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Candlestick Period of Influence |
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Written by Lance Beggs
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Trader Q&A - Candlestick Period of Influence
Question: Dear Lance
Is there any way to predict the next candle on 5min candlestick chart? ie.If the Hanging man appears at the top of the chart what does it suggest? Does it say the next candle will be bearish or the coming trend is bearish? pl help.
Thanks
A
Answer: Hi A, It's impossible to predict the next candle, in any timeframe. All we can do as traders is identify opportunities in the markets that offer us a greater probability of one outcome, than another outcome. We then act on that edge, with appropriate risk management and position sizing in place to minimize risk when we are wrong.
In the example you gave, candlestick theory states that a hanging man at the top of a trend, when broken by price closing below the low of the candle, will lead to lower prices. The duration of this change is only for a short period of time, maybe 1 to 8 candles maximum. Don't take those numbers as fixed. Sometimes you will get an absolute top which leads to a long bearish move. But that's rare. The two points you need to be aware of are (1) the signal alerts you to a higher probability of a bearish move over the next couple of candles, and (2) because we're dealing with probabilities you need to protect your capital through stops.
Happy trading,
Lance Beggs |
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