- PPF Points
- 1,738
Predicting the next candle on trading charts can be done by analyzing parameters such as price action, volume, and market sentiment to detect short-term movements. Traders usually commence by a thorough study of candlestick patterns such as dojis, hammers, or engulfing formations, which indicate reversals or continuations as the case may be. For instance, a bullish engulfing pattern can suggest that a downtrend is turning, while a bearish pin bar observed near the highest resistance level can predict its continuation. The role of support and resistance zones in the market is extremely crucial (to the extent that if a candle closes above resistance with strong momentum, the next one will most likely continue upwards). Furthermore, volume confirmation is of the essence; a rising candle supported by increasing volume will suggest an uptrend, while moving with the low volume may result in the lack of confidence. On one hand, moving averages are useful tools in estimating the direction of the trend, and a crossover of the shorter-term line over the longer-term line can typically mean that there is a bull market. On the other hand, momentum indicators such as the RSI or stochastic oscillator can tell the trader if an asset is overbought or oversold and, therefore, if it is going to retrace or continue to rally. Market structure, based on such signs as higher highs and lows, gives the understanding of current price direction. The attitude of the market (price) toward the previous high, world events, or key time (like daily close) occurs, determining the kind of movement the price will take. Another influencer of price is the opening session for exchanges and the publication of economic data, which, in most cases, trigger the market to move sharply or undertake a directional change. Success is attainable by the proper utilization of both technical signals and self-control in addition to risk management, keeping in mind that no pattern can be a guarantee of what will happen in the future.