Candlestick Patterns; the Wick Reversal
In technical analysis, day traders use candlesticks and the patterns they form to anticipate the future direction of the market.
There are thousands of candlestick patterns to work with, but only a few of them provide us with the tools we need to earn profit while using them every day.
One of our favorite candlestick patterns is called the ‘wick reversal’ and it’s used to predict short term reversals in the market we are trading.
We use the “wick reversal” candlestick patterns to know when to enter into a counter-trend trade, or when to take profit on a trend-following trade.
The rules for a wick reversal are as follows:
1. The body is used to determine the size of the reversal wick. A wick that is between 2.5 to 3.5 times larger than the size of the body is ideal.
2. For a bullish reversal wick to exist, the close of the bar should fall within the top 35 percent of the overall range of the candle.
3. For a bearish reversal wick to exist, the close of the bar should fall within the bottom 35 percent of the overall range of the candle.
How do we use these to earn profit?
We use a proprietary indicator called ‘JJ_Candlesticks’ to define the “wick-reversal” and this tool is provided to all of our students at SchoolOfTrade.com.
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