Always Wait For THIS Before Entering Trades (Candlestick Closures)

Summary

In this video, the importance of waiting for candlestick closures to validate trades is highlighted. It explains how impulsive decisions can lead to costly mistakes, using a personal trading experience to illustrate the concept. The video also introduces the Fake Closure Candle strategy, which involves identifying key candlestick patterns to avoid being trapped by false breakouts. The strategy emphasizes patience, proper confirmation, and the significance of consolidation phases in predicting market direction. By waiting for proper confirmations, traders can enhance their decision-making and increase the likelihood of successful trades.

Takeaways

• 😀 Candlestick closures provide confirmation of price movements and help avoid impulsive decisions in trading.
• 😀 A bullish candlestick opens at the bottom and closes at the top, showing buyers' strength, while a bearish candlestick shows sellers' dominance.
• 😀 Waiting for a candlestick to close is essential as it prevents trading based on incomplete or unconfirmed information.
• 😀 Jumping into a trade before the candlestick closes may lead to false signals, such as incorrectly predicting a reversal or trend continuation.
• 😀 A personal experience emphasizes the importance of waiting for candlestick closures, as premature action can turn a winning trade into a loss.
• 😀 The 'fake closure candle strategy' uses key candlestick formations to trap impulsive traders into false breakouts and reversals.
• 😀 The fake closure strategy includes four steps: identifying a range candle, an inside candle, a fakey candle (false breakout), and a confirmation candle.
• 😀 Impulsive traders often get trapped when entering a trade mid-candle during a breakout, but waiting for the candle to close prevents this.
• 😀 Multiple inside candles in a fake closure setup indicate prolonged consolidation, which can lead to stronger price moves when the breakout happens.
• 😀 Confirmation candles are crucial for validating the market's direction; they give the final signal whether to act or not.
• 😀 Learning to spot valid fake closure setups improves trade success by identifying the true market direction over the short term.

Q & A

Why is it important to wait for a Candlestick to close before making a trade?

Waiting for a Candlestick to close is essential because until it does, the movement within that candle is unconfirmed. Making trades before the close can lead to acting on incomplete information, which might result in costly mistakes.

What is the primary difference between a bullish and a bearish Candlestick?

For a bullish Candlestick, the price opens at the bottom and closes at the top of the body, indicating buyers were stronger. For a bearish Candlestick, the price opens at the top and closes at the bottom, showing that sellers had control.

How can making impulsive decisions during trading lead to losses?

Making impulsive decisions, like closing a trade too early out of fear, can turn a potentially winning trade into a loss. Waiting for Candlestick closures can help avoid this by confirming the full picture of the market movement.

What does a 'fake closure' candle strategy involve?

The 'fake closure' candle strategy involves four key Candlestick formations: the range candle, the inside candle, the fakey candle (which gives the illusion of a breakout), and the confirmation candle. This strategy helps traders avoid getting trapped in false breakouts.

Why do multiple inside candles strengthen a fake closure setup?

Multiple inside candles indicate prolonged consolidation, which builds energy in the market. The longer the market stays within the range, the stronger the eventual breakout or breakdown is likely to be, making the setup more reliable.

What is a range candle and why is it important?

A range candle sets the boundaries for the market within a specific time frame, marking resistance at the high and support at the low. This candle is crucial for defining the market's range and for identifying potential breakout or breakdown points.

What is a closure trap in the context of the fake closure candle strategy?

A closure trap occurs when the fakey candle breaks out of the range during its formation but then closes back inside the range. This creates the illusion of a breakout, misleading traders into making premature decisions.

How can you confirm a fake closure setup in trading?

To confirm a fake closure setup, you need to wait for a confirmation candle. For a bullish setup, the next candle must close above the range candle’s high. For a bearish setup, it must close below the range candle’s low.

Why is it important to check the body and wicks of the inside candle in a fake closure setup?

For the setup to be valid, the body and wicks of the inside candle must stay completely within the range of the first candle. If they don’t, the setup is invalid, and acting on it can lead to poor trades.

How does waiting for the confirmation candle help in avoiding false breakouts?

Waiting for the confirmation candle ensures that the breakout or breakdown is legitimate. Without this step, traders might enter positions too early and get trapped in false signals when the market reverses.