Master Candle Trading (2024)

FAQs

How accurate is the master candle? ›

A trading method only works if a real trader is trading it. So master candles can be as accurate as giving you 8 wins in every 10 trades using them. However, this will only be true if you use them in conjunction with other forms of analysis, common sense, and your brain.

Master candle trading strategy is a breakout trading strategy. It allows you to determine a new range of price between the maximum and minimum of the candle. When the breakout happens, we can expect the price to move significantly towards the direction in which the breakout occurred.

It consists of three successive candlesticks – the first is long and bearish and is followed by a smaller bullish bar that is completely engulfed by the first one. The third candle is bullish and closes above the second candle's high, suggesting a potential shift from a downtrend to an uptrend.

This requires a good understanding of the market and relevant information that can help them make the right decisions. In the stock market, the price of a share is determined by its demand and supply, among other factors. Tools such as candlestick chart patterns offer great help to traders.

Head and Shoulders Pattern: The head and shoulders pattern is considered one of the most reliable chart patterns and is used to identify possible trend reversals.

Which Candlestick Pattern is Most Reliable? Many patterns are preferred and deemed the most reliable by different traders. Some of the most popular are: bullish/bearish engulfing lines; bullish/bearish long-legged doji; and bullish/bearish abandoned baby top and bottom.

One of the ways beginners can implement the most profitable trading strategies effectively is by embracing the buy-and-hold strategy. This involves researching companies with solid fundamentals and stable earnings, then holding their stocks for a long time without being swayed by short-term market fluctuations.

You should not try to trade near a Support / Resistance (SR) zone. There should be no trade against a Support / Resistance zone that is closer than the Master Candle's height. Only take a trade when a candle breaks the Master Candle's High or Low.

The success rate (Percent Winners) for candlestick patterns is high: Among all 75 candlestick patterns, 66% beat the S&P 500 over its holding period (de-trended).

If we talk about the best candlestick time frame for day trading, the most commonly used time frame charts for intraday trading time are the 5-minute candlestick chart and the 15-minute candlestick chart. The candlesticks have four points that are commonly called OHLC (open high low close).

What is the 8 10 candle rule? ›

The 8-10 Rule: Place one 8 ounce candle for every 10 feet radius of room.

Traders use candlestick charts to determine possible price movement based on past patterns.

The rarest candlestick pattern is often considered the “Abandoned Baby.” This pattern is a strong reversal signal, consisting of a gap followed by a Doji candle, and another gap in the opposite direction.

The Candlestick Body

These candlesticks will usually have one of two colors. If they're green candles, then the bottom part of the candlestick represents the opening price whereas the topmost part of the body represents the closing price. On the other hand, if what you have is a red candle, then the opposite is true.

The Hanging Man Candlestick Pattern provides reliable and accurate signals to short trades and profit from falling markets. It is easy to spot even in volatile markets due to its unique shape, small body and long lower wick. When used with other reversal indicators, traders can trade reversing markets accurately.

The average success rate of some of the most accurate candlestick patterns comes out to at most, about 55% when used alone.

The hammer is a single line candle that appears in a downward price trend and it signals a reversal 60% of the time. That's not bad, but it's also not far from random (50%). Once the candlestick appears and price breaks out, the move is unexciting, ranking 65 out of 103 candles where 1 is best.

The Marubozu patterns are considered to have a success rate of 65-70% when used in conjunction with other technical indicators and price action analysis. But no trading strategy or indicator guarantee profits, and traders must always use proper risk management techniques and stick to their trading plan.