Candlestick patterns characterised by indecision and resembling long-legged Dojis are referred to as High-wave candlestick patterns. Their lower shadows are rather long, and their wicks at the top are quite a bit longer.
Additionally, they possess a bigger physical physique. They are prevalent at levels of support and resistance, as well as during times of consolidation when the market is relatively flat. There is the potential for either bullish or bearish high wave candles.
In the blog post that you will read today, we will go over how to recognise high wave candlesticks and trade with them.
What exactly is meant by the term “High-Wave Candlestick Pattern”?
A high wave candlestick pattern is an indecisive pattern that suggests neither bullish nor bearish market circumstances. This pattern appears when there is no clear trend in the market.
Support and resistance levels are the typical locations for these occurrences. Bears and bulls battle against one another in this arena to move the price in a certain direction.
For the purpose of illustrating the design of candlesticks, long lower shadows and long higher wicks are used. They, too, have bodies that are rather small. A lot of price movement occurred during the course of the time indicated by the long wicks. Despite this, the price ended up settling rather close to where it had started.
The majority of the time, purchasers seek to drive up prices, but they are met with strong resistance from sellers. In a similar manner, sellers strive to lower prices, but they are met with tremendous resistance.
Both of these factors are unable to push price in a certain direction, which results in the candlestick ending quite close to where it started.
Formation
The high wave candlestick is a one-of-a-kind variation of the standard spinning top candlestick that casts either one or two long shadows. Prices at the beginning of the day and prices at the end of the day are not the same. They are distinct from one another in several minor ways. The colour of the body is irrelevant to this discussion. The design looks like a long-legged Doji.
In the same way that most candles have relatively lengthy shadows, the High wave pattern in the market implies that price fluctuations are occurring at a quick pace. Because of this, the pattern that has been developing could not continue. The context of the market has a significant impact on the meaning of the candle, just as it does on the meaning of so many other things.
How should one make sense of this pattern?
On the price chart of a stock or currency pair, a high wave candlestick pattern might occur anywhere. If the High-wave candlestick pattern came in the midst of a move, whether it an upward or a downward trend, one may consider it to be a continuation pattern. This could be the case whether the motion was going up or down.
A consolidation could take place, for instance, if a stock is trending upward and the high wave candlestick pattern shows on the chart at the same time. After experiencing a few fluctuations, the price may eventually break out of the range it has been trading in and continue to go upward.
In a stock that is moving downward, the appearance of high wave candlesticks may signal the beginning of a range, which may then result in the stock moving sideways.
After the time of consolidation comes to an end, the price may experience a breakout and then proceed to decrease in tandem with the longer-term trend.
How should a trade be executed using this pattern?
High wave candlesticks occur on the chart when traders are uncertain about the direction a stock will move in. If you see such a pattern on a chart, you should often hold off on placing a trade for at least a day or two before doing so.
When something like this happens, it is essential to wait until the successive candlesticks appear before judging the direction the stock will go in. As a direct consequence of this, there are instances when it might be challenging to trade high wave candles.
Because of this, it is quite important to comprehend the information that may be gleaned from candlesticks. Additionally, it is very necessary to exercise patience and allow the process to develop in its own time.
Bottomline
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