after it you’ll see one really really
key example of this candlestick on left here that encompasses all the way up
till we start getting a bit more market movement here so what are encompassing
candlesticks well an encompassing candlestick is when one candlesticks
total height basically overshadows any bars directly prior or directly post of
it you know before or after it now you have to ask yourself why is this
important the reason it’s important is well market
psychology now no logging traders think like Oh psychology that’s not really
100% my thing I’m more of a technical guy but as traders we have to realize
that we wear many different hats we have to wear the you know data analyst hat we
have to aware the technicals have we have to wear the psychology hat I mean
we do so much psychology in technical trading that I swear wearing tweed vests
sometimes the psychology behind the market is what
drives price movement psychology you know it’s basic human psychology here
we’re talking you know green envy fear those are like the big big drivers that
we see in markets because you know there’s envy when you see a market
rocketing up in a direction you thought it was you want to get in so that people
pile on where there’s greed when people have the market moving in their
direction but they don’t want to remove that or trade on the market because they
think I can get a few more points a few more tics out of this and I can make a
few more bucks and so this is a definitely a market psychology thing so
when we look at we have three examples on here we’ll look at the one the middle
here the further the second one now the second one we were looking backwards in
the market so it’s not quite as useful to us but what we see is the fact that
we have a high quite a tall candlestick here and it encompasses all this data
prior all of these candlesticks are completely contained within this one
candlestick between the highest high and the highest and the lowest low of this
candlestick so with that we can take every one of these bars and essentially
give them a lesser weight to how much they’re contributing to this chart and
more importantly you’ll see that when we move forward in the market here and we
have this example here so we have quite a high candlestick quite a tall
candlestick here and what it does is it encompasses one two three four five
other candlesticks and that is incredibly important especially as the
market is developing because we can just take a look and say you know everything
that happened within these like 1 2 3 4 5 candlesticks right now we’re on a
60-minute chart so that’s 5 hours of trading now there might have been after
hours or a whole host of reasons but we have to take into account the fact that
that one candlestick that one chart pattern candlestick
had enough info it moved a great enough distance that it was able to encompass
multiple other candlesticks and you’ll see this move particularly often when
you get hard market movements we don’t quite see it here we only see the
remnants of it now we look at this extremely extremely tall candlestick
here in this market and what we see is the movement after you know the market
can shoot back up through it ends up actually does it actually ends up
breaking it but a lot of movement after these breaks is kind of lackluster
because everything that happens until the new highs broken past this
candlestick or pass the encompassing candlestick is not really much news you
know if we take for instance and say that this candlestick this red
candlestick and we didn’t get the slight tiny market break here above it then all
this trading that’s happening post this candlestick is it’s kind of old news the
market has recently moved through that area there’s nothing new really
happening we know there are both buyers and sellers all in that area and it’s
not as relevant so all the bars after an encompassing candlestick are just not as
relevant we have to take them with you know say a grain of salt and just be
like whoa you know obviously the mark can move within this reason region so
what really are we getting out of these candlesticks are the hives being made
within this this range as significant I would say not and I hope that gave you a
little bit of insight into encompassing candlestick patterns as always this is
Bruce Bank saying enjoy trading

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