This chart explains in detail the concept of the "Master Candle" in Forex Gold trading and its application in trading:
What is a Master Candle?
• Definition: The Master Candle is a candle pattern followed by 4 candles whose prices are completely within the range of the Master Candle's High and Low.
• Time Frame: The applicability of the Master Candle depends on the time frame you are currently observing. For example, a Master Candle of a 30-minute candle can only be analyzed in conjunction with candles of the 30-minute time frame.
• Recommended Time Frame: It is recommended to use the Master Candle on 1 hour and higher time frames, as lower time frames may result in disproportionate risk and reward.
Trading strategies
1. Determine the main candle:
• If the high and low points of 4 consecutive candles are within the same candle range, this candle can be defined as the master candle.
2. Breakout Trade:
• When price breaks the high or low of the dominant candle, consider taking a trade (usually a buy or sell) in the direction of the breakout.
3. Risk Management:
• Although the Master Candle is a valid technical pattern, it should not be used as the sole basis for trading analysis and should be combined with other indicators (such as trend analysis, support and resistance) to confirm trading signals.
Example in the picture:
• Candle No. 1: Marked as the Master Candle.
• Candles 2-5: The highs and lows of these 4 candles are all within the range of candle 1, meeting the definition of a master candle.
• Breakout trade: When the price breaks through the high of candle number 1 and moves up, it is displayed as “Good Trade!”.
Summarize
The master candle is a simple and practical price action pattern that can help traders find potential breakout points in the market. However, in actual use, it needs to be combined with other technical analysis tools to reduce risks and increase success rates.
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