If you pair the high wave candle with high stock volume, it means you are not certain about the direction the stock will go to. As a result, it is important to know how to implement technical analysis tools. Japanese rice seller Homma realized this a long time ago. Any accumulation of candles showing huge volatility of the market after a strong trend will mean the possibility of reversal. Nison described that wrote in the first edition of his book that the high wave candlesticks are the candles whose two shadows (lower and upper) are long.
Since there isn’t a traditional way of trading this pattern, we’ll jump right to the optimal bearish high wave crypto and stock market trading strategies. Read the backtest results to learn the best bullish candlestick patterns. Both are considered indecision candlesticks by traditional technical analysis, yet the backtests show that the high wave candles tell us that volatility is likely incoming. Nison recommends that traders should use candlestick signals with western technical indicators to find and get the best trades.
The Ultimate Guide To Implied Volatility
This is where bears and bulls battle each other in the effort of trying to push the price in a given direction. The High Wave Candlestick pattern does manifest itself whenever price moves to a support or resistance level. If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The high wave acts as a reversal just 51% of the time (think random) and a mid list performance rank of 67, where 1 is best out of 103 candlestick types. My book,
Encyclopedia of Candlestick Charts,
pictured on the left, takes an in-depth look at candlesticks, including performance statistics.
- This article will delve into the details of this candlestick pattern, tips on trading it, identification guidelines, and a real-world example.
- If the indecision candlestick were to occur in high volume, the same could affirm general confusion about the direction process is headed.
- Traders using this bullish mean reversion strategy stacked their satoshis by using history as a guide.
You can combine candlestick signals with other profitable trading systems that work well with candlesticks. High wave candlesticks form because traders are not sure about where a stock will head to. If you see that form on a chart, wait a day for two before placing a trade.
This is what you learned today
We only need to identify a single green bar with wicks at least 3x the size of its slight green body. The bullish high wave pattern appeared on Microsoft’s August 4th, 2021, daily chart. Today, we’re looking a the high wave candlestick pattern.
The body of the candlestick is tiny as compared to the shadows. Both are considered indecision candlesticks, yet the backtests show that the high wave candle tells us volatility is likely incoming. If so, keep reading to learn what a 21-year backtest tells us about the best bearish high-wave trading strategy. An intelligent forex trader will enter short after the price moves above and below the candlestick’s high, setting a stop loss of one ATR. Identifying the bullish high wave is relatively straightforward.
Bullish Spinning Top vs. Bullish High Wave
The high wave is a special kind of spinning top basic candlestick that has one or two long shadows. That’s why adding a confluence of other technical indicators is necessary to increase the winning ratio. It is a reversal and a continuation candlestick pattern. The breakout of the candlestick confirms the direction of price. The high wave candlestick pattern represents that the market makers are making the future decisions of the price. The High wave pattern is a candlestick pattern with large wicks/shadows than the average size of candlestick.
- Similarly, were the high wave candlesticks to occur in a stock trending lower, a range may come into play, resulting in sideways action.
- I backtested every candlestick pattern to determine the best candlestick patterns for day trading.
- A step by step guide to help beginner and profitable traders have a full overview of all the important skills (and what to learn next ) to reach profitable trading ASAP.
The bullish high wave is a one-bar pattern that most market participants believe represents indecision. According to our 21-year backtests, these candlesticks represent future volatility that can lead to profits when traded correctly. And while this is the best way to trade high wave patterns in the stock and crypto markets, according to the data, forex traders should go in the opposite direction. The bullish high wave is a frequently occurring one-bar candlestick pattern that most traders consider an indecision candle.
Trading the Evening Star candlestick pattern
The stock market is a battle between the bears and the bulls. Due to this, candlesticks like the high waves tell a story. After forming a high wave candlestick, the price will move towards the low or high of the candlestick, and these price values will act as support or resistance level. The price trend will be confirmed when a breakout of the high or low candlestick happens by the price. Our platform, its features, capabilities, and market data feeds are provided ‘as-is’ and without warranty. Data-driven stock and crypto traders enter long when the price falls and then moves back above the candle’s low, setting a stop loss of one ATR.