Candle Range Theory Explained

Summary

In this video, Solomon King explains the Candle Range Theory, a popular concept in trading that rebrands the Power of Three theory. He emphasizes that each candlestick represents a range, encapsulating the market's movement within a specific timeframe. King illustrates how to spot high and low-probability candle ranges and their importance in aligning with key trading levels. The video also explores different scenarios of candle range formations and practical strategies for using this concept effectively in trading. King concludes by highlighting the significance of aligning candle ranges with key levels to optimize trading decisions.

Takeaways

• 📈 The concept of Candle Wrench Theory is introduced as a rebranded version of the popular 'Power of Three' concept in trading.
• 🕒 A candle represents the entire range of transactions that occurred within a specific time frame, such as a day or 15-minute period.
• 📊 The importance of understanding candle range is emphasized for traders to interpret market movements accurately.
• 🔍 The video aims to teach viewers how to identify high and low probability candle ranges to align with their trading strategies.
• 🌐 The theory suggests that a candle's range can be broken down into three scenarios: one, two, or three candle formations, each representing different market behaviors.
• 📉 The 'Power of Three' concept is explained through the Accumulation, Manipulation, and Distribution (AMD) model, which helps in identifying trading opportunities.
• 📍 Key levels or points of interest are crucial when applying the candle range theory to ensure trades have a high probability of success.
• 📈 The video provides practical examples of how to spot candle range formations and how they align with market sessions like the Asian, London, and New York sessions.
• 📝 The presenter shares insights on how to blend the candle range theory with the Kill Zone strategy for better trading outcomes.
• 🔗 The video concludes by emphasizing the need for confirmation and a key level when applying the candle range theory to trading decisions.

Q & A

What is the main topic of Solomon King's video?

The main topic of Solomon King's video is the concept of Candle Range Theory, which he aims to explain in a way that is understandable to all viewers.

Why is Candle Range Theory important for traders according to the video?

Candle Range Theory is important for traders because it helps them interpret price movements and identify high and low probabilities of candle ranges, which are crucial for making informed trading decisions.

What is the significance of the daily candle in the context of Candle Range Theory?

The daily candle represents the entire transaction that happened in a 24-hour period, encapsulating the overall bullish or bearish sentiment for a particular currency pair within that timeframe.

How does Solomon King relate Candle Range Theory to the Power of Three concept?

Solomon King suggests that Candle Range Theory is essentially a rebranded version of the Power of Three concept, as both involve understanding the dynamics of price movement within a candle's range.

What are the three scenarios in which Candle Range Theory can be observed?

The three scenarios in which Candle Range Theory can be observed are: 1) within a single candle, 2) in two-candle price action, and 3) in three-candle price action.

What does the acronym 'AMD' stand for in the context of the video?

In the context of the video, 'AMD' stands for Accumulation, Manipulation, and Distribution, which are stages in the price action that can be identified within the Candle Range Theory.

Why is it important for the Candle Range Theory to align with a key level?

Aligning the Candle Range Theory with a key level is important because it helps traders identify high-probability trading areas where price is likely to react or reverse, increasing the chances of successful trades.

How does Solomon King demonstrate the practical application of Candle Range Theory?

Solomon King demonstrates the practical application of Candle Range Theory by analyzing charts and showing how price movements align with the theory's principles, especially in relation to key levels and market sessions.

What role do market sessions play in the Candle Range Theory according to the video?

Market sessions play a role in Candle Range Theory by providing specific timeframes, such as Asian, London, and New York sessions, where different stages of Accumulation, Manipulation, and Distribution can occur within a day's trading.

What is the advice given by Solomon King for traders using Candle Range Theory?

Solomon King advises traders to ensure that the Candle Range Theory formations align with their trading concept and strategy, and to look for confirmations before taking trades based on the theory.

Outlines

00:00

🕯️ Introduction to Candle Range Theory

In this paragraph, Solomon King introduces the topic of Candle Range Theory, explaining that it's a concept frequently requested by his audience. He emphasizes the importance of understanding this theory, not just in theory but also in practical trading on charts. Solomon sets the goal of the video: to explain what candle range is, its significance for traders, and how to identify high and low probability candle ranges that align with specific trading strategies.

05:02

📈 The Power of Three in Candle Range Theory

This section discusses the concept of accumulation, manipulation, and distribution (AMD) in Candle Range Theory, also known as the Power of Three. Solomon explains that Candle Range can be seen in one, two, or three candlestick price actions. He describes how a single candlestick can encapsulate a complete trading scenario, showing price movements such as accumulation, liquidity sweeps, and distribution within a trading day. This paragraph sets the stage for identifying different patterns within the Candle Range Theory.

10:04

🧭 Key Levels and Alignment in Candle Range Theory

Solomon emphasizes the importance of aligning Candle Range Theory formations with key levels or points of interest, such as order blocks or fair value gaps. He explains that trading the theory effectively requires identifying these levels, as they dictate the potential success of trades based on Candle Range patterns. He provides practical examples, showing how price actions like sweeping liquidity and shifting market structures play out in real trading scenarios, reinforcing the theory's application and effectiveness.

15:06

🌐 Candle Range Theory in Daily Trading Sessions

In this paragraph, Solomon explores how Candle Range Theory applies to different trading sessions throughout the day, particularly the Asian session, which often forms the initial range. He describes how subsequent sessions, like London and New York, involve liquidity sweeps and distribution phases, aligning with the theory's principles. This segment emphasizes the repetitive and predictable nature of these patterns across different timeframes and trading sessions, making it a valuable tool for traders seeking consistent strategies.

Keywords

💡Candle Range Theory

Candle Range Theory refers to the concept that each candlestick in trading represents a range of price movement within a given time frame. In the video, Solomon King explains that the theory is essential for understanding market behavior, emphasizing that without understanding how to interpret these ranges on charts, the theory is useless. The concept is described as rebranded from existing theories and is key to identifying market trends.

💡Power of Three

The Power of Three is a market concept that breaks down the price movement into three phases: accumulation, manipulation, and distribution. This concept is central to understanding the Candle Range Theory, as it is presented as a rebranding of the Power of Three. Solomon King mentions that the phases occur in different time frames, aligning with market sessions like the London and Asian markets.

💡High and Low of the Day

The 'High and Low of the Day' refers to the highest and lowest prices a trading asset reaches within a 24-hour period. According to Solomon King, knowing how to identify these levels is crucial for executing trades. He connects this with Killzone strategies, where specific market times, like the London Killzone, have a higher probability of determining the day's high or low.

💡Killzone Strategy

Killzone Strategy is a trading method where traders focus on specific market sessions, like the London or New York sessions, to capitalize on market volatility. In the video, Solomon King highlights that these time zones, particularly the London Killzone, are where traders can often spot the high or low of the day, which aligns with Candle Range Theory and the Power of Three concepts.

💡Liquidity

Liquidity in trading refers to the availability of assets to be bought or sold without causing significant price changes. In the context of Candle Range Theory, Solomon King discusses how liquidity gets swept as part of market manipulation, before the price moves to new highs or lows. This is a crucial part of spotting high-probability trades.

💡Market Structure

Market structure refers to the overall organization of price movement, including trends and patterns that indicate whether the market is in an uptrend, downtrend, or consolidation. In the video, Solomon King describes how shifts in market structure, such as breaking a previous high or low, are critical for applying Candle Range Theory effectively.

💡Order Block

An Order Block is a specific area on a price chart where large orders from institutions are placed, often indicating strong support or resistance levels. Solomon King emphasizes the importance of identifying order blocks when applying Candle Range Theory, as these areas often serve as key levels where price reversals or significant movements occur.

💡Fair Value Gap

A Fair Value Gap refers to a price gap that occurs when there is an imbalance between buying and selling, leaving unfilled orders in the market. In the video, Solomon King points out that identifying fair value gaps is essential for determining high-probability trading opportunities, as price often returns to these gaps before making significant moves.

💡Accumulation, Manipulation, Distribution (AMD)

The AMD concept represents the three phases of price movement: Accumulation (sideways market activity), Manipulation (price breakouts or false moves), and Distribution (price moves in the intended direction). Solomon King explains that Candle Range Theory incorporates these phases to help traders understand and predict market movements.

💡Key Levels

Key Levels in trading are important price points, such as previous highs, lows, or significant support and resistance areas, where price action is likely to react. Solomon King stresses that aligning Candle Range Theory with key levels is vital for successful trades, as these levels often dictate where the price will reverse or continue.

Highlights

Introduction to candle range theory and its significance for traders, emphasizing practical application on trading charts.

Explanation that a candle represents the price range within a specific timeframe, such as a daily candle covering 24 hours.

Introduction of timeframes and how lower timeframes reveal detailed price movements within larger candles.

Comparison of candle range theory with the power of three concept, stating they are essentially the same.

Three scenarios of candle range theory: single candle, two-candle price action, and three-candle price action.

Explanation of how to break down a candle into its components: open, high, low, and close, and their significance in trading.

Focus on key levels, including order blocks and fair value gaps, as important areas where candle range theory becomes relevant.

Practical example of price action using a daily candle from the gold chart to demonstrate candle range theory in action.

Key point that candle range theory aligns with higher-probability trades when it coincides with points of interest like order blocks.

The importance of sweeping liquidity, identifying key price movements that trigger shifts in market structure.

Demonstration of how price often respects fair value gaps and other key levels, and how this concept aids in trade planning.

Insight into how the Asian session often forms a range, and subsequent sessions manipulate or distribute price.

Detailed breakdown of accumulation, manipulation, and distribution (AMD) formation within a single candle and its trade implications.

Candle range theory's ability to highlight previous day highs and lows, helping traders identify draw on liquidity.

Final advice: Align candle range theory with key levels for high-probability trades, especially after sweeping liquidity.

Transcripts

hello folks welcome back to the channel

it's Solomon King here and in today's

video I'll be covering the concept of

candle wrench Theory this is something I

have gotten request from so many people

asking me to make this video and I feel

like let me go ahead and explain it in a

broader way so that every one of you

would be able to understand what exactly

is candle wrench Theory so my goal in

this video is to basically give you an

idea of what exactly is candle range how

important it is for you as a Trader

because that is the consummation of it

all if you will not be able to interpret

it on your chat there is no need for

knowing the theory I can just make the

video for Content sake but if you cannot

bring it into reality on your charts

then it's of no use then the last thing

is that I will talk to you

about how to spot a high probability

candle range and then low probability

candle range of course you will not be

trading every candle range you need the

ones that properly align with your

trading concept and strategy and that is

why we are trading in this industry if

we cannot take trades that will give us

good results then we are basically

wasting our time so this concept

recently got popularity on the internet

especially Trading in space and even

though this is a concept that even a new

be is aware of uh the name and the title

whatever was given to it was just a

rebranding all right so in simple term

whenever people talk about candle range

Theory what they are basically saying is

that a candle is simply a range all

right a candle is simply a range and

that brings us to the idea year of time

frame so this is a daily candle let me

start by that and what this is saying is

that the entire transaction that

happened in this day that is 24 hours

right is represented in this

candle one Candlestick and let's assume

this is a bullish candle that means the

entire transactions that happened in the

last 24

hours was bullish in simple term if that

particular currency PA GBP USD for

example is represented here that means

GBP has been strong throughout the 24

hours throughout the last 24 hours and

that is the receipt now if we break down

this guy into the lower time frame this

is the 15minute time frame right we're

going to see the entire price move

movement in such a way all right price

had a break off structure break off

structure even a shifting Market

structure everything that happened that

was represented within this daily candle

is captured

here all right so what this is basically

saying is that a Candlestick is simply a

range that means it has the low or where

we saw this and the high the highest

level that that candle went to that is

why whenever we are taking a trade in a

day we have where the low of the day or

the high of the day is formed and we

know how to trade it accordingly

especially for example if you have

followed my videos on the Killzone

strategies you will know that the London

Killzone has the highest probability of

creating either the high of the day or

the law of the day according to ICT now

this same candle wrange theory is the

rebranded or another name given to our

popular power of threee

Concepts because everything that is

covered in the candle wrench theory is

captured in the power of three concepts

as a matter of fact I have watched a lot

of ICT videos and and I have personally

traded ICT concepts for a while but I've

never really really had ICT mentioned

about the candle range Theory I don't

know if I am wrong you can correct me

but then what ICT thought is the power

of three concepts is the same thing I

hope you understand this so how can we

really spot it the reality of it now

there are three scenarios of this candle

wrench Theory which I want to show you

please pay attention to it in detail

look at these three different scenarios

I hope you can remember your

accumulation manipulation and

distribution this is a popular concept

where we have the AMD formation now

there are three different scenarios that

a power of tree can be formed or the

candle wrench concept can be formed we

can find candle wrange Concept in one

single

candle all right in one single candle we

can find it in two candle price action

and we can find it in three candle price

action let me give you a very simple

scenario I will go to my chart don't

worry we're going to do practicals we're

going to spot it and how important it is

for our trading as a general so look at

this the first

concept price start

started this is the lowest area but this

is the open for this bullish candle

price opens boom it

ranged then it went

lower then it went

higher all right and then it came back

and

closed at this

point are you now seeing what I'm saying

the candle range Theory let me adjust

this one so if you break down this

candle you have price

accumulating then sweeping the liquidity

below here if you break it down in the

lower time frame right and boom it went

High creating the highest level leing

area of liquidity here money and it

closed right here

the open the low the

high this is one Candlestick CRT which

is the candle range

Theory you can find it on one

Candlestick just like this example you

see price opened from here all right it

moved High to that area after sweeping

liquidity because this is mostly a range

and boom it went

high and closed around

here if you break it down to the time of

the day this is the

popular power of threee concept for one

Candlestick of a day it starts from a

range within the Asia this is why the

Asian time is mostly known as a range

let me give you a proper delineation of

what I'm trying to explain so if you

Asian time starts as a range and

manipulation comes

in after the Asia has

closed this is why I said a

Candlestick can be seen in this simple

format and then distribution comes

in distribution comes in during

word London SL New York so Asia comes as

a range let's have it here let's have it

Asia comes as a

range and

London comes with the manipulation which

is creating the low of the day you

remember the low of the day and

distribution then the close of that day

what is it called the candle range

Theory candle do is arrange the entire

price movement you can delineate don't

worry you will have every single detail

properly given to you in this video so

sweeping liquidity and it went up so in

this

same understanding we can also watch

other candle range formation that is not

only one

Candlestick all right the second type is

this one where price

went above the previous Day candle

clearing the high or the low in

different scenarios now if we are going

if we actually on a bullish scenario

clearing the high of that and then

targeting the drawn liquidity

below clearing the

high targeting the drawn liquidity

below all right I will talk to you about

how to spot the most important one

because we need key levels that this

will play out with properly we need key

levels that this will play out with

properly what I mean by key level is

basically your point of interest when I

go for the practicals you're going to

see it so right here you have this one

the to scenario is when price plays the

same and it Contin downward to Target

the draw liquidity you can do this same

tempting for a bullish scenario so these

are the three types or the three ways we

can sport candle range Theory all right

candle range Theory so how important it

is the candle range Theory formation

must align with your point of interest

if price is sweeping liquidity and

trading into for instance an order block

by this site or a feir value Gap then

this concept will play out perf L

because we are going above this sweeping

liquidity hitting the point of

Interest all

right and then we have a shifting Market

structure then we take it for the

bearish movement let me go to my chart

and show you because I don't want to do

too much of theoretical part of this

let's go to the Chart all right so this

is a practical example of what I was

showing you now look at this particular

scenario all right

price traded

below the low of this daily candle this

is gold the daily candle price have

traded below the low of this candle

which is where the liquidity is

resting and after that we saw price

going above pushing upward what area did

we locate this bullish order Block

Please take note of how price is

trading and

respecting this

concept so that particular bullish order

block is where price traded into and

quickly moved up this

is the second type I showed you price

pressing below the low before going to

the opposite direction this is it again

look at this one we have

this price clearing the liquidity above

trading into this area rejection block

boom and what

happened quickly moving in the opposite

direction the same thing

here the same thing here moving in the

opposite direction

boom moving in the opposite direction

now if you go through your chart whether

in the daily time frame in the 4our time

frame you're going to see this happening

time and again and again candle range

Theory

clearing this highs trading into this

area before crashing

down you see oh this one has not reached

that point of interest but then it's

something that if you go through your

chart you're going to see it time and

again and again you see the T type of or

the T scenario where you have three

candles you see these ones price going

above the previous day high and then

targeting the low all this draw on

liquidity starting from the internal

draw on liquidity and finally

reaching to that area so candle range

theory is

basically those of you that are trading

previous day high previous day low and

then that concept is what has been

rebranded to the candle range Theory

concept but it must be aligning with a

very important or it must be aligning

with a key level all right look at this

one price have

this the body of the candle look at

this this

Candlestick pushing into where the fair

value gap which is the point of Interest

and price went from there so those of

you who are trading the previous Day

candle high if you sweep the previous

Day candle high or you sweep the

previous Day candle low you target a

point this is the same concept you know

price going above it and then crashing

downward so when you spot these things

they can be aligned in such a way that

you can use it for trading so now let's

talk about how we can align this with

the times of the day

with the times of the day all right is

very very important now let's look at

this particular scenario this is the

candle range theory for a day the one I

told you about the AMD I used to use

this indicator for trading this same

concept of candle range Theory now you

can divide it into sessions where we

have the Asian station the Asian station

is basically formed like a range for the

day this is the range the high and the

low and what do we look out for if we

come to the next session we basically

look out for the sweep of liquidity that

is resting above or below it which is

popularly known as the

manipulation and the

distribution it's a simple concept that

repeats itself often times and you can

see it on your chart you can literally

spotted without any stress all right the

candle range Theory formation here you

can see it happened right here price

targeting the LW of Asia this one is

simply for the day and what did we see

boom it went up to that area now this is

the same scenario we are seeing so this

same scenario if you bring it in a

Candlestick formation you will see it

something like this the candle body and

this is the

high this is the low manipulation all

right the open and then it ranged it

went below to sweep liquidity below just

a little bit and then boom it closed as

a bullish candle this happens many times

of the day you see price have

accumulation manipulation and it

distributed to this side all right so

you see this happening time and again

and again the power of three concept is

the same thing as the candle range

Theory you have price sweeping the

liquidity going into a key level and

then trading either to the next

direction to distribute or giving you a

perfect thread entry so always look for

a confirmation in

conclusion when you have your candle

range let's say this is the

range and you trade into either a fair

value Gap or a key level a key level

must always be there a key level whether

you're looking at it from the 4our time

frame or from any time frame the key

level is to basically help you know

whether that particular area is a high

probability area Because by the time you

sweep either the high of that candle or

the low of the candle if you don't have

any key level level that will be

important for price to bounce back from

it is going to be futile price is going

to go up so whenever you have price

trading and sweeping liquidity above or

below the previous day high into a key

level or a point of interest and having

a shifting structure you can easily take

the trade from there and that is my

basic understanding of the candle range

Theory nothing more nothing less if you

can use this and blend it with your Kill

Zone strategy power of threee is almost

the same thing all right thank you very

much guys I just tried to share with you

and show you what exactly it is see you

in my next video