Candle Part iii by NickB (forex4noobs)

The Three Parts Of a Reversal Trade

Even though an indecision candle is not a reversal candle in the right context can indicate a possible reversal. An indecision pattern indicates a possible reversal when it forms after a strong move. The possible reversal is confirmed if the indecision candle is followed by a candle moving in the opposite direction. In the pictures below you can see several examples of indecision patterns that you should consider reversal patterns.


Why are these considered reversal patterns though? To answer that lets once again delve into the minds of buyers and sellers.


Preceding Trend




















Ok so let’s look at the first part of a reversal, this is something I call the preceding trend/candle. Simply put this is a strong move by the bull/bears indicating a lot of buying/selling pressure. In this example the preceding trend/candle is a very strong bearish move indicating that there are a lot of sellers in the market and very few buyers.

You may be thinking ‘why is a preceding trend/candle an essential part of a reversal?’, well the answer is very simple. If a indecision candle forms without a preceding trend/candle what the heck could it possibly be reversing from? If it is not reversing from anything it cannot be considered a reversal candle, right? I will explain this a little more later. Now I am going to add another of these stupid pictures:












So this is the preceding bearish trend, you can see the bears have a lot of power and while the bulls have very little. This is why the price is moving down, but then….


Indecision Candle













Look at that, we have an indecision candle forming in the middle of a strong bearish trend. Let’s think about what happened here for a second. In the picture above we see that there was a lot of selling pressure and the bears had control. All of a sudden we get this indecision pattern and if you have been paying attention you know what that means. An indecision pattern means that the bulls and bears now have equal power. In other words it means some sellers have left the market and some buyers are coming into the market. This transition of power is reflected to us by the indecision candle.

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