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Tradingview recently introduced a new chart type, the High Low chart, and for price action
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traders, this could be of great help.
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Today I’ll show you how to read price action using High Low charts and you’ll also learn
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how to easily find trends and trade with the current momentum.
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You know the drill, like, subscribe, and stick around for the full video.
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High-Low chart
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The High-Low chart is located in the chart type selection menu.
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Bars are built based on the value of the maximum and minimum prices for a given timeframe.
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The price values for which the chart was built are displayed on each bar, below and above
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the bar.
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This type of chart basically removes the open and close price, and instead, you see the
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range in which the value changed, on your timeframe.
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If you want to customize it, in the Chart Settings, you can change the color of the
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bars and text.
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I personally don’t have a problem with the fact that I don’t see the red and green
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color of the candles.
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By having the same color on up and down candles, you’ll actually trade in a neutral/ unbiased
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state of mind.
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This chart looks weird at first, because you don’t see the open and close.
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You are only seeing a range.
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But from a price action perspective, if you are a trader who is analyzing highs and lows
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in price, this is very helpful.
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Most traders are looking at major market swings when they are analyzing highs and lows and
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determine trends.
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But you can also analyze highs and lows of individual candlesticks.
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With the High Low chart, reading price action of individual candlesticks is super easy.
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When the high and the low of the recent candlestick is higher than the high and low of the previous
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candlestick, market is in a bullish momentum and buyers are controlling the market.
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There is buying pressure.
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When the low and high of the recent candlestick is lower than the low and high of the previous
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candlestick, market is in a bearish momentum and sellers are controlling the market.
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You see just how easy it is to read price action, bar by bar.
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Candlestick simplified
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Now, using the High low chart presents an opportunity to simplify candlestick trading.
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If you are that type of trader that memorized dozens of candlestick formations, you’re
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in luck, because you don’t have to over-complicate things.
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With this type of chart, there are only 4 candlestick formations.
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First candlestick formation is the bullish candle.
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A bullish candle has a higher high and a higher low compared to the previous bar.
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Second formation is the bearish candle.
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Bearish candlesticks have a lower high and a lower low, again, compared to the previous
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bar.
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Third type is the inside candlestick, which has a lower high and higher low relative to
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the previous bar.
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This bar is contained within the range of the previous candlestick.
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Even if the high or the low are equal to the previous candlestick, it’s still an inside
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bar.
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Last formation is the engulfing candlestick, which has higher high and lower low relative
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to the previous bar And even if either the high or the low are
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equal to that of the previous bar, it’s still an engulfing bar.
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So this is the foundation of your price action analysis: bullish and bearish candlesticks,
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inside candles and engulfing candles.
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It’s time to train your eyes to easily spot each formation, on a high low chart.
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Open any chart, and start reading price action.
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We have both highs and lows that are lower than the previous bar, so this is a bearish
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candlestick.
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Another bearish candlestick.
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And another one.
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Another bearish candle.
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Here’s the first inside bar, with a lower high and higher low compared to the previous
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bearish candle.
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Next is a bearish candle.
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Another bearish candle.
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Another one.
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Another bearish candle.
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Again, a bearish candlestick.
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Bearish candle once again.
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Okey, we have our first engulfing candle, with a higher high and lower low compared
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to the previous bar.
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Another bearish candlestick.
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Next is a bullish candlestick, with a higher high and a higher low compared to the previous
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bar.
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Another bullish bar and now trend seems to change to the upside.
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Bullish candlestick again.
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Another bullish candle.
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Next is an engulfing candle.
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Bearish candlestick.
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You see just how easy is to read price action.
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I’ll say it again, you don’t need to memorize other candlestick combinations.
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So, to get used to high low charts, the first thing is to start reading candlesticks until
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it becomes very easy to determine which type is.
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6 Price action rules Now, you might ask, how is this useful to
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trade?
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It’s simple.
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Once you know to recognize these candlesticks, you’ll then determine the state of the current
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trend.
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To find the current trend, you follow 6 easy rules.
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1.
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If you have consecutive bullish bars, you are in a minor uptrend.
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2.
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Consecutive bearish bars indicate a minor downtrend.
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3.
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A bullish candle starts an upswing and confirms the end of a downswing.
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4.
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A bearish candle starts a downswing and confirms the end of an upswing.
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5.
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Inside candlesticks are neutral bars.
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They don’t affect the direction of the current swing, because they do not break the previous
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high and low.
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So an inside bar after a bullish or bearish candlestick don’t change the current trend.
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6.
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Engulfing candlesticks introduce uncertainty into the market structure, because they break
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both the previous high and low.
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But, we’ll give the benefit of the doubt to the current swing.
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So, engulfing candlesticks in an upswing continue the upswing.
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Engulfing candlesticks in a downswing continue the downswing.
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Now, let’s look at the previous example and let’s mark the main swings, based on
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the bars that changed the direction of the market swings.
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These bars are inside candlesticks and engulfing candlesticks and they do not affect the direction
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of the market swings.
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Let’s change markets and find the market swings based on this system.
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You simply look for bullish candles to start an upswing and to confirm the end of a downswing.
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And for bearish candles to start a downswing and to confirm the end of an upswing.
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And you include the inside candlesticks and engulfing candlesticks in the respective swing.
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First we have a downswing, with many consecutive bearish candles.
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Then, an upswing, this is the candle which interrupts the previous down leg.
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And another downswing, this is the candle which ends the upswing.
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Then market forms an upswing, and another downswing.
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Upswing once again.
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Then I see a choppy period, with a small downswing, a small upswing and another downswing.
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And finally, another upswing.
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This analysis might seem very simple and unimportant.
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But if you understand how the swings are marked and you see the swings clearly, you will identify
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the current direction of the market with ease, at any point in time.
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Support and Resistance trading
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I found that high low charts are great to trade support and resistance, and are also
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a good filter to eliminate false breakouts, when price moves beyond a previously established
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price range but then retreats back to within the range.
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As you probably know, one of the classic rules of support and resistance is that support,
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once violated, becomes resistance and conversely, resistance, once violated, becomes support.
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With high low charts, and the previous swing recognition technique, you can find decent
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trades around major levels in the market.
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So on this GBP/USD hourly time frame, we see an uptrend, with price trading around this
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resistance level.
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We have a candle breaking the previous high, and a quick retracement below the level.
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After a small consolidation, we have a valid breakout.
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So a decent signal would be at the re-test of the previous level, when the downswing
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is ended with a bullish candlestick.
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Here’s the signal.
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I like to enter when the high of the bullish candle is broken, but you can also enter immediately
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after you see the candle.
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Stop goes below the most recent swing and we’ll be conservative and we’ll set a
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risk to reward ratio of 2.
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You see how using this type of chart helped us to avoid the first fake out and allowed
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us to enter, in the direction of the main trend, when a new upswing was forming.
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Liquidity clear-outs
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Another great way is to trade liquidity clear-outs in the direction of the main trend.
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If you watched my previous smart money manipulation video, you know I like to join the market
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after a false breakout.
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Markets hunt for stop orders and activity beyond significant price levels.
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If this breakout occurs and fails, there will be many trapped traders, which can add momentum
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to the opposite direction from that level.
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The best trades of this type occur in direction of the main trend.
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In this example, we have a clear downtrend, with price currently in consolidation.
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For a short entry, the market trades above this resistance area, and immediately reverses
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on the following bars and closes back under the resistance.
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There no real continuation beyond the level.
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And when the price forms a bearish candlestick, which ends the previous upswing, we can take
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a short trade, after this liquidity clear-out, in the direction of the main trend.
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Stop goes above the previous swing high, and we’ll target this next swing low in the
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price structure.
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Here’s another example.
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We have a clear support, in an obvious uptrend, with the price being unable to continue lower.
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We then have a small breach below support, but price immediately closed back above the
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support level.
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Once the movement was confirmed by a bullish candle, the wiser trade would be a long trade,
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instead of chasing the failed breakout.
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Stop loss is placed below the previous swing low, and we’ll target this next swing high
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in the price structure.
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In some way, high low charts eliminate some market noise.
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You don’t see the wicks, the red or green candles.
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I can see the market swings and the support and resistance levels very easy using high
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low candles.
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You see, many traders follow market swings in a wrong manner and find them useful only
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in hindsight.
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They are unable to apply the concept of market swings in real-time.
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With this chart, and following some basic price action rules you will know exactly the
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current price wave you are in, and with a solid understanding of support and resistance,
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you will find good areas to trade from.
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Of course, there are lots of other methods to trade high low charts, involving volume
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and even with indicators, divergences in particular work very well in combination with these candles.
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So if you a follow up video about high low candles, leave us a like.
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This way we’ll know if you'd like to see more videos like this one.
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And check out our academy program if you want to further level up your trading.