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Chapter 9, Part III. Simple but fundamental and important patterns. Page 7

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 15, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    ADVANCE talks about small ranged candle or bar.


    Commander in Pips: There is one type of candle or bar that potentially could provide you very important information. It not necessary has to be a Doji. It could be any candle but it should appear with some conditions:

    1. This candle should appear at support or resistance area;

    2. The trading range of this candle (i.e. difference between high and low prices) has to be no more than 30% of an average candle.

    3. The tick volume during this period should be at least 50% greater than the average trading volume during the period

    Here, you can see how it looks like on the chart:

    #3
    [​IMG]

    Pipruit: Looks nice, but what is it?​

    Commander in Pips: First of all take a look at the candle that is on line crossing. What can you tell me about it?

    Pipruit: Well, this is a small candle that appears at support. After this candle we can see explosive move up.​

    Commander in Pips: Very good, so we’ve accomplished the two initial conditions – “candle appears at support (or resistance)” and “this candle is small”. What is the last condition?

    Pipruit: The tick trading volume during this period should be at least 50% greater than the average trading volume during the period. But what does it mean?​

    Commander in Pips: Look at lowest histogram – such vertical bars, see? This is a trading volume that has happened during the each candle on the chart. Let’s say for simplicity now, that trading volume shows how much trades had happened during each particular period. The volume could be in money terms, number of contracts or other points – it doesn’t matter currently. More important, that we see that during this small candle trading volume was significant and almost 50 % higher than average.

    Pipruit: Ok, I understand, and what do red vertical lines show?​

    Commander in Pips: This is derivative indicator – in fact, this is just a volume divided on trading range of particular candle. This indicator just helps us to find these candles that we’re talking about. So, what do we have - small ranged candle at support with combination of huge trading volume. Sometimes this combination is called “Churning”, Joe DiNapoli and Larry Williams refer to this as “Squat”. Let’s take a look at market mechanics of this pattern.
     
    Hamza Samiullah and fran alvarez like this.
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