[Geko]

Lately, I came across an interesting idea about yesterday’s candle wicks. I have coded this idea into Blast to display yesterday candle in colour and yesterday wick zones in colour:

Candle_wicks.png

In the screenshot above, we can see that yesterday candle was bullish as the candle is highlighted in Green, and that yesterday’s wick zones are highlighted in colour on today’s candle time zone.

Just after London Open, there was a potential trade at the breakout of yesterday’s Candle Low, which was also supported but the fractal box low breakout.

The concept is that more than 70 % of the time when the price is inside a wick zone it leaves the zone. I will code something later to double check this statistic.

Those wicks zone can be used in different ways.

Trade yesterday’s candle breakout:

• Trade the upper wick breakout up (previous candle high breakout)
• Trade the lower wick breakout down (previous candle low breakout)

Trade yesterday’s candle range:

• Trade the upper wick breakout down (trade inside previous day candle during ranging conditions)
• Trade the lower wick breakout up (trade inside previous day candle during ranging conditions)

Yesterday candle direction could be used to filter trades.

Stop Loss could be the other side of the zone.

In order to enter a trade, one could also wait the pullback after the breakout to see if the breakout is confirmed.

Those wicks can also be used for take profit area when you are trading other strategies. If you are in a long trade and price enter the upper wick zone, price might find some resistance and fail to break yesterday high. Time to take profit or protect your trade?

You like this wicks zones concept? You trade wicks?

Why not sharing with us your feedback and some screenshots of your trades.

[ScarletPip]

I don't have any screenshots but anecdotally, I would say that this is mostly true. Whether it is true simply because price is always in motion, or whether wick zones are regarded by other traders as points of support/resistance I can't say for sure. Almost by definition, a trending chart is clearing the wick zone of its prior candle, otherwise it is ranging. Ranges usually have smaller wicks as well.

A wick is really just a product of where you decide to have your open/close periods, so they are arbitrary. If you are watching H1, for example, the portion that is wick and the portion that is candle body will be different than on M30. So if these have any power it is only because many other traders are seeing the same thing.

You do have enough here to make a simple EA that could test the theory though. Something like:
If price is trending - AND price is inside yesterday's top candle wick - enter long
If price is trending -AND price is inside yesterday's bottom candle wick - enter short
If price is ranging -AND price is outside yesterday's top candle wick - place pending sell limit order
If price is ranging-AND price is outside yesterday's bottom candle wick - place pending buy limit order

Now you have a very simple system that in theory can trade ranges and breakouts - but obviously it would need refining. How do you determine what is a range an what is a trend - I've seen many indicators that attempt this and some are pretty good. You probably already have one. :)