Candle Timing Strategy for Candlestick Trading

The Ultimate Timing with Candlesticks

‘

"As in life, trading is all about the timing"

April 2015

ⒸCandle Master

CANDLE TIMING

---------------------------------- Table of Contents ----------------------------------

1. Basic Concepts of the Candle Timing Strategy

2. Waves and High-low Lines

3. High-low Wave

4. Reversal Wave

5. Triple Peak Wave / Inverted Triple Peak Wave

6. Large-bodied and Small-bodied Candle Groups

7. Long-shadowed Candle Group

8. Validity, Reliability, and Missed Timing for Rise/Fall

9. Candle Timing Signals

(1) Upper-shadowed Black Candle(s)

(2) Lower-shadowed Black Candle(s)

(3) Upper-shadowed White Candle(s)

(4) Lower-shadowed White Candle(s)

(5) Bullish Rickshaw Man / Impatient Rickshaw Man

(6) Bearish Rickshaw Man

(7) Bullish Flying Squirrel / Bullish Flying Squirrel Yin for Yang

(8) Bearish Flying Squirrel / Bearish Flying Squirrel Yang for Yin

-----------------------------------------------------------------------------------------------------------------

(9) Evening Star / Evening Star Yang for Yin

(10) Morning Star / Rising Morning Star

(11) Bullish Sisters

(12) Bearish Sisters

(13) Bullish Charge Yin for Yang

(14) Bearish Charge Yang for Yin

(15) Bullish Punch / Bullish Punch Yin for Yang

(16) Bearish Punch / Bearish Punch Yang for Yin

(17) Bullish Punch after Black Candle

(18) White Highwave

(19) White Spinning Top

(20) Long and Long Tail

PART Ⅰ

PART Ⅱ

(21) Mini Slanted W

(22) Engulfing Brothers

(23) Three Black Candle Sisters

(24) Twisting Black Candle

(25) Crab

10. Favorable Section

11. Messy Section

12. Steep Slope Section

13. Horizontal Sideways Section

14. Bullish Flag Section

15. Steadily Downward Section

16. Potential Support Area / Potential Resistance Area

17. Strength Mustering Section

18. Tips for Live Trading

Welcome. You are now about to encounter an ingenious and revolutionary strategy that

has never existed before in the history of trading.

Unfortunately, here we are revealing only a small portion as marked in bold letters in

the table of contents above.

Once you study the entire version, you will be able to acquire countless skills and, one

day in the near future, find yourself a top one percent trader free of all kinds of

psychological issues. In the meantime, we believe you can discover a whole new horizon

in the world of trading and pick up a lot of inspiration through this sample.

Meanwhile, regardless of whether you're an experienced trader or not, in order to

understand the basic concepts of the Candle Timing Strategy, you need to thoroughly

read and study the book at least five times. Bon Voyage!

- The Candle Master, Philip Shin

PART Ⅱ

1. Basic Concepts of the Candle Timing Strategy

Foreword

Literally, trading is a zero-sum game. For one to win, the other must lose. In every

market, it is believed that more than ninety percent of individual traders lose their

investments, which end up going mostly to the big market players, in other words, the

“institutions.”

These big players mostly profit from the losses of personal traders. They employ market

analyses, both fundamental and technical, as a means to rake in money from the pockets

of individual traders. It would be closer to the truth to say that the market does not

move along a (predetermined) trend but stop hunts. Once aware of this, it will become

obvious to the trader how the market moves in the manner of a random walk gobbling

up stop-losses set along its path.

What is it that institutions rely on most in hunting down stops of individual traders?

I would say, trend predicting. More precisely, they take advantage of the trader's

tendency of trying to predict the trend. As a result, all indicators including trend lines

and support/resistance lines can become nothing but traps set up for hunting bears and

bulls.

In the market studded with stop hunters, there is not much ground for individual

traders to stand. Such traders have a high chance of taking profits only when it’s

perceivable, or more precisely, assumable based on probability, whether either the

buyers or sellers are dominant, which occurs in 20 to 30 percent of the chart. Only these

sections are worth trading. However, most traders try to scrutinize each and every

portion of the chart in addition to predicting the trend. Moreover, desperate in making

profits or winning back what they've lost, some traders increase the number of trades

and bet their entire stakes at any random point. To become a truly professional trader,

you must possess the patience and composure that allows you to enter the market only

when the timing is right so that you're not swept away by market movement. Great

trading skills also include concentration and perseverance which will enable you to hold

onto positions that are profiting. In conclusion, the only key to success is the nurturing

of such qualities keeping in mind that trading is just a game of probability and all the

while sticking to your trading principles. The practice of patience and concentration, in

the end, is gaining the insight of grabbing the right timing. This, truly, is all you need to

become a successful trader.

From a theoretical point of view, the TIC Trading Theory may be complex and hard to

understand. But you must remember that there can never be such a thing as a clear-cut

theory in the market, and if there were such a theory, it would not be reflecting the

market's true nature. This is because trading is solely based on probability. Trading is

not like, for example, science and math where all phenomena are predictable. If you

have a 70 percent chance of winning, you also have a 30 percent chance of losing. This is

because nothing is certain in the market. Only when you accept this indefinite quality of

the market, will you be able to approach it humbly and be less obsessed with the trend.

Furthermore, you will also gain composure and insight to stay calm in times of either

instant success or failure.

So I recommend you to forget about all the various trading methods and indicators that

you have used all this while for the time being. And do not aim making big profits

overnight. You also need to do away with conventional ideas on the trend. Being a

trader is not a game of being a fortuneteller or gambler. The market will always take

advantage of you the more you believe you can predict its direction.

This book is a description of numerous standards and formulas for trading. Though vast

in number and variety, they are all connected to each other like branches of the same

tree. The deeper you delve into it, you'll learn to understand how and why the market

moves the way it does. As you learn and study the theory with perseverance, you will

begin to see the true meaning of probability and find yourself a trader with great virtue

as well as consistent profits.

< The Four Elements that Move the Market Price>

New buyers

Existing sellers stepping out

Existing buyers

Buyers Sellers

New sellers

Existing buyers stepping out

Existing sellers

• The market is made up of only buyers and sellers.

• The four elements that move the market price are buyers and sellers both existing and incoming.

• When existing buyers exit, the sellers gain more strength as the number of buyers decreases.

• When existing sellers exit, the buyers gain more strength as the number of sellers decreases.

The market is...

• A power game between the buyers and sellers

• A psychological game between the buyers and sellers

• A game of hot potato between existing and incoming buyers/sellers

• A game of "timing" between incoming buyers and sellers

• A game of stop-hunting of individuals by institutions

<Example of Stop-hunting in Charts>

The market is like a battlefield of war between the buyers and sellers and also a hunting

ground for the institutions. In such a market, volatility is one of the most essential

factors. When volatility rises, this means transaction is increasing which enables the

trader to exit previous positions more easily at favorable prices. This increase of

volatility or transaction is particularly an important element for players trading large

positions. This is because, in order to close their previous trades with ease, they need

new buyers or sellers to hand their positions over to while slippage is reduced with the

increase of transactions. As such, in many cases, institutions intentionally raise the

volatility to exit existing huge orders or to make it easier to pull out of new large

positions they are intending to grab. The big players lure new buyers and sellers by

manipulating prices (to hike and drop) and at the same time hunt down stops to sell off

trades at favorable prices. This kind of logic is applied mostly where it can be used to the

disadvantage of individual traders who are armed with only conventional indicators and

knowledge, and most aggressively near the previous high and low. And it is in this

process that meaningful candle signals are produced. Based on this mechanism and a

probabilistic view, the TIC Trading Theory is a compilation of various wave types,

candle groups, and candle signals.

Previous high

Volatility increased


Sell stops

ⓐ Major buyers intervene

Positions of ⓐ closed ⓑ Major sellers

intervene

Prior uptrend

ⓑ additional intervention

Low volatility

All positions closed à Bearish reversal wave Ⅰ

All positions closed after additional buy orders

à Bearish reversal wave Ⅱ

Intervention of new major sellers

à Triple peak wave

New buyers

Buy stops

Major buyers holding onto positions

à High-low bullish wave Ⅱ

All positions closed after waiting for new buyers to step inà Steep slope section

All positions closedà Mini slanted W

All positions closedà Bullish reversal wave Ⅱ


à Inverted triple peak wave

All positions closed after waiting for new sellers to step inà Steep slope section

Positions of ⓑ closed

New sellers

Volatility increased New sellers

Sell stops


ⓐ additional intervention

ⓑ Major sellers intervene

Prior downtrend

All positions closedà Bearish reversal wave Ⅰ


à Bearish reversal wave Ⅱ


à Triple peak wave

New buyers

Buy stops


à Long-shadowed candle group

All positions closedà High-low bearish wave Ⅴ

Positions partially closedà Bullish reversal wave Ⅰ


à Inverted triple peak wave

All positions closed after waiting for new sellers to step inà Steep slope section

ⓐ Major buyers intervene Volatility

increased

Sell stops

New sellers

ⓒ Major buyers intervene

Previous high

Positions of ⓐ closed

Positions of ⓑ closed

Market Flow Examples of the Evening Star

The examples given below are in no respect an argument on the truth of the market or a

depiction of how the market moves. They are provided solely to describe the

characteristics of the market I believe individual traders should be aware of. They are

only a few of the most probable cases (regarding the balance of power between the

buyers and sellers) among the numerous possibilities where the criteria and formula of

the evening star can be applied.

<Normal Case>

▶Downward movement confirming the intervention of sellers of ⓐ

▶Evening star ⓐ after break of previous high à Intervention of new major sellers

▶Additional sell orders by sellers of ⓐ to defend initial entry price à Formation of dozens of various candle signals likely

▶Some existing sellers exit and new buyers join (expecting uptrend to continue)

▶Candle concluding the tug-of-war between major sellers of ⓐ and new buyers à Point where mid to long-term sell position can be taken

<Case of Timing for Fall Missed -1>

▶Sudden upward movement ⓒ mainly of large candles à Intervention of minor buyers

▶Candle concluding tug-of-war between major sellers of ⓐ and minor buyers of ⓒ à ⓐ likely to be dominant since they operate large funds

▶Group of small candles ⓑ moving sideways à No incoming new buyers or sellers (low volatility)

▶Market can be easily moved up by minor buyers as large amount of sell orders of ⓐ were closed



▶Retracement wave forms as sellers of ⓐ close positions and buyers of ⓒ get stopped out

<Case of Timing for Fall Missed-2>

▶Sudden downward movement mainly of large candles à Likely to be additional sell orders by sellers of ⓐ to get previous buyers stopped out and to lure new sellers to step in

▶Market does not go further down and lingers à Likely to be sellers of ⓐ partially closing positions from previous sell orders as there are no new following major sellers

▶New buyers are stepping in à Point where short-term buy entry is possible

▶The major sellers of ⓐ have already gone out but new major sellers are likely to be exploiting price resistance line of ⓐ



▶Group of small candles ⓑ moving sideways à No incoming new buyers or sellers (low volatility)


▶Price defended by sellers of ⓐ

▶Formation of choppy wave section ⓑ à Appearance of minor buyers

▶Fall after choppy section of ⓑ à Market participants made to mistake it as strong downtrend

▶Retracement wave forms as sellers of ⓐ close positions and buyers of ⓑ get stopped out

▶Stop-hunt of trend-chasing sellers

▶Participation of a large number of (individual) sellers misjudging the trend to go down since ⓑ à New major buyers motivated to intervene for stop-hunting new sellers




▶Upward movement ⓑ immediately breaking ⓐ à ⓐ might be minor sellers or likely to have formed merely due to previous buyers closing their positions.

▶Immediate low / bottom price broken to get previous buyers stopped out and lure new sellers to step in

▶Immediate high / top price is broken à Likely stop-hunt of sellers who entered around ⓐ

▶Major sellers intervene as seemingly not many new buy orders are made à Point where short-term sell entry is possible

▶No major sellers observed at ⓐ immediately after which the market went up à A sudden downward movement is likely to be a trick played by major sellers


▶Candle showing that the major buyers of ⓑ have already left or there were no additional orders à Point where additional sell position can be taken


▶ⓐ is instantly broken by white candle ⓑ à Stop-hunt of major sellers of ⓐ by major buyers of ⓑ

▶Market moves steadily downwards mainly by small candles à Existing buyers are pulling out while there is no intervention of new major sellers


The TIC Trading Theory consists of a total of 26 waves, around 80 candle signals, and

various candle group sections. As seen above in the case of the evening star, hundreds of

different cases can occur on the chart.

By applying such a large collection of unique criteria and formulas, the buyer-seller

balance in charts can be read more elaborately and in detail than any other existing

theory or technique. However, based on my experience, in general, only 20 to 30 percent

of the chart is worth looking into for a (mid to long-term) trade. As you study the Candle

Timing Strategy, you will realize how jeopardizing, useless, and inefficient it is to

scrutinize every single section for an entry signal. After acknowledging this, you will

gradually overcome anxiety, be able to let go of your obsessions, and in the end,

naturally grow more psychologically composed.

Introduction to the Candle Timing Strategy

The “Candle Timing Strategy” is a technique for finding the best entry and exit points by

judging candles that appear in crucial areas. Learning and studying the strategy is

similar to the process of practicing martial arts as a way of gaining enlightenment and

expanding your awareness. The following are descriptions of the basic elements of the

Candle Timing Strategy used to analyze the power balance between the buyers and

sellers.

① The Form of Candles and Candle Groups

Acknowledging the form of candles and candle groups is the first step of analyzing

candlestick charts. However, in the end, the trader needs to realize that although

mastering form is necessary in the beginning, it’s not the key factor of the Candle Timing

Strategy. This is because, keeping a flexible stance and applying the strategy in versatile

ways is possible only when you’re not obsessed with form.

② Location

Whether or not a candle pattern is in a valid location as a signal or base of

interpretation is determined primarily by factors such as: 1) the high/low lines, 2) the

three main wave types, 3) candle groups, and 4) long-shadowed candle groups.

③ Previous Signals

The candle signal’s reliability can be determined and adjusted by combining it with

preceding signals.

④ Missed Timing for Rise/Fall

The validity and reliability of a signal varies by whether or not the timing for fall/rise

was previously missed. Despite a valid signal, if the timing for fall/rise is missed

afterwards, it’s necessary to shift stances or pull out of the current position.

⑤ Following Signals

If a valid candle signal is followed by additional signals pointing the same direction, the

signals become the more reliable. On the contrary, if an opposite signal appears, it must

be reinterpreted along with the previous signal. Furthermore, if the market does not

move in the course pre-determined by standards and formulas, a shift of stance is

needed.

<How to Combine Signals>

• The three main wave types, large or small-bodied candle groups, long-shadowed

candle groups, and 25 candle signals each have its own “standard” and “formula.” They

are combined and connected with one another like puzzle pieces.

• Whether the buyers or sellers are stronger is only probabilistically estimated by

combining signals.

• If a signal lacks validity and reliability, wait and look for additional signals that are

combinable to supplement and verify it.

• If the market does not move in the pre-determined direction and goes the opposite, it’s

necessary to shift stances since the market is more likely to move strongly in that

direction (at least for short-term).

• If contradicting signals or the timings for rise and fall overlap within a short interval,

the next movement is very likely to be choppy, so it’s best to avoid trading at least for a

short while.

<Definition of the Trend in the Candle Timing Strategy>

In the Candle Timing Strategy, “trend” is defined in a totally different light from the term

widely used in the conventional market. Under this new definition, trend is merely the

endless shifts of direction the market makes as a result of the power and timing game

between the buyers and sellers. It’s considered the trend is unpredictable and so any

kind of attempt to predict the trend is meaningless and useless.

All there is to do is enter at the right moment when the power balance becomes clearer

or collapses in favor of either the buyers or sellers and follow the flow (trend) until

market conditions change. This is what true “trading with the trend” means in the

Candle Timing Strategy, simply following the trend and not predicting it.

Therefore, in order to acquire a substantial understanding of the Candle Timing Strategy,

you need to forget all conventional ideas and theories about the trend and not be

concerned of the market’s next move.

Trend defined by the Candle Timing Strategy consists of four types of sections including

those favorable for trades and other that are unfavorable, such as choppy or meandering

sections, which are not worth analyzing or trading in.

1) Straight upward movement

2) Straight downward movement

3) Beginning of a potential bullish reversal

4) Beginning of a potential bearish reversal

5) (Potential) Choppy/Meandering section

1) Straight Upward Movement

A straight upward movement means that the buyers are evidently in control and thus

buy signals appearing amid it are the more reliable. In many cases, candle patterns amid

it become highly reliable buy signals regardless of the base of interpretation that

appeared beforehand and even without being combined with other signals.

There are largely four types of straight upward movements.

ⓐ Small waved, steady uptrend

The most common form of this type is the high-low bullish wave I. The movement is

composed of small candles ascending steadily without forming any large waves.

ⓑ Short pullback section of uptrend

This type is a short pullback section forming after a strong rise mainly by large candles.

It can also be part of a high-low bullish wave II, in short, a bullish flag, and sometimes a

high-low bullish wave I.

ⓒ End of long meandering section in uptrend

Preceded by a strong rise and a long meandering section composed mainly of rapid

waves, this type is a steadily or strong upward move towards the previous high, which

occurs where the wave begins to widen.

ⓓ Strong upward section after downtrend

This type begins a certain distance up from the sideways section preceded by a strong

rise from the bottom of the downtrend. A section rising steadily upwards from the

bottom of a downtrend mainly by small candles can also be seen as a straight upward

movement.

2) Straight Downward Movement

A straight downward movement means that the sellers are evidently in control and thus

sell signals appearing amid it are the more reliable. In many cases, candle patterns amid

it become highly reliable sell signals regardless of the base of interpretation that

appeared beforehand and even without being combined with other signals.

There are largely three types of straight downward movements.

ⓐ Small-waved, steady downtrend

The most common form of this type is the high-low bearish wave I. The movement is

composed of small candles descending steadily without forming any large waves.

ⓑ Small-bodied candle group after strong fall

This type refers to a small-bodied candle group moving sideways and forming an arch-

like gradual wave following a slight rise up after a strong fall.

ⓒ Steadily downward section after uptrend

It is the section that comes a certain period after a gradual move to the downside from

the top of an uptrend that is composed of a small-bodied candle group progressively

opening and closing lower.

3) Beginning of Potential Bullish Reversal

A beginning of a potential bullish reversal is a section where the market is likely to

reverse to the upside, and so naturally, buy signals appearing within it are highly reliable.

Buy signals such as a bullish rickshaw man or bullish flying squirrel in the beginning of a

potential bullish reversal can be valid amid a straight upward movement as well. But, in

most cases, signals in the two locations are dealt with separately.

The beginning of a potential bullish reversal can be largely divided into six types as

described below.

ⓐ Potential high-low bearish wave V section

The section that comes right after a large wave breaks below the low of a double bottom

composed of noticeably large waves in a downtrend.

ⓑ Potential bullish reversal wave section I, II, or III

This is the section where a bullish reversal wave I, II, or III is expected to form after a

break below the previous low of a downtrend or a pullback section in an uptrend.

ⓒ Inverted triple peak wave’s second section

This type is a horizontal meandering wave section forming in a downtrend and buy

signals are highly reliable when they form in the inverted triple peak wave’s second

section, especially near the low.

ⓓ Horizontal sideways wave section in downtrend

When a wave at the bottom of a downtrend, though a bit rapid, moves horizontally

sideways, this means that the sellers are losing momentum, in other words, it suggests a

possibility of a bullish reversal. Sections where the market can be expected to turn to

the upside based on the horizontal sideways wave section can again be divided largely

into two sub-types.

ⓔ Steep slope section

This type comes after a short upward movement following small candles moving

gradually to the downside opening and closing progressively lower.

ⓕ Long meandering section in downtrend

A section after a relatively small wave moves sideways or meanders for a long interval

without breaking below the previous low.

4) Beginning of Potential Bearish Reversal

A beginning of a potential bearish reversal is a section where the market is likely to

reverse to the downside, and so naturally, sell signals appearing within it are highly

reliable. Sell signals such as a bearish rickshaw man or bearish flying squirrel in the

beginning of a potential bearish reversal can be valid amid a straight downward

movement as well. But, in most cases, signals in the two locations are dealt with

separately.

The beginning of a potential bearish reversal can be largely divided into five types as

described below.

ⓐ Potential high-low bullish wave V section

This type comes right after a large wave breaks above the high of a double top composed

of noticeably large waves in an uptrend.

ⓑ Potential bearish reversal wave section I, II, or III

This type refers to the section where a bearish reversal wave I, II, or III is expected to

form after a break above the previous high of an uptrend.

ⓒ Triple peak wave’s second section

This type is a horizontal meandering wave section forming in an uptrend and sell signals

are highly reliable when they form in the triple peak wave’s second section, especially

near the high.

ⓓ Low of long meandering section in uptrend

This type is a small-bodied candle group section forming right below the low of a long

sideways or meandering section in an uptrend.

ⓔ Section missing timing for rise

After the uptrend tops out and is followed by a deep pullback, when a meandering wave

section breaks the previous/immediate low two to three times and the same low is

broken once more, it can be considered that the market has begun trending down.

Furthermore, in cases where a pullback follows according to the criteria in this book

such as the horizontal sideways candle group and there’s a high possibility for the

market to resume to the upside, if the previous/immediate low is broken two to three

times and the same low broken once more, it’s also considered that a downtrend has

begun.

5) (Potential) Choppy/Meandering Section

A choppy/meandering section or a section that is expected to show a choppy/

meandering movement forms when the power balance between the buyers and sellers

is unclear or when volatility is high and is an unfavorable section (where the success

rate is low) for trading. In most cases, candle signals that appear in such a section are

invalid. There are a large variety of (potential) choppy/meandering sections that differ

depending on the previous chart movement. Here are some of the most common ones.

Strong rise after deep pullback

Rise after fall by large candles

Sudden rise after deep break below

previous low

Rapid wave amid rise by small candles

Rapid wave right above previous low

2. Waves and High-low Lines

In the TIC Trading Theory, there are three main types of waves.

① High-low Waves

② Reversal Waves

③ Triple Peak Wave / Inverted Triple Peak Wave

If the meaning of each candle pattern was the same at all times, analyzing charts and

trading profitably would not be so difficult. Interpreting candlestick charts is not a

simple job that can be accomplished by just applying formulas as when you solve a math

problem. This is because candle signals differ in meaning according to where and when

they appear, and what the market movement is like before and after their formation.

The essence of the candlestick chart methodology is distinguishing the location of

candle signals, and the standards adopted by the TIC Candle Timing Strategy to judge

the validity of a signal’s location are: the high-low waves, reversal waves, and the triple

peak wave / inverted triple peak wave, which of the former two are defined based on

the high-low lines.

The three main wave types may appear in the typical form as suggested in this book but

this is not always the case. In fact, they more often do not appear in a fixed form. This is

why traders should interpret the waves in a flexible manner and not be obsessed with

the “form” itself. In addition, it’s a requisite for traders to put aside mathematical

reasoning and adopt a probabilistic way of thinking.

High-low Waves

Reversal Waves

Triple Peak Wave / Inverted

Triple Peak Wave

Combinations of Waves

High-low Wave(Bullish Wave Ⅲ)

Reversal Wave(Bearish Reversal Wave Ⅱ)

Inverted Triple Peak Wave

Triple Peak Wave

Reversal Wave(Bullish Reversal Wave Ⅳ)

High-low Wave(Bearish Wave Ⅰ)

High-low Wave(Bearish Wave Ⅴ)

Reversal Wave(Bullish Reversal Wave Ⅰ)

High-low Wave(Bullish Wave Ⅱ)

Triple Peak Wave's 2nd Section

Reversal Wave(Bullish Reversal Wave Ⅲ)

Inverted Triple Peak Wave's 2nd Section

The High-low Lines

The high and low lines are drawn primarily based on the most recent previous high and

low. Meanwhile, the immediate highs and lows between the current price and the high-

low lines can be referred to for short-term periods. Generally, the high and low of visibly

singular waves hold significance, and so, when multiple highs and lows form within a

given interval, only the topmost and bottommost points and the highs and lows of

noticeably large waves are taken as a base of interpretation. When a new high or low

forms, the former high or low no longer holds meaning.

Meanwhile, in some cases, a high or low that is insignificant in a weekly or daily chart

due to the small size of the wave can become meaningful in a smaller timeframe chart

such as an hourly.

The high-low lines are the most basic elements of the Candle Timing Strategy. Without

the capability to discriminate the high-low lines, it’s almost impossible to judge the

validity, needless to say the reliability, of waves and candle signals. Therefore, a

thorough understanding of the basic concept is required before moving on to the next

stage.

③

Previous High

①

Previous High

④

Previous Low

Immediate Low

②

▶①,②,③,④: Highs and lows of waves that are too narrow or rapid are invalid as reference points.

<Figure 2-1> NASDAQ 100 Futures Daily Chart

②

Previous High

Previous Low

Immediate High

④

Immediate Low

③

①

⑤

▶①,②,③,④,⑤: Highs and lows of waves that are too small in size are invalid as reference points.(amid high-low bullish wave Ⅰor small-waved, steady uptrend)

▶⑥: Can be meaningful immediate high depending on the following movement. ⑥

<Figure 2-2> Kia Motors (KOSPI) Daily Chart

②

Previous High

①

▶①,②,⑤: Highs and lows of narrow and rapid waves are invalid as reference points.▶③: Invalid high being too near the previous high.▶④: Invalid low being too near the previous low.

Previous Low

Immediate Low

Previous High③

⑤

Previous High

Immediate Low ④

<Figure 2-3> GBP/USD Daily Chart

Previous Low

Immediate Low

▶①,②,③,④,⑤,⑥: Highs and lows of waves too narrow and rapid are invalid as reference points.

Immediate Low

Previous High

Previous High

Immediate High

Immediate High

Previous Low

Previous Low

①

② ③

④

⑤

⑥

Immediate Low

<Figure 2-4> USD/JPY 1H Chart

Previous High

Previous Low Immediate LowPrevious Low

①

②

▶①: Invalid being low of too rapid and narrow wave▶②: Invalid being high of mere meandering section

<Figure 2-5> Crude Oil 1H Chart

Previous High

Previous Low

Immediate Low▶①: Invalid high being too near the previous high.▶②: Invalid being high of a rather too narrow and rapid wave.

①

Previous Low

②

<Figure 2-6> Platinum 1H Chart

3. High-low Waves

The high-low waves are a classification of various wave types based on the high-low

lines to apply in discerning the strength of the current trend and to single out favorable

sections. Basically, small and gradual waves mean a strong trend while large and rapid

ones suggest that the trend is weak or there is no trend at all.

The 10 High-low Wave Types

High-low Bullish Waves

Bullish Wave Ⅰ (Small-waved,

steady uptrend)

Bullish Wave Ⅳ (Bullish

Wobble)

Bullish Wave Ⅱ (Bullish flag) Bullish Wave Ⅲ (Bullish W)

Bullish Wave Ⅴ (Double top)

Key Features

• Small waves mean a strong trend.

• Small waves are usually composed of small-bodied candle groups.

• The trend composed of small waves tends to weaken after the formation of large

waves

Bearish Wave Ⅰ (Small-

waved, steady downtrend)

Bearish Wave Ⅳ (Bearish

Wobble)

Bearish Wave Ⅱ (Mini Tail)Bearish Wave Ⅲ (Large

Cascade)

Bearish Wave Ⅴ (Double

Bottom)

High-low Bearish Waves

• All types of waves and candle signals become invalid or less reliable when they appear

amid a small-waved section of the opposite direction as the high-low bullish/bearish

wave I withholds the highest priority in meaning at all times.

• Large waves mean a weak trend.

• Large waves are usually composed of large-bodied candle groups.

• The more volatile the wave, the weaker the trend.

• Rapid waves that are tall and narrow do not indicate any trend.

• Both the double top at the top of an uptrend and the double bottom at the bottom of a

downtrend have a high probability of being broken out.

• After a break, the trend is very likely to be reversed.

• If the double top or double bottom isn’t broken, the market is likely to move more

strongly in the opposite direction of the former trend.

The Candle Timing Strategy and the High-Low Waves

Among the 10 high-low wave types, those used in the Candle Timing Strategy are as

listed below.

∙ High-low bullish wave I - N type (small-waved, steady uptrend)

∙ High-low bullish wave II - Bullish flag

∙ High-low bullish wave V - Double top

∙ High-low bearish wave I - Small cascade (small-waved, steady downtrend)

∙ High-low bearish wave V - Double bottom

① High-low Wave I

• Sell signals appearing amid a bullish wave I are invalid and lack reliability. This is

likewise for buy signals showing up amid a bearish wave I. In a case like this, it’s

necessary to wait for the triple/inverted triple peak wave’s second section or a visible

wave to form and trade only at other combinable signals.

• In the case of the bullish or bearish wave I, trading with the trend is doubtlessly

advisable.

• Representative buy signals appearing on the bullish wave I

- White candle with upper shadow (White inverted hammer)

- Bullish rickshaw man

- Bullish flying squirrel

- Evening star yang for yin

- White and morning star

- Bullish punch

- Bullish bounce

• Representative sell signals appearing on the bearish wave I

- Bearish rickshaw man

- Bearish flying squirrel

- Bearish Punch

Chart Examples

1

2

1▶2▶When mainly small-bodied candle groups move steadily upwards without forming any noticeably large wave, this suggests that the buyers are in control. Even though small waves like 1 and 2 form midway, as long as they consist mainly of small candles, the section still can be seen as the high-low bullish wave I.

T I Cⓒ t h i s i s c a n d l e . c o m

<Figure 3-1> GBP/JPY 1H Chart

2

1

3

1▶2▶Wave 1 consisting of a number of large candles formed amid a small waved, steady uptrend. Although it's not noticeably large nor choppy, it suggests that the buyers are losing momentum temporarily. However, the small-bodied candle group 2 moving steadily upwards right below the high of 1 suggests that the buyers are taking over again.

3▶Despite 2, a pullback is more likely to follow if waves made up of large candles like 3 break the immediate top price within a short interval. In order for the uptrend to continue further in this section, a small-bodied candle group moving sideways needs to come after 3.


<Figure 3-2> USD/JPY 1H Char

1

1▶When a small-bodied candle group slowly slides down like in 1, the downtrend is more likely to continue for a longer period than in the case of a strong and sudden fall composed of large candles. A single buy signal is invalid or less reliable when it appears amid small waves in a downtrend, so it's best to remain bearish until visible waves form composed of mainly large candles.


<Figure 3-3> AUD/CHF 1H Chart

4

1

3

2

1▶2▶Small candles of 1 are moving sideways along and around the previous low of an uptrend. For the price to resume an uptrend in this section, the most ideal case would be the immediate bottom price being broken suddenly by large candles, then moving in a trail like 2.

3▶4▶Forming where the timing for rise is missed right after the semi-sell signal 3 (consecutive lower-shadowed white candles), the small black spinning top 4 can be the starting point of a small-waved, steady downtrend (high-low bearish wave Ⅰ).


<Figure 3-4> GBP/USD 1H Chart

② High-low Bullish Wave Ⅱ

• The bullish wave II forms after a strong upward movement and is composed mainly of

a small-bodied candle group moving sideways resembling a flapping flag.

• Trading in the center part of the sideways section should be avoided.

• Positions should be taken only when there’s a valid buy signal near the previous or

immediate low.

• If the buy signal around the previous or immediate low is broken, shift to sell for

short-term or further observe until combinable candle signals appear amid a visible

wave.

Center part(avoid trading)

If buy signal appears near previous/immediate low à Buy

If small-bodied candle group forms above previous/ immediate high à Buy

Small-bodied candle group in sideways movement

Strong upward movement

Chart Examples

1

2

1▶2▶If a sideways movement composed of mainly small candles follows immediately after a strong rise midway of an uptrend, the trend is very likely to continue. So it's best to find a valid buy signal near the immediate low like area 2 and make a entry while avoiding trades between the high and low of section 1. Unlike in an uptrend, the bullish flag amid a downtrend is only valid when within a section favorable for buy and a certain distance away from the bottom.


<Figure 3-5> USD/CAD 30M Chart

1

2

1▶2▶Although forming after a strong rise, 1 cannot be seen as a bullish flag section because it's composed mainly of large candles. However, if small candles in a sideways movement form a small wave like section 2, this suggests that the buyers are still in charge. In result, the section from 1 to 2 can be considered as conceptually similar to the bullish flag.


<Figure 3-6> Silla (KOSPI) Daily Chart

③ High-low Bullish/Bearish Wave V

• When regarding the long-term trend, the bullish/bearish wave V is only valid when

forming at the trend’s top/bottom.

• It should be composed of large sized waves.

• It should contain a double top/bottom forming at almost the same price level.

High-low Bullish Wave Ⅴ (Double top)

Sell

High-low Bearish Wave Ⅴ (Double Bottom)

Sell

Buy

Buy

Sell

Buy

Top of uptrend

[Ideal Progress of Wave]

If previous high broken without any notable pullback waveà Strength mustered for rise

If the market lingers at above the previous high of the double top à Move further upward (short-term)

If small-bodied candle group forms even after break of the immediate low à Downtrend highly like to continue

Top of uptrend

Bottom of downtrend

If previous low broken without any notable retracement wave à Higher possibility of the downtrend to deepen

Chart Examples

4

3

1 2

1▶2▶The double top 1 and 2 made by a large wave are very likely to be followed by a break above the previous high (after a noticeable pullback), and a bearish reversal.

3▶4▶Basically, it's better to wait for a pullback down to area like 3, near the previous low, and look for buy signals. Afterwards, at 4, above the previous high, it’s possible to look for sell signals (upon a reversal wave if possible) and hold position down to below the previous low.


<Figure 3-7> Ameren (NYSE) Daily Chart

1 2

3

4

1▶2▶1 and 2 together compose a double top. But since the wave is formed mainly of small candles and candles following 2 are also mostly small, the price is less likely to turn to the downside after breaking the previous high.

3▶4▶3, the break of the immediate bottom price by a short wave, is a good place to look for buy signals and enter a trade. Meanwhile, if small candles like 4 ascend steadily towards the previous high, this means that the buying power is strong. Therefore, it's preferable to hold the position until at least a potential bearish reversal wave Ⅱ forms above the previous high.


<Figure 3-8> Samsung Fire & Marine Insurance (KOSPI) Daily Chart

1 2

3

4

1▶2▶In the case of 1 and 2 in this chart, the wave is relatively small and the two highs are at slightly different levels. As such, 1 and 2 cannot be considered as a valid double top. However, if the immediate high is pierced only by the upper shadow like 2, a break above the previous high is very likely as same as in the case of a double top (while a notable pullback may take place beforehand).

3▶4▶A strong break through the previous low took place at 3. So if a valid buy signal appears, an entry is possible here. Since the previous high was broken by a rapid wave, 4 becomes a favorable section for sell.


<Figure 3-9> Celltrion (KOSDAQ) Weekly Chart

1 2

4

3

1▶2▶The double top composed of 1 and 2 is not meaningful as the wave is too small and consists mostly of small candles. In this case, it's best to look for a buy signal at 3. And it's not necessary for the trade entered here to be closed even when the previous high is broken suddenly.

4▶After a break of the previous high in a relatively short period of time, if small candles ascend steadily like 4, this suggests that the buyers are still in control.


<Figure 3-10> Gas Oil Daily Chart

1 2

4

3

5

6

1▶2▶1 and 2 are a bit insufficient as a double top. This is because the wave is rather rapid and the rally up to point 2 was messy.

4▶5▶No buy signals can be found in area 4. If the buyers were to take control in this section, an immediate rise should follow in the trail of 5.

6▶Since the double top of 1 and 2 was ambiguous in form, the possibility of the pullback to deepen should not be overlooked. However, if combinable buy signals show up at 6, where a bullish reversal wave Ⅳ is expected to form, a long trade can be entered with the first target set above the previous high.


<Figure 3-11> Younyi Information (KOSDAQ) Weekly Chart

1 24

1▶2▶1 and 2 can be seen as a double bottom. If followed by a retracement, it's best to look for valid sell signals around the previous high, and open a trade aiming a target below the previous low.

3▶4▶Due to the strong breakout of the previous low after 3, the possibility of a bullish reversal grew very high. Accordingly, it’s possible to enter a long position at a buy signal in area 4 and hold until combinable sell signals appear amid a visible wave.

3T I Cⓒ t h i s i s c a n d l e . c o m

<Figure 3-12> EUR/USD 1H Chart

1 2

4

5

1▶2▶Candle 1 with a long lower shadow and 2 form a double bottom. Meanwhile, although the two lows were made by a noticeably large wave nearly at the same level, what is more important than the validity of the double bottom itself is how the chart movement progresses afterwards.

3▶4▶Breaking the previous high after the double bottom, 4 is a favorable section for sell. Afterwards, candles pierced the previous low only with their shadows at 5. But regarding 3, which is close to a horizontal sideways candle group (indicating the weakening of selling pressure), it's very normal for the price to head upwards after 5.

3


<Figure 3-13> KPX Chemical (KOSPI) Daily Chart

1

24

1▶2▶Because candles of 2 slightly broke the low of 1 with their lower shadows, 1 and 2 are a bit insufficient to be a valid double bottom.

3▶4▶(Although it’s a bit ambiguous to apply the standard of the double bottom,) if the previous low is suddenly broken right after the small choppy sideways section 3 there is a high possibility of a bullish reversal. Therefore, a long position can be taken at a buy signal in area 4.


<Figure 3-14> NZD/USD 1H Chart

1 2

3

4▶After 3, the price did not instantly break the previous low and instead bumped into it by a group of small candles. This suggests that the downtrend may continue further on. However, due to the influence of the double bottom and the following large retracement wave, as long as the price descends gradually forming small candles (and not appropriately-sized waves), there is still a possibility for it to turn to the upside.

1▶2▶Because a sharp rise took place after the double bottom 1 and 2, area 3 is a section favorable for sell.

4


<Figure 3-15> UIL (KOSDAQ) Weekly Chart

1 2

4 5

1▶2▶Being composed of a noticeable wave, 1 and 2 are a double bottom (at the time of formation).

3▶3 cannot be considered a meaningful wave. If the double bottom is broken immediately without any notable retracement wave, the double bottom is no longer applicable. As there was no such retracement, the downtrend is highly likely to continue.

3

4▶5▶Because the wave in between is small in size (although composed of candles with long lower shadows), 4 and 5 do not resemble a double bottom in any aspect.

6▶7▶In order for the price to reverse its direction in this section, 6 needs to be followed by another group of small candles further descending (which would be a sign that the sellers are getting exhausted). But, on the contrary, if waves like 7 form instead, the downtrend is likely to deepen.

7

6


<Figure 3-16> USD/CAD 1H Chart

4. Reversal Waves

Reversal waves are sub-waves deriving from high-low waves which are adopted for

more precisely judging where the trend can be expected to reverse. Basically, candle

signals that appear in a potential reversal wave sectin are more reliable and, in most

cases, become a critical turning point where the market decides whether to move to the

upside or downside.

Small and large-bodied candle groups are the key components that determine the type

and validity of reversal waves. In many cases, most types of reversal waves, except for

the bullish/bearish reversal wave II and bearish reversal wave IV, are valid when

composed mainly of large candles.

The 10 Reversal Wave Types

Bullish Reversal Wave Ⅰ

Bullish Reversal Wave Ⅳ

Bullish Reversal Wave Ⅱ Bullish Reversal Wave Ⅲ

Bullish Reversal Wave Ⅴ

Bullish Reversal Waves

Key Features

• Bullish/Bearish reversal waves I, II, and III are sub-waves deriving from high-low

waves.

• Bullish/Bearish reversal wave IV and V are sub-waves of bullish/bearish reversal

waves I, II, and III.

• Most reversal waves are only valid when forming after a break of the previous high or

previous low.

• The waves are highly reliable on one hour or bigger timeframe charts.

• When a valid bullish/bearish reversal wave I, II, or III is observed, the following

Bearish Reversal Wave Ⅳ Bearish Reversal Wave Ⅴ

Bearish Reversal Wave Ⅰ Bearish Reversal Wave Ⅱ Bearish Reversal Wave Ⅲ

Bearish Reversal Waves

section can be seen as favorable for buy/sell.

• When a valid bullish/bearish reversal wave I, II, or III is observed, it’s possible to wait

for bullish/bearish reversal wave IV or V to form and look for valid signals.

• After a reversal wave, if the market does not proceed as it normally should and instead

lingers, it is very likely to go in the opposite direction.

• While reversal waves raise the validity and reliability of candle signals, they are also a

reference tool that helps determine critical turning points (of the market price) but not

predicting the trend.

① Bullish Reversal Wave Ⅰ

Highly reliable Highly reliable Highly reliable

Buy signal

Buy signal

Buy signal Buy signal

Reliable Reliable

Buy signal

Buy signal

Less reliable

Buy signal

Not noteworthy Not noteworthy Not noteworthy

Buy signal

Irregular wavesNo buy signal Right above previous low

Not noteworthy

Excessively wide wave

Example of missed timing for rise

Small-bodied candle group

Buy signal

∙ The wave should be visibly large and appropriately wide.

∙ Basically, the wave is only valid amid a downtrend. In the case of an uptrend, it’s valid

only when forming a far distance away from the top, in other words, at the break of the

previous low in a deep pullback section.

∙ Besides forms that are highly reliable, the waves are considered valid only when they

form after the break of the previous low. In cases where there is no previous low nearby,

some may still be valid. But waves forming right above the previous low are not worth

taking note.

∙ When a strong upward movement completes the last leg of a bullish reversal wave I,

the following section can be favorable for buy.

∙ When a bullish reversal wave I has been observed, the trader can wait for a bullish

reversal wave IV and V to form and look for valid signals.

∙ If a buy signal appears at the second or third higher low instead of the first higher low

made by a visible large wave, it lacks reliability. If the signal is broken immediately, it’s

necessary to shift to a bearish stance.

∙ After a higher low is made by a wave, if the market does not move to the upside

immediately and instead lingers forming small candles, this suggests that the timing for

rise is being missed. Thus, it is inevitable for the market to fall below the previous low

before it can try to rise again. If this attempt for rise is failed as well, the downtrend will

likely deepen.

Chart Examples

1▶2▶1 is a good example of an ideal bullish reversal wave Ⅰ. A buy signal appeared at 2, the break of the previous low, and the visible wave of 1 was observed afterwards. Another buy signal (twisting black candle) appeared in the short horizontal sideways section 3. Generally, buy signals in such a location can be considered the more reliable when preceded by an upward movement and downward movement consisting of large candles.

3

2

1


<Figure 4-1> CAD/JPY 1H Chart

1

2

4

3

4▶5▶It's possible to look for buy signals in area 4, which is the potential support area of 2 and where the last leg of the bullish reversal wave I is expected to begin. But if the wave dips down to below 5, it can no longer be considered as a bullish reversal wave I.

5

1▶2▶1 is close to a bullish reversal wave Ⅴ. Since 2 (morning star) was completed a distance below the previous low, it is not a buy signal at the time of formation (despite being under the influence of 1). But it became noteworthy after a visibly large wave like 3 formed immediately afterwards.


<Figure 4-2> Sungwoo Hitech (KOSDAQ) Daily Chart

13

5

2

6

7

1▶2▶Due to section 2, similar to an M wave, the buy signal 3 (bullish sisters), which appeared at a higher low made by a wave, has become the more reliable.

4▶5▶Another buy signal 4 (white highwave) appeared after 3 at the second higher low. But since its bottom price was broken, the previous low was more likely to be penetrated.

4

6▶7▶After 4, the price broke deep down below the previous low. In such a case, the price is likely to show a choppy movement before heading upwards. Accordingly, it's possible to look for sell signals above the previous high, especially amid a bearish reversal wave Ⅱ like 6. 7 cannot be seen as a higher low made by a wave because it's too close to the previous low.


<Figure 4-3> USD/CHF 30M Chart

② Bullish Reversal Wave Ⅱ

Not noteworthy

Large wave

Highly reliable

Buy signal

Less reliable

Buy signal

Not noteworthy


∙ The waves should be relatively small in size.

∙ If the wave is too large, it can be applied to supplement insufficient high-low waves or

reversal waves. But it is not itself worth taking note.

∙ It can be applied in both an uptrend and downtrend. But in most cases, it is only valid

when forming after the break of the previous/immediate low.

∙ When a bullish reversal wave II has been completed by a strong upward movement,


∙ When a bullish reversal wave II has been observed, the trader can wait for bullish

reversal wave IV or V to form and look for valid signals.

∙ After a buy signal, if the market does not immediately move to the upside and instead

lingers forming small candles, this means that the timing for rise is being missed and as

such the downtrend is more likely to deepen.

Chart Examples

1

T I Cⓒ t h i s i s c a n d l e . c o m1▶2▶After a strong break of the previous low, if the

immediate bottom price is quickly broken within a short interval by a small wave, it's best to make an entry at a buy signal in area like 2. When the previous low is broken and then the immediate bottom price broken by large candles within a short interval, this does not suggest a strong selling pressure but is more likely to be intended by institutions to stop-hunt existing buyers while attracting new sellers in order to sell their former short positions at a favorable price and aim another stop-hunt.

2


1

2

3

1▶2▶After a break deep below the previous low, the immediate bottom price was broken suddenly by large candles like 2. In such a case, it's possible to look for buy signals afterwards.

3▶Basically, a strong rise should come after the bearish reversal waves Ⅰ, Ⅱ, and Ⅲ. Meanwhile, it's still acceptable for the bullish reversal waves Ⅰ, Ⅱ, and Ⅲ to be followed by small candles moving steadily upwards like 3.


<Figure 4-5> Gold 30M Chart

1


1▶2▶A wave like 2 forming after the break of the previous low that is rather large in size and mainly composed of long-shadowed candles cannot be seen as a bullish reversal wave Ⅱ. Accordingly, buy signals appearing in section 3 are less reliable. Therefore, it’s safer to enter a buy position below the signal’s bottom price or watch further.

3


③ Bullish Reversal Wave Ⅲ

Highly reliable Reliable Reliable

Buy signal Buy signal Buy signal

Less reliable

Large/Rapid waves

Not noteworthy


Buy signal

∙ The wave is valid as long as it’s not excessively large in size.

∙ A bullish reversal wave III is valid only when it’s completed by a strong upward

movement mainly of large candles.

∙ In some cases, the bullish reversal wave II can develop into the bullish reversal wave

III. However, the more reliable the bullish reversal wave II was, the lower the possibility

is for the market to turn to the upside if the wave proceeds into a bullish reversal wave

III.

∙ It can be applied to both an uptrend and downtrend. But in most cases, it is only valid

when forming after the break of the previous/immediate low.

∙ When a bullish reversal wave III has been completed by a strong upward movement,


∙ When a bullish reversal wave III has been observed, the trader can wait for bullish

reversal wave IV and V to form and look for valid signals.

∙ After the wave’s last leg, if the market does not move further upwards nor ascends

steadily by a small-bodied candle group and instead lingers forming small candles, it’s

an indication that the timing for rise is being missed. In this case, it is inevitable for the

market to fall below the previous low before it can try to rise again. If this attempt to

rise is failed as well, the downtrend will likely deepen.

Chart Examples

4 5

2

1▶2▶The rapid wave section 1 is not related to the bullish reversal wave Ⅱ in any aspect. But 1 and the following wave 2 together suggest a possibility of the development of a bullish reversal wave Ⅲ. Accordingly, buy signals that show up in area 3 and following sections are highly reliable.

1

4▶5▶Candle signals appearing at higher lows made by waves like 4 and 5 are much less reliable than when appearing at 3. If the closing price of the buy signals are broken immediately by the following candles, it's necessary to shift to a short-term sell position.


3

<Figure 4-7> Dow Jones Industrial Average Index Futures Weekly Chart

④ Bullish Reversal Wave Ⅳ

Highly reliable

Buy signal

Buy signal

Not noteworthy

Small waves

Not noteworthy Not noteworthy

Mere retracement section of downtrendLarge/Rapid waves

∙ The wave should be composed of waves that are visibly large enough to be countable.

However, excessively large waves are not worth referring to as a base of interpretation.

∙ The wave is valid only after a bullish reversal wave I, II, or III is observed at the low of

a downtrend or when it forms amid a straight upward movement of an uptrend.

∙ The wave is highly reliable when forming after a strong upward movement composed

mainly of large candles.

∙ A buy entry can be made if a valid buy signal appears at the second or third break of

the immediate low/bottom price. Or, when a signal for buy is expected to form with the

completion of the next candle, for example, when the bearish flying squirrel is expected

to develop into a yang for yin pattern, it’s possible to enter a trade in advance based on

this anticipation.

∙ If the immediate low/bottom price is broken for the fourth time, the wave is no longer

valid. Rather, the market is likely to go further downwards.

Chart Examples

2

3

1

1▶2▶Forming amid an uptrend, 1 is an ideal form of the bullish reversal wave Ⅳ. Therefore, if a bullish bounce or a signal that can be expected to develop into a yang for yin pattern appears in area 2, it's possible to make a buy entry in advance under this assumption, or buy signals can be searched for by cross checking with smaller timeframe charts.

3▶4▶When a bullish reversal wave Ⅳ is observed, the area where the immediate low is broken for the second or third time by a small wave can be a favorable section for buy. If the price does not turn to the upside right after 3, it's necessary to shift to a bearish stance as the downtrend is likely to begin in a trail like 4.

4


<Figure 4-8> Morgan Stanley (NYSE) Daily Chart

2

1▶2▶Forming lower highs and lower lows, 1 is a potential bullish reversal wave Ⅳ and not a triple peak wave section. If candle signals that can develop into yang for yin patterns, such as the bearish flying squirrel or bearish punch, show up at 2, it’s possible to make a buy entry in advance based on the anticipation that the next candle will be white.


<Figure 4-9> Amazon.com (NASDAQ) Daily Chart

⑤ Bullish Reversal Wave V

Highly reliable Reliable Partially reliable

Buy signal

Large-bodied candle group

Buy signal

Buy signal

When near top of uptrend

Partially reliable Partially reliable Not noteworthy

Buy signal

When rightside high is lower

Buy signal

When in a downtrend When the leftside high is lower

Not noteworthy Not noteworthy

Right above previous low When breaking immediate low

∙ The wave should be shaped like the letter M with the two highs at almost same price

level.

∙ In the case where the high on the right side is noticeably lower than the left side, in

other words, when the wave is insufficient in form, it’s necessary to apply the concept of

bullish reversal wave II below the previous low and only buy signals in this location are

considered valid.

∙ When a bullish reversal wave V is observed and a valid buy signal appears, the first

target can be set above the top.

∙ The wave is valid only after a bullish reversal wave I, II, or III is observed at the low of

a downtrend, or when forming amid the pullback section of an uptrend. Meanwhile, it

should be located a far distance from the top.

Chart Examples

2

1

1▶2▶From a bigger perspective, the price was previously in an uptrend and the bullish reversal wave Ⅴ of 1 formed in the pullback section. In such a case, taking a mid to long-term buy position is possible after a valid signal appears below the previous low. As 2 is a horizontal sideways section, buy signals appearing within it are the more reliable.


<Figure 4-10> KOSPI 200 Index Futures 1H Chart

1

3

2

1▶2▶In terms of form, 1 is a potential bullish reversal wave Ⅴ, but not reliable as it's very near the previous high. In this case, it's safer to just keep watch even if a buy signal appears at 2.

3▶As the reliability of 1 is limited, the concept of the bullish reversal wave Ⅱ needs to be applied here (though not ideal in form). Accordingly, buy signals that appear in area 3 can be considered much more reliable than signals in 2.


<Figure 4-11> Binggrae (KOSPI) Weekly Chart

1

2

3

1▶2▶Because the second high of the M wave 1 is slightly lower than the first, it cannot be seen as an ideal bullish reversal wave Ⅴ. In such cases, it’s necessary to apply the bullish reversal wave Ⅱ and look for a buy signal in area like 2.

3▶Since a buy signal (evening star yang for yin) appeared at 2 and was followed by an immediate rise, the following section can be considered as favorable for buy. Accordingly, it's possible to look for an additional buy signal at 3 where a bullish reversal wave Ⅳ is expected to develop.


<Figure 4-12> SK Hynix (KOSPI) 1H Chart

1

3

2

1▶The second high being relatively higher than the first, 1 cannot be considered a valid M wave.

2▶3▶In the case of 2 also, the second high is higher than the first, and furthermore, as seen in 3, the second low is too close to the first low. Thus, 2 is not worth taking note. Basically, when the second high is higher than the first, as in 1 and 2, this means that the bearish momentum is strong.


<Figure 4-13> AUD/USD 1H Chart

⑥ Bearish Reversal Wave Ⅰ

Not noteworthy

Large wave

Reliable

Sell signal

Highly reliable

Sell signal

Not noteworthy


Not noteworthy


∙ The wave should be not too large and not too small.

∙ In most cases, the wave is valid when it forms at the previous high of an uptrend or at

the previous high amid the retracement section of a downtrend.

∙ The wave is also valid when forming right below the previous high of an uptrend,

especially at an area which is conceptually the same as the high of the triple peak wave’s

second section.

∙ When a bearish reversal wave I has been completed by a strong downward movement,

the following section can be favorable for sell.

∙ When a bearish reversal wave I has been observed, the trader can wait for bearish


∙ Unlike in the case of the bullish reversal wave I, the wave must be completed by a

strong fall composed mainly of large candles. If, instead, the market lingers forming a

small-bodied candle group, it is more likely to eventually move to the upside (though

before it there may be a short pullback).

Chart Examples

1

2

3

4

1▶2▶After a strong rise was followed by a small-bodied candle group in a sideways movement, large candles suddenly appeared in section 2. As a strong fall has been observed afterwards, 1 is acceptable as a bearish reversal wave Ⅰ.

3▶4▶As the bearish reversal wave Ⅰ has been confirmed at the top, the trader can look for a valid sell signal in area like 4 where the bearish reversal wave Ⅳ is expected to develop. Only visible waves that are large and broad like 3 are countable as the bearish reversal wave Ⅳ.


<Figure 4-14> EUR/USD 30M Chart

13

2

1▶Forming amid an uptrend, 1 is similar in concept with the bearish reversal wave Ⅰ. But it's relatively not as reliable as the ideal form (because it's composed mainly of small candles and the downward movement at its last leg is not strong enough). So it's more effective to wait for buy signals after the timing for fall is missed.

2▶3▶Since 1 is insufficient, it's necessary to add a wave, which is the same as the bearish reversal wave Ⅱ in concept, to the bearish reversal wave Ⅳ. In this case, (if the price were to turn to the downside here) it should move in the trail of 2. But instead a sideways small-bodied candle group formed as in 3 and this indicates a strong buying power. T I C

ⓒ t h i s i s c a n d l e . c o m

<Figure 4-15> Silver Weekly Chart

⑦ Bearish Reversal Wave Ⅱ

Not noteworthy

Large wave

Reliable

Sell signal

Highly reliable

Sell signal

Not noteworthy


∙ The waves should be relatively small in size.

∙ If the wave is too large, it can be applied to supplement insufficient high-low waves or

reversal waves. But it is not itself worth taking note.


when forming after the break of the previous/immediate high.

∙ When a bearish reversal wave II has been completed by a strong downward movement,

the following section can be favorable for sell.

∙ When a bearish reversal wave II has been observed, the trader can wait for bearish


∙ The wave must be completed by a strong fall composed mainly of large candles. If,

instead, the market lingers forming a small-bodied candle group, it is more likely to

eventually move to the upside (though before it there may be a short pullback).

Chart Examples

2

1

3

1▶2▶Though small in size, a choppy section like 1 formed immediately after the break of the previous high. As it appeared right after 1, 2 (evening star) can be a semi-sell signal where an entry is possible based on the expectation of a bearish reversal wave Ⅱ to be completed.

3▶4▶As 2 was not directly followed by a strong fall confirming the bearish reversal wave Ⅱ, the bearish reversal wave Ⅳ and Ⅴ are no longer applicable. Yet, the trader can hold sell position until valid buy signals appear or pull out at 4 if a visible wave like 3 forms.


4

<Figure 4-16> KOSPI 200 Index Futures 30M Chart

13

5

4

2

1▶2▶A bearish reversal wave Ⅱ like 1 was observed. But the timing for fall was missed right after 2 where a bearish reversal wave V could be expected to be completed, and instead small candles moved sideways.

3▶A strong fall came immediately after 3. But as the top price of 1 was already broken at 3, the price is more likely to return to the upside (though a short pullback may take place).

4▶5▶There are no valid buy signals in 4 after a strong breakout of the previous low. In such a case, considering the possibility of a bullish reversal wave Ⅱ to form, it's recommendable to take a mid to long-term position at buy signals in area like 5.


<Figure 4-17> S&P 500 Index Futures 1H Chart

⑧ Bearish Reversal Wave Ⅲ

Reliable

Large/Rapid waves

Sell signal

Highly reliable

Sell signal

Highly reliable

Sell signal

Not noteworthy


∙ The wave is valid as long as it’s not excessively large in size.

∙ In many cases, the bearish reversal wave II can develop into the bearish reversal wave

III.


when forming after the break of the previous/immediate high.

∙ When a bearish reversal wave III has been completed by a strong downward

movement, the following section can be favorable for sell.

∙ When a bearish reversal wave III has been observed, the trader can wait for bearish


∙ The wave must be completed by a strong fall composed mainly of large candles. If,

instead, the market lingers forming a small-bodied candle group, it is more likely to

eventually move to the upside (though before it there may be a short pullback).

Chart Examples

2

1

1▶2▶A bearish reversal wave Ⅲ has been observed crossing over the previous high (it can also be seen as a bearish reversal wave Ⅰ). In general, the wave is the more reliable when composed of sudden large candles like in area 2 and a strong fall afterwards.

3▶It's possible to make a sell entry at a valid sell signal at 3, where a bearish reversal wave Ⅴ is expectable, and the first target can be placed below the previous low. In this case, small waves conceptually similar to the bearish reversal waves Ⅰ and Ⅱ may possibly form in section 3.

3


<Figure 4-18> EUR/USD 1H Chart

⑨ Bearish Reversal Wave Ⅳ

Highly reliable

Sell signal

Bearish reversal wave I, II, III


∙ The wave is valid only after a bearish reversal wave I, II, or III is observed at the high of

an uptrend.

∙ Shortly after a sell signal, if the market does not head downwards and instead lingers

forming a small-bodied candle group, this means the timing for fall is being missed, In

most cases, a choppy section comes next before the market goes up.

⑩ Bearish Reversal Wave V

Highly reliable Reliable

Sell signal


Sell signal


Example of missed timing for fallNot noteworthy

When wave not noticeable in size

Bearish reversal wave I, II, III Bearish reversal wave I, II, III

Buy signal

Choppy wave


∙ The wave is valid only after a bearish reversal wave I, II, or III is observed at the high of

an uptrend.

∙ Shortly after a sell signal, if the market does not head downwards and instead lingers

forming a small-bodied candle group, this means the timing for fall is being missed, In

most cases, a choppy section comes next before the market goes up.

∙ If a valid sell signal appears where a bearish reversal wave V is expected to form, it's

possible to set the first profit target below the previous low.

∙ When a bearish reversal wave V is observed and a sell signal appears, the first target

can be set below the previous low.

Chart Examples

2

1▶2▶The bearish reversal wave Ⅱ of 1 was observed at the top of an uptrend. So, at point 3, where a bearish reversal wave Ⅴ like 2 (which is similar to a bearish reversal wave Ⅳ) can be expected to be completed, an entry is possible at a sell signal with the first target price set below the previous low.

1


<Figure 4-19> EUR/CHF 30M Chart

1

3

4▶As strength mustering section 4 formed right above the previous low, it's better to keep short position until at least the immediate low / bottom price is broken by a wave below the previous low.

2

4

1▶2▶A bearish reversal wave Ⅰ was observed at the top. So a sell signal can be looked for in section 3, where a bearish reversal wave Ⅴ is expected to be completed.


<Figure 4-20> EUR/JPY 30M Chart

1

3

1▶2▶A bearish reversal wave Ⅱ like 1 was observed. Afterwards, at 2, the timing for fall was missed instead of a bearish reversal wave Ⅴ being completed and the top price of 1 broken. Accordingly, though a pullback takes place the uptrend is likely to continue further on.


3▶Accordingly, it's possible to open a trade at valid buy signals in section 3. In such a case, a buy position can be kept at least until a potential bearish reversal wave Ⅱ forms above the previous high.

2

<Figure 4-21> SM (KOSDAQ) Daily Chart

5. Triple Peak Wave / Inverted Triple Peak Wave

The triple peak wave / inverted triple peak wave is an important component of the

Candle Timing Strategy and is used along with the reversal wave as a basic element for

determining the validity and reliability of candle signals.

In live charts, the triple peak / inverted triple peak wave does not appear often in the

ideal form but, in most cases, in similar shapes that are conceptually applicable.

Therefore, trying to match waves on charts with standard shapes is not helpful. As you

become more and more obsessed with wave “lines,” it will become the more difficult to

understand the hidden concept of the triple peak/inverted triple peak wave, which is

“trade only when the timing is ripe.” Therefore, you will likely end up repeating the habit

of predicting the trend (by drawing the wave line).

In this context, the triple peak wave / inverted triple peak wave tells us the basic

attitude a trader should pursue and attain. For instance, trading against a strong and

straight trend is mostly reckless and inefficient. In many cases, it’s safer and more

effective to wait for waves to form and trade mainly in sections where the power balance

between the buyers and sellers becomes more obvious. By acquiring an in-depth

understanding of the triple peak / inverted triple peak wave, you can naturally gain the

patience and capability to observe the chart movement with serenity.

The 6 Types of Triple Peak Waves / Inverted Peak Waves

Amid straight upward movement

Triple peak wave's 1st section Triple peak wave's 2nd section

Amid straight downward movement

Inverted triple peak wave's1st section

Inverted triple peak wave's2nd section

Valid Triple Peak Waves / Inverted Triple Peak Waves

Below are examples of the triple peak waves / inverted triple peak waves that are valid

and those that are not. For both the triple peak wave and inverted triple peak wave to

be valid, the first leg should respectively be a strong upward or downward movement

composed mainly of large candles.

Appropriately-sized waveSmall wave, but mainly

composed of large candles

Large wave Wide wave

Wave making higher highs & higher lows

Wave making lower highs& lower lows

Rapid wave

[Valid Triple Peak Waves]

[Valid Triple Peak Waves in Limited Cases]

[Invalid Triple Peak Waves]

Appropriately-sized waveSmall wave, but mainly

composed of large candles

Large wave Wide wave

Wave making lower highs & lower lows

Wave making higher highs& higher lows

Rapid wave

[Valid Inverted Triple Peak Waves]

[Valid Inverted Triple Peak Waves in Limited Cases]

[Invalid Inverted Triple Peak Waves]

If too large in size or too wide in width, the waves are only partly valid. In other words,

buy or sell signals that appear in the second section of such a wave are less reliable

compared to when in the triple peak wave / inverted triple peak wave of a typical form.

Places of Formation

Strong & straight upward movement

Triple peak wave section

Inverted triple peak wave section


Strong downward movement




Strong & straight downward movement






Chart Examples

4

12

3

1▶2▶Forming right after a strong fall like 1, 2 is a typical inverted triple peak wave (where the wave's highs and lows are all at similar levels).

3▶4▶Appearing at 3, the low of the inverted triple peak wave's 2nd section, 4-A (bullish rickshaw man) can be a buy signal and also a timing for fall as a critical turning point. (The critical turning point is a pivot point where the market is likely to decide whether to continue in the prior trend or reverse it. The trader can shift positions here if the market goes the opposite direction of the signal.)

A5


5▶Basically, sell signals at the high of the triple peak wave / inverted triple peak wave's 2nd section need to be immediately followed by a fall. Meanwhile, as for buy signals at the low of the 2nd section, they're still acceptable when a slow rise like 5 comes next.

<Figure 5-1> Microsoft (NASDAQ) Daily Chart

1

3

2

1▶2▶The inverted triple peak wave section 1 formed after a strong breakout of the previous low. But the location of 2 cannot be seen as the high of the wave's 2nd section (the wave is rather rapid and the high is not high enough).

3▶4▶4 is acceptable as the low of the wave's 2nd section. Being completed after candles of 3 with long lower shadows, 4, black candle with upper and lower shadows + white candle similar to the white highwave, can be considered as a buy signal and a critical turning point.

5

4

5▶Since it consists of only a single long-bodied white candle, 5 should not be seen as a triple peak wave section but a small-bodied candle group (in a section favorable for buy starting from 4) which suggests a possibility of the price to continue to upwards.



1▶2▶Forming amid a small-waved, steady downtrend, wave 1 is not worth taking note. For a small wave like 1 to become an inverted triple peak wave, the wave should proceed into a relatively large size like 2.

4

3

16

3▶4▶4 is the low of the inverted triple peak wave's 2nd section made by the wave of 3. But, since there were no candle signals, 4 has no meaning. Meanwhile, a location like 5 can be the high of a typical inverted triple peak wave's 2nd section.

2

5

6▶The steep slope section 6 passing through the immediate low does not suggest the weakening of selling pressure. This is because it formed amid a small-waved, steady downtrend and continued on after breaking the low of the inverted triple peak wave.


<Figure 5-3> AUD/NZD Daily Chart

3

1

4

2

3▶4▶Forming after a sudden rise, 3 is a typical triple peak wave. A sell signal appearing in the wave's 2nd section should be immediately followed by a strong fall like 4 (to verify the validity of the signal).


1▶2▶1 is not a typical triple peak wave but can be seen as similar in concept. Accordingly, a sell signal appearing in 2, which would be the high of the triple peak wave's 2nd section, can be valid and also a critical turning point.

<Figure 5-4> Gold 1H Chart (1)

5

6▶If a sell signal in a typical triple peak wave section is followed immediately by a strong fall composed mainly of large candles like 6, the first target should be set at least below the previous low.


5▶Though it's not a typical triple peak wave, if the semi-sell signal at the high of the wave's 2nd section is not followed by a strong fall and instead a gradual move down like 5 mainly composed of small candles (which means that the timing for fall is being missed), the uptrend is more likely to further continue.

<Figure 5-5> Gold 1H Chart (2)

2

1

3

1▶2▶Although 1 is a very small wave section consisting mainly of small candles, if some particular patterns composed mainly of large candles like 2 appear, the section can be considered conceptually the same as the triple peak wave's 2nd section.

3▶In order for the price to turn to the downside here, a strong fall like 3 should follow immediately.


<Figure 5-6> EUR/USD 1H Chart (1)

2

4▶Instead of falling right after 2 as it normally should, if the price moves sideways as in 4, this means that the buyers are still in control (as the intervention of sellers has not been observed since 2).

4


<Figure 5-7> EUR/USD 1H Chart (2)

2

1

3

1▶Alhtough 1 is composed of relatively rapid waves, it can still be seen as a triple peak wave section. Basically, aside from form, a triple peak wave can be identified by the existence of valid candle signals in its 2nd section.

2▶3▶Moving sideways mainly by small candles with no visible wave, 2 cannot be considered as an inverted triple peak wave section. 3 also is not any particular wave section. Both 2 and 3 do not contain any candle signals as well.


<Figure 5-8> KECC (KOSPI) Daily Chart

1

2

A

B

1▶Though 1 is rather a large and wide wave section, it can be considered as an inverted triple peak wave if valid candle signals appear at A and B.

2▶2 is a typical triple peak wave section.



13

3▶Right after the break of the previous high of 1, a sell signal (evening star yang for yin + black candle) formed at 3. Accordingly, a mid to long-term sell position can be entered here.


1▶2▶A strong fall took place while no signals appeared at 1, the high of the triple peak wave's 2nd section. Afterwards, a buy signal (bearish punch yang for yin + white spinning tops) showed up at 2, below the immediate low, which can also be seen as the low of the triple peak wave's 2nd section.

2

<Figure 5-10> Shenzhen Stock Exchange (SZSE 100) Index Futures Daily Chart

12

1▶2▶In the case of an excessively large wave section like 1, an additional small-sized triple peak wave or a wave that is conceptually the same as the bearish reversal wave I, Ⅱ, or Ⅲ needs to form in the pink box 2 in order to raise the reliability of the candle signal (as a critical turning point).



Summary

• Aside from the typical form, there are many derivations. Thus, a conceptual

understanding is more important than the recognition of the standard form.

• The triple peak wave / inverted triple peak wave’s first and second sections are short-

term meandering sections composed mainly of large candles.

• In many cases, the high and low of the triple peak wave / inverted triple peak wave’s

2nd section becomes the critical turning point.

• If a critical turning point is followed by a movement in the opposite direction of the

signal, in most cases, it’s possible to shift positions from buy to sell or vice versa.

• Counter-trend trading must be avoided amid a straight upward or downward

movement.

• The triple peak wave/inverted triple peak wave is partially similar in concept to the

bullish/bearish reversal wave III.

• The triple peak wave / inverted triple peak wave section is the more reliable the

closer they are to a horizontal sideways movement.

• A wave that rapidly forms a higher high or lower low is not a triple peak wave /

inverted triple peak wave.

• A rapid wave that is narrow in width cannot be seen as a triple peak wave / inverted

triple peak wave section.

9. Timing Candle Signals

Among the candle signals described in the TIC Trading Theory, the few that borrow

their names from conventional markets are listed below.

∙ Doji

∙ (White/Black) Spinning Top

∙ (White/Black) Hammer

∙ White (Inverted Hammer)

∙ (White) Highwave

∙ Morning Star/Evening Star

∙ Bullish/Bearish Rickshaw Man

∙ Hanging Man

∙ Shooting Star

Aside from the candle patterns mentioned above, other common patterns such as the

Engulfment, Harami, and Tasuki are not featured at all in the TIC Trading Theory. Even

patterns whose names are borrowed are completely new in concept and nature. For

example, the evening star is commonly known as just a bearish reversal signal.

Meanwhile in the TIC Trading Theory, the pattern can be interpreted largely into three

types of signals according to its characteristic. Generally, the characteristic of a candle

pattern depends on 1) the size of the candles, 2) the length of the shadows, 3) its

location, 4) whether or not there were preceding signals, and 5) signals following it. In

addition, the location of signals is further categorized based on the high-low lines and

the three main wave types, as well as what kind of candle group the signal appeared in.

Therefore, the candle signals of the TIC Trading Theory should not be analyzed merely

based on form as in the conventional approach.

All other candle signals not mentioned here but included in the TIC Trading Theory are

totally new and ingenious creations.

The 25 Candle Timing Signals

(a)

(1) Upper-shadowed Black Candle(s)

(b) (c)

(d) (e) (f)

(a)

(2) Lower-shadowed Black Candle(s)

(b) (c)

(d)

(a)

(3) Upper-shadowed White Candle(s)

(b) (c)

(d) (e)

(a)

(4) Lower-shadowed White Candle(s)

(b) (c)

(d) (e)

(a)

(7) Bullish Flying Squirrel / Bullish Flying Squirrel Yin for Yang

(b)

(d)

(a)

(8) Bearish Flying Squirrel / Bearish Flying Squirrel Yang for Yin

(b)

(a)

(5) Bullish Rickshaw Man / Impatient Rickshaw Man

(b) (a)

(6) Bearish Rickshaw Man

(c) (c)

(d)

(e)

(a)

(9) Evening Star / Evening Star Yang for Yin

(b) (c) (a)

(10) Morning Star / Rising Morning Star / Falling Morning Star

(b) (c)

(d)

(a)

(11) Bullish Sisters

(b) (a)

(12) Bearish Sisters

(b)

(a)

(13) Bullish Charge Yin for Yang

(a)

(14) Bearish Charge Yang for Yin

(b)

(a)

(15) Bullish Punch / Bullish Punch Yin for Yang

(b) (a)

(16) Bearish Punch / Bearish Punch Yang for Yin

(b)

(a)

(17) Bullish Punch after Black Candle

(b) (a)

(18) White Highwave

(a)

(19) White Spinning Top

(a)

(20) Long and Long Tail

(a)

(21) Mini Slanted W

(a)

(22) Engulfing Brothers

(a)

(23) Three Black Candle Sisters

(a)

(24) Twisting Black Candles

(b) (a)

(25) Crab

(e)

(c)

Family Tree of Candle Signals

Bearish Flying SquirrelLong and Long Tail

White HighwaveBullish Punch

after Black Candle

Morning Star

Bullish Sisters

Lower-shadowedWhite Candle

Lower-shadowedBlack Candle

Lower-shadowedBlack Candle(s)

Twisting Black Candles

Long Lower-shadowed White Candle

Long Lower-shadowed Black Candle

CrabMini Slanted W

Engulfing Brothers Bullish Bounce

Bearish Rickshaw Man

Rising Morning Star

Twin Black Tails

Bearish Flying Squirrel Yang for Yin

Mutated Bearish Flying Squirrel

Falling Morning Star

Evening Star

Evening StarYang for Yin(1)

Evening StarYang for Yin(2)

Bearish Sisters

Bullish ChargeYin for Yang

Bullish Charge

Upper-shadowedBlack Candles

White Spinning Top


Bullish PunchBullish PunchYin for Yang

Bullish Punch after Black Candle


Lower-shadowedWhite Candles

Upper-shadowedWhite Candles

Small Black Candle with Upper Shadow

Upper-shadowedBlack Candles

Bearish PunchBearish PunchYang for Yin

Bearish ChargeYang for Yin

Long-shadowedCandle Group(1)




Impatient Rickshaw Man

Lower-shadowedBlack Candles

Bullish Flying SquirrelYin for Yang

Bullish Rickshaw Man

Bullish Flying Squirrel

9-17. Bullish Punch after Black Candle

Bullish Punch after Black Candle(1)

When a white candle with upper shadow and a white candle with lower shadow form

consecutively after a noticeably large black candle, it can be considered a buy signal.

The white candles' real bodies should be of an appropriate size and the signal is the

more reliable when the last white candle’s lower shadow stretches down the lowest.

The signal is valid when it appears right below the previous/immediate low of a

downtrend or in the inverted triple peak wave’s first or second section. When amid a

pullback section far below an uptrend's top, it’s valid only when preceded by a short

meandering candle section.

Bullish Punch after Black Candle(2)

The bullish punch after black candle turns into a sell signal when it appears at the top of

an uptrend or very near it (which cannot be seen as a valid location for a buy signal).

Valid Locations

High of triple peak wave's 1st & 2nd sections

<Bullish Punch after Black Candle as Buy Signal>

Low of inverted triple peak wave's 1st & 2nd sections

Break of previous/immediate low of downtrend

<Bullish Punch after Black Candle as Sell Signal>

Pullback section of uptrend

Chart Examples

<Figure 9(17)-1> EUR/JPY 1H Chart (1)

1▶2▶Being completed as soon as the downtrend's previous low was broken by large candles, 1 can be a buy signal. Meanwhile, since the last white candle is a little too large, it's safer to open a long position in area like 2.

1

3▶4▶3 to 6 are examples of the typical bullish punch after black candle. The pattern is the more reliable when the last white candle's lower shadow stretches down the lowest.

3 4

5 6

Stop

2



7▶8▶Though the price did not go up right after 1 and instead lingered in section 7, a buy entry is still possible at the small lower-shadowed white candle 8 that formed along the group of white spinning tops.

1

Stop

2

7

119

10

8

9▶10▶The bullish rickshaw man 10 showed up along a wave like 9. If the first white candle's opening price, or 11, is broken within the next one or two candles, it's possible to open a short trade. Although the price went up after 1, it was natural for it to turn back to the downside when considering the meaning of 7.



<Figure 9(17)-4> Australia ASX 200 Index Futures 1H Chart (1)

2

1▶2▶2, which did not appear in locations like 1, is not valid as a buy signal. As it's also insufficient in terms of form, even if the price may retrace back upward but is more likely to resume a downward movement.

1



2

3▶The price did not go down right after the first black candle (bullish bounce) of 2, whose open or real body's mid-point can be the potential support area, and instead a small meandering candle group with long shadows followed. Opening a short-term buy position is possible at the lower-shadowed white candle 3, which closed higher than the previous candles.

3

4

4▶5▶In this case, it would be best to wait for a primary bearish wave like 4 to form and look for sell signals in area 5.

5



<Figure 9(17)-7> GBP/JPY 1H Chart (1)

1▶2▶A long entry is possible at 2 at a higher low made by a wave. However, considering that the last white candle's lower shadow is a bit long and section 1 being composed of mainly small candles, it's safer to open the trade at 3, below the bottom price of 2.

2

1

3



4▶5▶As the price did not go up directly after 2 and instead small candles moved sideways like 4, there was a high possibility for the price to break below the previous low. The long lower-shadowed black candle 5 in such a location can be considered a short-term sell signal.

2

57

43

6

7

6▶7▶Though 2 is followed by an immediate upward movement, if a small bodied candle group moves sideways at 6, this means that the timing for rise is being missed temporarily. However, if the price suddenly breaks below the previous low, there's still a high chance of a bullish reversal.



8▶As the previous low was suddenly broken while there was no upward movement right after 2 and instead small candles moving sideways like 4, the price is likely to eventually turn back to the downside after retracing a considerable distance up. Accordingly, a shift to short-term buy is possible at the morning star 8. But since the pattern formed quite low below the previous low, it's safer to open the trade around the last white candle's opening price.

2

5

4

7

9▶If the immediate high is broken within a short interval, it's preferable to pull out at a point like 9. Although the price may meander briefly afterwards, it will more likely resume to the downside and break below the previous low when regarding the criteria of 2 and 4. 8 Stop

9



<Figure 9(17)-11> AUD/NZD 1H Chart (1)

1▶When a candle group like 1 forms a small wave slightly bumping into the previous low and the immediate bottom price is broken, the downward movement will probably deepen at least for a short while.

1 2▶2 is not a buy signal due to the influence of 1 and because it's far below the previous low. The pattern is also invalid in form as the last white candle's upper shadow is a bit long. The basic strategy for such a case would be to look for a sell signal when a retracement occurs.

2

3

3▶Based on the criteria of 1 and 2, the small upper-shadowed white candle 3, which closed higher than the previous meandering candles, is likely to be a mere whipsaw. So an immediate sell entry is possible here. But if the next candle is white, it's necessary to pull out and further observe as there's a high chance for the price to meander for a short period.



4▶The doji 4 with a long upper and lower shadow that showed up amid a small-bodied candle group moving straight downwards is a sign that the sellers have begun to lose momentum.

1 5▶The black spinning top 5-A that closed lower than the previous meandering candles, mainly large, is very likely to be a whipsaw (to attract new sellers into the market). Therefore a long trade can be opened. If the next candle is black, it's necessary to pull out and look for a short entry point above the top price of 5-A.

2

3

4

A

5



<Figure 9(17)-14> Dow Jones Industrial Average Index Futures Weekly Chart (1)

1▶The bearish punch yang for yin 1 that appeared in a sudden pullback section of an uptrend is not worth taking note at the time of formation.


2

1

2▶2, which was preceded by a short meandering candle section including 1, can be an immediate buy signal. However, if the next candle is black, shifting to a short position is needed as there's a high chance of the price to go further down.



3▶The pullout is possible at 3, completed at the break of the previous high. But 3 is insufficient as a sell signal because the first black candle is too small.

Stop

3

2


<Figure 9(17)-17> London Stock Exchange (FTSE 100) Index Futures Daily Chart (1)

2▶3▶The bullish punch after black candle 2 that formed at the top of the uptrend can be considered a sell signal. In many cases, the signal is followed by a black candle, and that with an upper shadow like 3, so it's preferable to open a short trade a little bit above the close of the last white candle.


1

2

3

1▶1 is not worth taking into consideration as it showed up in a mere meandering section and the first black candle is too small. Basically, the bullish punch after black candle, either a buy or sell signal, should have the second and third white candle's real bodies enclosed within the first black candle's real body.


4▶Although 2 was followed by a white candle, the bullish punch after black candle as a sell signal, unlike a buy signal, does not necessarily have to be followed by a black candle and even if one or two white candles come next, it's possible to hold the position as long as it's not stopped out.

5▶6▶The price fell too rapidly from the uptrend's top and formed the rapid wave section 5. A shift to buy is possible at the long-bodied black candle cum bullish bounce 6 that nearly broke the immediate bottom price.


Stop4

2

5

6


<Figure 9(17)-20> EUR/GBP 1H Chart (1)

1▶2▶Section 1 composed mostly of small candles is not a horizontal sideways candle section. But as the candles moved sideways almost horizontally, the white candle with long lower shadow 2, which appeared along it, suggests that the buying power has begun to weaken.

3▶Being preceded by 1 and 2, 3 is a sell signal. However, considering the deficient form of 3 (the second white candle closed higher than the opening price of the first black candle), it's hard to rule out the possibility of the price to resume to the upside after a pullback.

3

2

1



4▶The doji 4-B that came after the large black candle 4-A amid a section that can be considered a mini slanted W is an indication that the price may go further down.

5▶When a small upper-shadowed white candle shows up right after a bearish rickshaw man or a long and long tail amid a pullback section of an uptrend, this can sometimes be a buy signal. Meanwhile, in the case of 5, it could merely result in a short retracement because the timing for rise was already missed right after 4-A.

3

2

Stop

B

5

4

AT I Cⓒ t h i s i s c a n d l e . c o m


13. Horizontal Sideways Section

The horizontal sideways section can be divided into one in an uptrend or downtrend

depending on its location, and specified as a horizontal sideways candle or wave section

according to its form.

① Horizontal Sideways Section Amid an Uptrend

If a group of candles move horizontally sideways at the top of an uptrend, this may

likely mean that the buyers are losing momentum for at least temporarily.

Here, it must be pointed out that the "horizontal sideways candle section" and

"horizontal sideways wave section" are clearly different in shape from the high-low

bullish wave II, which is also called the bullish flag. The bullish flag refers to a sideways

section composed mainly of a small-bodied candle group (flapping like a flag) that

appears right after a strong rise.

Meanwhile, the horizontal sideways section amid an uptrend refers to a section at the

top of an uptrend where rapidly alternating small and large, black and white candles

move horizontally sideways or where small waves composed of rapidly alternating

small and large candles move in the same manner. Because the bullish flag is likely low

in volatility, the wave range, from top to bottom, is not that big. As for the horizontal

sideways section, since bullish momentum is lost temporarily, usually a strong and deep

fall comes before the price resumes to the upside.

<Horizontal Sideways Candle Section in Uptrend>

<Horizontal Sideways Wave Section in Uptrend>

<Horizontal Sideways Candle Section>

Small & large, black & white candles alternating rapidly

∙Bullish flying squirrel (yin for yang)

∙Bullish Punch (yin for yang)

∙Bullish rickshaw man (white candle + doji)

∙White candle with short upper shadow

∙White candle with short lower shadow

∙Bearish rickshaw man

∙Bearish flying squirrel (+ black spinning top)

∙Bearish punch (+ black spinning top)

∙Black candle with long lower shadow

<Horizontal Sideways Wave Section>

The concept of the triple peak wave (2nd section) applied. In some cases, it is possible to make a sell entry even

before the signal is completed.

Small waves composed of rapidly alternating small &

large candles

<High-low Bullish Wave Ⅱ (Bullish Flag)>

※ Candle patterns that can be sell signals

<Standard Case>

Section favorable for buy

<Variation #1>

Short fall

<Variation #3>

Strong & deep fall

<Variation #2>

Short fall


Section favorable for sell



Strong & deep fall

② Horizontal Sideways Section Amid a Downtrend

When a candle group or wave moves horizontally sideways at the bottom of a

downtrend, this likely suggests that the sellers began to lose momentum. Accordingly,

buy signals can be more reliable when they appear in such a section.

Generally, in most cases, buy signals in a downtrend need to be immediately followed by

an upward movement. But it’s still advantageous to hold the position when the signal is

followed by candles moving horizontally sideways.

Other than at a downtrend's bottom, when the horizontal sideways wave section forms

in a pullback section amid an uptrend, it is only meaningful when it’s noticeably far

below the top and is preceded by a strong downward movement. In addition, the waves

composing it must be more rapid than in the case when at the downtrend’s bottom.

There are times when a horizontal sideways section amid a downtrend coincides with

the inverted triple peak wave section. From a larger perspective, the crab, that

sometimes can be seen as a horizontal sideways candle section, is also classified into

this category. As the crab has already been dealt with in ‘The 25 Timing Candle Signals,"

this chapter will mainly focus on the horizontal sideways wave sections.

<Horizontal Sideways Wave Section in Downtrend>

Horizontal wave section composed of rapidly alternating

small & large candles

Buy signal

<Horizontal Sideways Wave Section in Downtrend>


Horizontal wave section composed of rapidly alternating

small & large candles

<Variation #1>



<Variation #2>




<Variation #3>




Chart Examples


1▶ 2▶Forming right above the uptrend's previous high, 1 is a horizontal sideways candle section. As it's considered that the timing for rise was temporarily missed, the price should normally resume to the upside forming a wave like 2. However, if 1 is followed by a large and rapid wave like 3 instead, it may take time for the price to go back up as there's a high possibility for a meandering section to follow.

12

3

<Figure 13-1> AUD/JPY Daily Chart

1▶ 2▶The horizontal sideways candle section 1 at the uptrend's top should normally be followed by a strong fall. But instead of a fall and rise in a trail like 2, the price went down gradually mainly by small candles. In this case, the downward movement will likely deepen and so buy signals appearing right below the previous low are no longer reliable.


1

2

<Figure 13-2> NZD/USD 1H Chart


2

1▶1 is a horizontal sideways wave section cum a triple peak wave section. A short trade can be entered even before the sell signal is completed when the pattern can be expected to develop into a yin for yang or the timing for rise missed.

1

3

4

2▶ 3▶If a primary bullish wave does not form after the strong fall and instead a wide, arched wave composed of mainly small candles like 2 forms instead, this means the market may begin trending down. Furthermore, the price dipped deep below the previous low. As such, even if a buy signal appears along the M wave 4, it will likely result in a mere short retracement.


1▶ Forming right above the previous high, 1 can be seen as a horizontal sideways candle section.


1

3

2

2▶ 3▶Generally, as in the case of 2, when the price falls deep and bounces right back up breaking above the horizontal sideways candle section's top price, there's rather a high chance of a bearish reversal. On the other hand, if the price climbs up mainly by small candles after a short pullback and breaks the top price of 1 as in 3, it's more likely to continue to the upside.

<Figure 13-4> Molex (NASDAQ) Daily Chart

1▶ As 1 is composed of very small candles, it can't be seen as a horizontal sideways candle section. However, like in the case of a horizontal sideways section, it still can be considered that the following pullback is a process of recovering bullish strength.

2▶ 3▶ No noticeable wave formed after 1 and the price just headed steadily towards the immediate high. This means that buying power is still strong. Accordingly, buy signals appearing in areas like 3 and 4 are highly reliable.


1 32

4

<Figure 13-5> Yongone (KOSPI) daily Chart

1▶ 2▶ 1 is not a horizontal sideways candle section as the candles are too small. In this case, it's more effective to go bullish after confirming that no significant downward movement occurs. 2 cannot be considered as any noticeable downward movement.

3▶ 4▶ The sideways section 3 that formed after the immediate top price of 1 was broken twice shows that the buyers are still dominant. As such, a buy signal that shows up along a wave like 4 in area 5 can be highly reliable.


1

5

2

34

<Figure 13-6> Equifax (NYSE) daily Chart

T I Cⓒ t h i s i s c a n d l e . c o m1▶ Although it did not form at the top of an uptrend after a strong rise but in a

mere meandering section, 1 is similar to a horizontal sideways wave section. But as it's not in a typical location, it's better to just closely watch the following candle groups.

2▶ 3▶ If the underlying meaning of 1 is a temporary loss of bullish momentum, the price should normally rebound in the trail of 2. However, instead of forming a wave like 2 to gather bullish strength, if the price rises suddenly and forms a primary bearish wave like 3 below the immediate high, it will likely go down deeper.

1

3

2

<Figure 13-7> EUR/USD 15M Chart


1

2

1▶ Composed of alternating small and large, black and white candles, 1 is a horizontal sideways candle section.

2▶ If no downward movement comes after 1 and instead an instant break above the top price of 1, there's a high chance of a bearish reversal. Accordingly, 2 can be a section favorable for sell.


1▶ The morning star 1, which can be a potential buy signal and contains a white highwave, appeared amid a straight downward movement.


2

1

4

3

2▶3▶Even though there is no combinable signal after 1, if a horizontal sideways wave section like 2 follows, this mans there's a high chance of a bullish reversal. Accordingly, buy signals appearing in section 4 along a wave like 3 are highly reliable.

<Figure 13-9> USD/CHF 1H Chart

1▶ As it's not at the bottom of a downtrend and a bit far above the previous low, section 1 is not worth taking notice.


2▶ 3▶ 2, which formed around the previous low, is a horizontal sideways wave section consisting of alternating small and large candles. In such cases, if the bottom price of 2 is broken two or three times by very small waves, it's possible to aim mid to long-term profits at a buy signal in area like 3.

2

3

1

<Figure 13-10> EUR/AUD 1H Chart

1▶ Regaridng the criteria of the M wave 1 amid a downtrend, if a primary bullish wave(= bullish reversal wave Ⅱ) forms after the break of the immediate low, a buy signal can be looked for.


2▶ Though it's not a primary bullish wave, section 2 resembling a horizontal sideways candle section formed after 1 and thus there was still a high chance of a bullish reversal.

2

1

<Figure 13-11> KOSPI 200 Index Futures 30M Chart

1▶ Since it was immediately preceded by a steep slope section, it's natural for section 1 to be followed by a retracement. However, it's not a typical horizontal sideways candle section as the candles are mostly small.

2▶ 3▶ 2 is not in a notable location. In a downtrend, horizontal sideways candle sections are noteworthy only at the bottom of a downtrend or at a higher low made by a wave as shown in 3.

4▶ 5▶In terms of form, section 4 can be seen as a horizontal sideways candle section but it's not in a valid location either. In such a case, buy signals are only reliable when they appear right after the price breaks below the previous low or in area like 5, where the sideways movement has proceeded long enough to be considered as a long sideways section of a downtrend.


3

1

2

4 5

<Figure 13-12> GBP/USD 15M Chart

1▶ Section 1 consisting of large and gradual, not rapid, waves, cannot be a horizontal sideways wave section.


2

1

2▶ Although 1 is not a typical horizontal sideways wave section, if the previous low is broken by large candles, buy signals appearing in area like 2 are still reliable.


1▶ 1, which formed at the bottom of a downtrend, is yet insufficient since the candles and waves consisting it grew gradually smaller.


1

2

2▶ If no significant wave forms after the break below the previous low and instead the price moves straight downwards like 2, it will more likely not long after be followed by a retracement.

<Figure 13-14> FirstEnergy (NYSE) Daily Chart

1▶1 is not a horizontal sideways wave section but an inverted triple peak wave section (because the wave is wide and it's composed mainly of small candles) .


1

2

2▶Section 2 slowly passing through the downtrend's previous low is conceptually similar to a steep slope section and so may signify the weakening of selling pressure. In many cases, a sudden rise follows shortly after.

<Figure 13-15> Huyndai Elevator (KOSPI) Weekly Chart

Dear Readers and Starters

• For your information, this sample of the “Candle Timing Strategy” is an excerpt of

around 125 pages among the entire 600 pages.

• The hundreds of criteria and formulas introduced in the 17 chapters of the “Candle

Timing Strategy” are closely related to each other. As such, memorizing and applying

just a number of candle patterns will not be of much help in your live trading

performance. The strategy is effective only after you fully understand the basic concepts

of every criteria and formula.

• Most of the sample charts in this manual were inserted as of August and September of

2013. Since July of 2014, we only apply the Candle Timing Strategy to 30-minute or

bigger timeframe charts. Generally, we recommend using weekly charts for stocks, and

for other markets, one-hour charts.

• The Candle Timing Strategy is optimized for all markets marked with high volatility

such as stocks, futures, E-Mini futures, options, Forex, and so on.

• The first and most important principle for trading is money management. Trading

without considering the capital amount and leverage ratio is the same as gambling. The

Candle Timing Strategy limits the size of contracts entered simultaneously as below.

For Forex:

Maximum operation size: 1 lot / $3,000

(For example, if, by average, you open trades by a leverage of 1:400 for five currency pairs at the

same time, and your total capital is $3,000, you can trade only 0.2 lots per currency pair. If you

want to trade one lot each for the same five pairs, you need at least $15,000)

For E-Mini S&P 500: 1 contract / $15,000 (recommended)

* For other markets and instruments, it depends on the capital and leverage.

• The maximum allowable stop-loss range for the Candle Timing Strategy differs

depending on the market and its volatility, but in general the range is as below:

E-Mini S&P 500 Futures: 6 to 14 points (24 ticks to 56 ticks, equal to $300 to $700)

Futures (gold, oil, natural gas, etc.): 30 to 70 pips / 24 ticks to 56 ticks

Forex (major currency pairs such as the EUR/USD and USD/JPY): 15 to 35 pips

Forex (minor currency pairs such as the EUR/AUD and GBP/AUD): 20 to 45 pips

Stocks: 5 to 10 percent (when trading with weekly charts)

• When profits exceed a certain amount after entering a trade (for example, 40 pips or

more for EUR/USD, 50 pips for GBP/JPY and 70 pips for Gold), the stop can be moved to the

entry level. At a critical turning point where a tight stop is possible, a stop-loss range of

10 to 15 pips/ticks is enough for even minor currency pairs and futures.

• Primarily, once entered, the position should be held until an opposite signal shows up.

In the case of Forex, 50 to 100 pips would be called a short-term profit, 100 to 500 mid-

term, and 500 pips or more a long-term profit. The average profit per position should be

at least 100 to 200 pips ($1,000 to $2,000 per lot/contract) while the average stop-loss

range is 20 to 40 pips (equal to $200 to $400).

• You should not set a target profit daily or weekly. This is because you can miss out on

an opportunity to make bigger mid to long-term profits while you're satisfied with small

daily profits. Or you could end up repeating bad trading habits such as emotional trading

and holding onto losing trades. The trader’s best policy should be mechanically entering

and exiting whenever signals appear.

• In any given situation, the maximum allowable loss per day must not exceed 10

percent of the total invested capital. Vice versa, you should be able to accept that you

can also sometimes possibly lose 10% of your investment. Only when you are

determined to lose no more than 10 percent a day, are you capable of gaining 30-40

percent once or twice a month.

• After you've seen a big loss or raked in big profits, you should take the next day off

from trading.

• Trading is one of the things you must do strictly on your own. Chances of making

consistent profits by shadow trading or having someone else trade with your account in

the end is zero percent. The golden rule for traders is minding your own account and not

those of others.

• Trading can be called an art of waiting. As such, the Candle Timing Strategy does not

suit people who aim to become rich overnight. Those who have a fixed mind-set or are

conceited are not cut out for this art as well. If you are obsessed with winning rates and

the average daily or monthly income, this means that you are not yet a professional

trader with a full understanding of the market's mechanism because profits depend on

market conditions, not your will and goal. You could have no profits three months in a

row, but hit huge one day the next month. To embark upon the path to becoming a

sophisticated trader, you must dispose all conventional knowledge and trading methods.

• Here’s how the charts would be set on your computer screen for monitoring the futures

and Forex markets when applying the Candle Timing Strategy (Let’s say, if you are a

futures and Forex trader). For instance, 30 to 40 instruments are divided into four

categories such as futures, major currency pairs, yen pairs, and minor pairs and all the

charts are set at the one-hour timeframe. If you had been using indicators such as the

moving averages and Fibonacci or the support and resistance trend lines, or whatever,

you should erase them all from your screen.

• Remembering the past chart movement of all the 30 to 40 instruments will not be easy

at first, but with time you’ll gradually pick up the knack. Trading only one or a few

markets every day for trivial daily profits not knowing how to discriminate a good price

movement from a bad one would be the same as walking the tightrope blindfolded. To

make bigger and more stable profits, you need to be skilled enough to filter out markets

worth trading among the numerous.

Major Currency Pairs

Futures(Metal/Energy/Index..)

Yen Currency Pairs

Minor Currency Pairs

• The “Real Candlestick Trading Strategy” published in November, 2012 in Korea is an

introduction to the basics of the TIC Trading Theory. The “Candle Timing Strategy” is an

e-book covering the core concepts of the theory in depth and showing how it is applied

to live charts. Our third book titled “The Imaging of Waves” will be a compilation of the

theory and strategy altogether describing how to read the market movement through

waves composed of candles and candle groups in a more fun and easier way. We hope

you will discover the joys of learning the TIC Trading Theory and find it life inspiring.

Any comments or questions are welcome.

TIC Trading Institute Head Office

58-1, Unjung-ro, 225beon-gil, Bundang-gu, Seongnam-si, Gyeonggi-do, South Korea

+827041004926 [email protected] www.thisiscandle.com

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Economy & Finance

Candle Timing Strategy for Candlestick Trading