Analysis of the 6-hour Timeframe
This document explains in detail how to analyze the 6-hour timeframe to gain an understanding of the current market direction.
Last updated
This document explains in detail how to analyze the 6-hour timeframe to gain an understanding of the current market direction.
Last updated
Important: This is the most crucial timeframe among them all. If an opportunity is not presented on this timeframe, or if the analysis is done incorrectly, it will likely result in a misleading market direction signal.
When utilizing Heikin-ashi, each 6-hour candle represents the market's strength and direction over the past 6 hours. This timeframe is used to determine the current direction in the market, often referred to as the "ocean". This direction is determined by two consecutive 6-hour candles forming the "Stronger Color on Color" pattern. One thing to keep in mind is to ensure that these candles are not indecisive. At times, candle size can be misleading when not compared to previous candles that are indeed indecisive. Typically, indecisive candles exhibit a range of 0.15% to 0.4% variation in Bitcoin. You should ensure that the variation of each candle surpasses these values at the very least.
The provided image illustrates an example of two consecutive red candles forming the "Stronger Color on Color" pattern. An additional noteworthy aspect is that neither of them exhibits a tail or upper wick. This confirmation of absence of upside wicks reinforces the downside strength that we seek when determining market direction.
You might be wondering whether the two candles preceding the ones that were referenced are also valid. The answer is no, as the first candle in this scenario is indecisive and further characterized by a substantial upper wick. Consequently, you would only have one valid candle, which is the second one. As previously discussed, to establish the "Stronger Candle on Candle" pattern, a minimum of two candles is required.
In case there is any confusion regarding which candles we are discussing, they are delineated in red in the following image:
The exact same principle applies to a bullish scenario. Attached below is an example illustrating a confirmation of bullish market direction through the Stronger Color on Color pattern, as indicated by the two outlined candles.
In the previous example, you can observe that despite the presence of multiple 6-hour candles preceding the two referenced ones, the consistent pattern that emerged was "Weaker Color on Color". Each time a solid green candle appeared, the subsequent candle seemed weaker (smaller), leading to a lack of confirmation in the market direction.
Only after this analysis is performed correctly and we can identify the market direction based on the explanation provided above, can we proceed to the 1-hour timeframe to delve deeper into the waves of the larger 6-hour timeframe, akin to navigating the smaller waves within the overarching ocean.
