Candle Patterns
This guide reveals how Heikin-ashi candle patterns can provide insights that nearly predict the near future.
Last updated
This guide reveals how Heikin-ashi candle patterns can provide insights that nearly predict the near future.
Last updated
This pattern is observed when we encounter at least two consecutive candles with the same color, and the newer candles are larger than the previous ones.
The following image illustrates an example of this pattern in a Bearish market state on the 6-hour timeframe. In this case, we can infer that Bitcoin was experiencing a greater "dumping" effect as the hours progressed, indicated by the increasing size of the candles (reflecting higher momentum in the bearish movement).
The same principle applies to a Bullish market state. The sole distinction lies in the direction when executing trades.
The following image illustrates an example of the pattern described in a Bullish scenario.
As we discussed regarding the previous pattern (Stronger Color on Color), the same logic can be applied in reverse to this pattern. It's understood that the magnitude of the candle's size corresponds to the potential magnitude of the market movement. Candles are determined by averaging the market's variations over a specific time duration. Conversely, smaller candles indicate less significant price movements. By comparing the latest candle's size to that of the preceding candle, we can determine if it's equal, smaller, or larger. This analysis provides insights into whether the market is gaining or losing momentum.
The following image illustrates an example of this pattern on the 6-hour timeframe.
This pattern symbolizes candle weakness and aids in identifying potential reversals, especially when combined with the Weaker Color on Color pattern.
When a green candle forms a small wick at the bottom, it signifies bearish strength within that candle at a certain point; this is often referred to as a tail. This suggests that the color of the candle might switch in the next few candles, giving you an advantage over most traders when analyzing the market.
The same concept applies to a red candle, with the tail represented by the wick at the top. This wick signifies bullish strength in contrast to the candle's color.
In the following image, you can observe, on a 3-minute timeframe, the tails formed on several green candles. Subsequently, the next few candles turned red, indicating that the tails on those green candles had anticipated a potential change in the market.
Warning: Although this pattern can be useful on every timeframe, it should never be solely relied upon for trading decisions. It becomes most valuable when used in conjunction with market context and combined with all the other techniques taught within the IQ Trading Community.
