1 of the oldest adages in the market is that the trend is your friend. This means that, for best results, investors are better advised to trade in line with underlying market direction rather than bet against it. In terms of trading this means that trend following signals are the ones you really want to use. 1 way is to use reversal signals to pinpoint corrective peaks & troughs during a trend in order to predict entries. This method works well when the market is making peaks & troughs but sometimes it is not, sometimes the market is trending strongly in 1 direction so what do you do then? You target continuation signals, signals that indicate underlying strength in the market & a follow through of current trends. Check Out: Millionaire blueprint
- Tip – Candles signals are best interpreted using three criteria; relative size, volume & location relative to support & resistance. Candles should be noticeably larger than average with high or rising volume. In this case, bullish continuation signals are best taken when asset prices are rising from support or breaking through resistance & bearish signals should be taken when prices are falling from resistance or breaking through support.
3 Continuation Signals Binary Investors Should Know
Rising 3 ways– I like this 1 a lot for 2 reasons; it has a cool name and is simple to spot on a chart. Believe, once you learn it it’ll pop at you when it forms. This is a five candle formation and 1 that requires a close of the final candle in order to be valid. This pattern can be bullish or bearish. In an uptrend the first candle will be a long white candle that closes near its top. It can be shaven topped but doesn’t have to be. The next 3 candles will be spinning tops. They’ll be small, can have white or black bodies, will usually fall over the course of 3 days and not move below the low of the first candle. The fifth candle, the important one, will be another long white candle. It’ll usually begin above the low of the first candle, close at the high of the day, & have the highest close of all five candles, most likely a new high for the current trend. 1 completed this signal has a better than 75% success rate with expiry equal to two-five candles from purchase (five minute candles equals 10-25 min’s expiry).
- Tip- Signal strength is relative to time frame. Signal in larger time frames such as one hour versus five minute, or 1 day versus 1 hour, are stronger than those which form in shorter time frames.
Tatsuki Gap – This is another multi-candle formation which can take up to five candles to form. The Tatsuki can be formed in bullish or bearish market but in either case involves 2 key features; a gap & a test of support/resistance. The pattern forms in a trend market when prices gap in the direction of the trend. In a down trend this would be a down gap. The candle mayn’t be overly large but will be a long & black, closing at or near the low of the day. The next few candles will pull back to the open of the 1st candle at test it for resistance. Entry can be taken at this level but a confirmation of resistance makes a stronger signal, such as a 2nd drop from this level. The confirmation candle does not have to close below the first candle but the entire pattern should have noticeably higher volume. This signal has about a 66% success rate.