Pice action element – “Mother candle”

  

                     Hello. Today I want to review one of technical analyses method from price action. Price action do not uses indicators. It is using candles and levels. It is important to learn price action, because you are analyzing price, which is the most important thing in trading. Trading without indicators are simple when you know how to do it .  The major benefits of price action analysis are:

 

                      1.    It is not lagging as indicators do;

                      2.    You can adapt to changed market conditions very fast;

                      3.    You can trade at any time.

 

                     For trading you will need four things:

 

                       1.    Candlestick patterns;

                        2.    Price action;

                        3.    Support and resistance lines;

                        4.    EUR/USD H4 timeframe 

 

  

                                                       What is a “Mother candle”?

 

                      A mother candle forms when a large candle makes a recent highs and lows that engulfs the following several  candles. More candles are better. These candles often are about 50 pips or more and very well seen on the chart. But  mother candle can be at the first view not important and simple candle.

Very important: mother candle is only that candle, that have „childs“. What is a child? A child is another candle, which highest and lowest point is in the previous candle. It needs at least 2 childs.  So more childs, so better a mother candle is (as in real life... ). Take a look at example:

 

 

  

                          When the "mother" candle appears on the chart, we have to draw two levels on it’s highest and lowest point:

  

                               Everything almost are done. We have a mother candle with several childs. Now we must do two conditional orders for sell and buy. They must be 5 pips away from these levels outside of the mother candle. When the one conditional order will work, other must be deleted. The stoploss must be set to another side of master candle. When price makes the second big candle, stoploss must be moved over or behind it.

 


                               Take profit can be 50 pips and more, it defends in what chart place the mother candle appeared. You can take you TP on suport or resistance levels, good candle combination, help of indicators, or any other method.

 

                               Now we can look for some examples how it works:

  

 

P.S. A "mother" candle is a good element  in my trading life. I like it, because it is simple, it do not requires a big knowledge about news, political or economic situation. Timeframe is H4, so news spikes rarely makes you cry. Mother candle you can use with any trading system, sometimes it will help you to take a good decision in trading


Good luck and thanks for viewing!