Market States
Follow this guide to uncover how Heikin-ashi candles can demystify market states that 95% of traders tend to overcomplicate.
Last updated
Follow this guide to uncover how Heikin-ashi candles can demystify market states that 95% of traders tend to overcomplicate.
Last updated
The market can only manifest itself in three states: Bullish (Pump), Bearish (Dump), and Indecisive. These states are interconnected and constantly alternate, operating around the clock, 24/7. The Indecisive state consistently follows a "Pump" or "Dump," akin to a cooldown period in the market.
Bullish and Bearish states are explained as one because, aside from the color, there is no significant difference between them. The only distinction lies in toggling between the "Long" and "Short" buttons to execute trades. What's crucial to understand is the correlation between the size of the candles and the magnitude of the subsequent market moves.
In the following images, you can observe these Bullish and Bearish states, which are marked by the red outlines.
After a period of market movement, whether bullish or bearish, there comes a point when the market becomes indecisive. You can recognize this by observing the size of Heikin-ashi candles in comparison to the preceding few candles. As illustrated in the screenshot below, candles within the red outline signify indecision due to their significantly smaller size compared to the previous candles, during which the market experienced actual movement.
Attention: During indecisive periods, it's best to avoid trading since there isn't a clear direction or clue about the market's next move.
