This article discusses how candlestick wicks can be simply analysed to understand the market sentiment quicker and more efficiently. I will, of course, explain exactly how the wick and the wick percentage are calculated but then also indicate the meaning behind the wick percentage of a candlestick.
For an in-depth lesson and training on candlestick, make sure to join the webinar with Steve Nison, the father of modern candlestick charting and winner of the traders' hall of fame award. The candlestick has a wick on both the top and bottom of the candle.
Traders can therefore calculate two wicks for each candle, although typically only one of the two is relevant for actual trading decisions see next paragraph. Calculating the wick percentage of a candlestick only requires a few steps. Here is the process for the top wick:. The top wick is 1. The bottom wick is 1. Now that the wick size is calculated, it is important to compare it to the total size of the candle.
This will provide Forex and CFD traders with a wick percentage and that in turn gives me information about the market sentiment in each candle. The wick percentage offers critical information about the market sentiment during that candle. The wick percentage simply shows the winner and loser of the battle between bulls and bears in each candle.
Countless long and short positions and orders are driving price up and down but when the candle closes, the candle wick or lack of it explains who dominates the candlestick. The opposite is equally valid for a candle close near the low, which indicates that bears remain in control. A bearish close which is far away from the low also indicates weakness and potential bullish bounce or reversal. Bottom wick more important: Top wick more important: In that case the top wick is more important to understand whether a breakout or bounce is occurring.
The percentage of the wick is a key ingredient to understand whether control of the candle by bulls or bears is maintained or lost.
Here is the table that I use:. None of the percentages are guarantees — nothing ever is with trading. These are rough guidelines that I use when price is reaching a key decision zone or point of confluence.
It is important to always review and analyse the market structure, trend, patterns, and support and resistance so as to understand whether that candlestick will have any significance.
Relatively larger sized candlesticks will have more importance than smaller candles. The same holds true for candles of higher time frames like the 4 hour or daily chart compared to 1 and 5 minute charts.
And for those that are interested in a live training with the master of candlesticks Steve Nison, make sure to reserve your spot by clicking on the button below. April 30, Android App MT4 for your Android device.
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