Trading the NAS100 with candlestick charts requires a disciplined process that combines price patterns, volume dynamics, multi-timeframe confirmation, and careful trade management. Below is a concise, actionable workflow you can apply to indices like the NAS100 (NDX) and adapt to your preferred timeframe.
Process
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Identify market trends using daily candlestick patterns
Start with the daily chart to determine the primary trend. Look for a sequence of higher highs and higher lows in an uptrend or lower lows and lower highs in a downtrend. Confirm trend strength by noting candle bodies: long-bodied candles in the trend direction and small-bodied candles on pullbacks suggest momentum. Use moving averages (e.g., 50-day and 200-day) as context—price above both supports a bullish bias.
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Analyze key reversal candles
Watch for reversal candles at logical areas: hammers, shooting stars, engulfing candles, and doji. The context is critical: a hammer that appears after a pullback to a clear support level on the daily chart is more meaningful than the same candle in the middle of congestion. Mark the high/low of those reversal candles as short-term decision levels.
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Confirm trends with volume
Volume validates price. On breakouts or breakdowns, expect higher-than-average volume in the direction of the move. A daily breakout on rising volume suggests follow-through; a breakout on weak volume is suspect and more likely to fail. Also observe volume during pullbacks—low volume on pullbacks in an uptrend suggests a healthy correction, while high volume can indicate distribution and a potential trend reversal.
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Set entry and exit points
Use a lower timeframe (4-hour or 1-hour) for precise entries once the daily bias is established. Entry examples: enter on a pullback to a daily support with a confirming reversal candle on the 4H, or enter on a breakout with confirming volume. Always set a stop-loss—below the recent swing low in long trades or above the swing high in short trades. Define a target using support/resistance, measured moves, or a risk-reward ratio (aim for at least 1:2). Consider a trailing stop to lock in profits as the trade moves in your favor.
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Maintain a trading journal
Document every trade: date, timeframe, instrument (NAS100), candlestick pattern observed, volume context, entry, stop-loss, target, position size, and the outcome. Add a short note on the trade rationale and emotional state. Review your journal weekly and monthly to identify recurring strengths and weaknesses.
Common mistakes to avoid
- Overlooking market sentiment—ignoring macro news or overall market risk can quickly invalidate patterns.
- Failing to confirm signals with other indicators—candles alone can mislead; use volume and contextual indicators for confirmation.
- Ignoring support and resistance levels—entering trades without clear logical levels increases the chance of premature stop-outs.
Checklist
- Use at least two timeframes: daily for trend, 4H/1H for entries and timing.
- Examine volume dynamics: confirm breakouts, watch for distribution or accumulation during reversals.
- Set a stop-loss for every trade, sized to your risk rules and positioned beyond recent structure.
- Document trades: record patterns, reasons, and outcomes in a trading journal.
- Review performance regularly: weekly notes and monthly performance summaries to refine your rules.
Applying candlestick techniques to the NAS100 requires consistency: identify the daily trend, validate reversals with clear candle patterns, confirm with volume, time entries on a lower timeframe, and keep meticulous records. Avoid the common pitfalls by combining price action with context—support/resistance, volume, and broader market sentiment—and by reviewing your work regularly. That disciplined loop is what turns isolated good trades into a reliable edge.
