In the binary options next candlestick prediction strategy, specific patterns such as Rising Three Methods, Side by Side Lines, and Tasuki Gap help to predict market trends. But how do you find out which candlestick pattern you are looking at and how do you make the right trading decisions based on this knowledge?
In this article, we will discuss how to predict the next candlestick to understand whether the market is bullish or bearish.
Good to know:
- Candlestick charts are essential tools for traders to predict market movements and make informed decisions in binary options trading.
- Patterns like the Rising Three Methods, Side by Side Lines, and Tasuki Gap can help predict market trends with varying success rates.
- Bullish market predictions are indicated by patterns such as Bullish Engulfing Pattern, Hammer, and Inverted Hammer, signaling a potential uptrend.
- Bearish market predictions are indicated by patterns like Bearish Engulfing Pattern, Shooting Star, and Hanging Man, signaling a potential downtrend.
What is the candlestick prediction strategy in binary trading?
The candlestick prediction strategy in binary trading involves reading patterns such as Bullish Engulfing Pattern, Hammer and Inverted Hammer, which signal an uptrend, or other patterns such as Side by Side Lines and Tasuki Gap to predict market trends. But let us start with the basics before we take a closer look at each of these strategies.
Candlestick charts were well-known in the Japanese market before they became famous in the Western world. They are one of the most important indicators that traders use to monitor market movements and analyze data to make future predictions.
The patterns created by the position, volume and size of the candlestick help the trader to understand resistance levels and important support levels. This helps in making an informed decision to minimise the risk factor while trading binary options.
Usually, candlestick charts consist of different candlesticks, one of which represents the price of the chosen asset with its body in a specific time frame. The wick and shadow on the candlestick highlight the high and low price of the asset. For example, a green candlestick represents a rise in price and a red candlestick represents a fall in price.
The patterns of these candlesticks help traders to understand buying and selling opportunities – the predictions of the next candlestick help to understand whether the market is bullish or bearish.
How to predict the next candle with Binary Options?
If you want to make profits in the trading market, it is advised to trade in the market’s direction. Before starting in deep details, the best method to interpret a candlestick is to analyze the position, volume, and relative size of the candlestick.
#1 Rising three methods
The three rising methods are some of the simplest methods used for candlestick prediction. Once you learn the basics of this method, the pattern will jump out at you whenever it starts to form on the chart.
The three rising methods form five candlesticks and one candle which must be close to the last candle to be valid. This pattern can be either bullish or bearish. The first candle is always a white (green) candle that closes near the shaved or unshaved top. The next three candles are small with spinning tops that are either white or black.
They are seen to fall for three days, but not below the first candle. The fifth candle starts above the low of the first candle. It has the highest close of the five. This signal has a 70% success rate in this strategy with an expiry of 2-5 candles from the purchase.
#2 Side by side lines
Side-by-side lines is a pattern with a fairly high success rate. It consists of two candlesticks of the same colour side by side on the chart.
If the trend is up, the first white candlestick will always be high at the end of the day. This is because the candlesticks have good volume, indicating a moderate rise in price. Therefore, the second candle of the same colour will start at the same level as the first candle and close near the high at the end of the day, or it may even cross the length of the first candle.
The two white candlesticks with good volume indicate that the market is gaining strength. This strength will soon be seen. Traders are therefore always on the lookout for this trend.
Tips: The credibility of the signals generated is always subject to the time frame. The signals generated in 5 minutes will have more noise than the signals generated in one day.
#3 Tatsuki gap
Like the three rising methods, the Tatsuki Gap consists of up to five candles. The Tatsuki Gap can be formed in both bearish and bullish markets; the only factor in identifying this pattern is a visible gap indicating the market’s resistance or support.
This trend is usually formed when there is a gap in prices along the direction of the market. For example, if the market is down, the gap will also be down and vice versa. In the case of the down market, the candle will have high volume and be black, closing near or at the day’s low.
The next candles will open above the first candle to test the resistance in the market. You can decide to go long on this indicator, but a confirmed resistance will highlight the second drop in the market. This signal has a 65% success rate in predicting the market.
(Risk warning: Your capital can be at risk)
Predicting a bullish market by using different candlestick patterns
You need to keep an eye on three major patterns on the candlestick chart for predicting a bullish market. These are as follows:
- Bullish Engulfing Pattern: The bullish engulfing pattern is formed on the candlestick chart when the number of buyers is more than the number of sellers in the market. It is represented by a long green bar and a smaller red bar.
- Hammer: In the hammer case, the candlestick has a shorter body and a long lower wick. It indicates that the buyers have increased the selling price, and pressure is built on the seller’s market. In this case, the next candlestick is always a green one.
- Inverted Hammer: In the case of the Inverted hammer, the upper wick is seen to be longer, indicating the buying pressure in the market. The sellers drive the prices down, and the buyers rule the market in this case.
The bullish market trend is known for indicating a reverse gear from a downtrend to an uptrend. This pattern is meant for traders looking to enter and hold on to the assets for a longer period.
Predicting a bearish market by using different candlestick patterns
You need to keep an eye on three major patterns on the candlestick chart for predicting a bearish market. These are as follows:
- Bearish Engulfing Pattern: The bearish engulfing pattern is seen to be formed at the end of the upward market trend. In this case, the green candlestick is followed by a large red candlestick, highlighting the fall in the market. It is an indicator of the downward trend of the market.
- Shooting Star: A shooting star has a similar shape to the hammer, but the candlestick is in red. This pattern is created when the closing price is a little bit higher than the opening price.
- Hanging Man: The shape of the hanging man is similar to the inverted hammer highlighting the start of a downtrend in the market. It highlights that the buyers manage to increase the prices even when there was huge selling pressure in the market.
Technical signals for future movements:
A technical indicator is a heuristic or pattern-based signal. Traders use the volume, price, and, or open interest of a contract or security to produce technical indicators to follow technical analysis. Traders can predict the future with binary options using their technical analysis. It means that they use technical indicators to predict future price movements. A few of the most commonly utilized technical indications for forecasting the outcome with binary options are:
- The RSI or Relative Strength Index
- MFI or Money Flow Index
- MACD or Moving Average Convergence Divergence
- Stochastics
- Bollinger Bands
Most chartists or technical analysts seek technical indicators in the price information of historical assets to entry and exit points for binary options trades.
Add technical indicators for predict Binary trading
Traders use several technical indicators to predict the future with binary options, but all of them fall under two major categories such as oscillators and overlays.
As the name suggests, Oscillators are oscillating technical indicators. They fluctuate between a local maximum and minimum plotted below or above a price chart. Stochastic oscillators, Moving Average Convergence Divergence, and Relative Strength Index are examples of Oscillators.
Overlays are technical indicators that use the same scale, which is used to plot the prices on a stock chart, which are usually marked over the top of the price. Bollinger Bands and moving averages are instances of overlays. Also keep in mind while trading signals, that companies often offer signal scams.
Some of the most popular technical signals to forecast the price movement of binary options include:
Wilder’s DMI (ADX)
This technical indicator consists of three lines, ADX, DI-, and DI+. The relative positions of these lines aim to grab the strength of an identified trend. Traders can predict the future of their binary options trading according to the identified trend or momentum. It enables clients to make informed judgments on whether to buy or sell their stake.
Pivot point analysis
Traders use the Pivot Point technical indicator by combining resistance and support levels. It aids them considerably in determining trends and directions for a known timeframe. Pivot point analysis is flexible and easy to use, making it the most sought-after option among traders to predict the future of their binary options trading. Pivot point analysis is handy for trading chief liquid currencies in particular.
CCI or Commodity Channel Index
The CCI facilitates traders to calculate the current price level of an asset concerning the average price during any known timeframe. The moving average will usually be the mean price level, and traders can choose the period according to their convenience. This flexibility allows traders to identify new trends and overbought or oversold assets during extreme conditions. CCI is extremely popular among day traders who want to perform binary options trading for a short time.
Stochastic Oscillator
Stochastic Oscillators will usually follow the momentum or the speed of price, but the impetus will change direction before price. This vital feature specifies extreme cases of overselling and overbuying, allowing traders to identify reversals for bearish and bullish stages. Binary options traders have the liberty to use their desired timeframes against the standard period of 14 days.
Bollinger Bands
Bollinger bands play a crucial role in capturing volatility. They can identify lower and upper levels as dynamically generated bands derived from the latest price moves of an asset. Traders usually follow 12 values for the simple moving average. They use two values for top and bottom bands for standard deviation.
When a trader contract and expands the bands, it indicates reversal signals. They assist the trader considerably in taking suitable positions in binary options. Overselling implies that the present market rate is less than the bottom range. Overbought situations indicate if the current market price is over the top band. Thus, predicting the future with binary options happens to be a challenge for binary options traders.
Conclusion: Use the next candlestick prediction strategy for your success
In conclusion, you should put this strategy into practice for your success. This article has taught you how to predict and read candlesticks to improve your analytical and data prediction skills. It will take a while to learn to look for patterns and make predictions on the chart, but with regular practice and experimentation you will reach the level of an advanced trader.
If you are new, you need to start consciously looking for patterns on the chart on a regular basis. You can start experimenting with your pattern recognition skills on platforms like Pocket Option by signing up and practicing investing without losing any money.
Trading is a complex domain, and it takes years and years of practice to understand the market. Still, the trading market is highly subjective and is subjected to various risks, but you can certainly minimize them by taking calculated risks and finding a balance. See my other articles about strategies here.
(Risk warning: Your capital can be at risk)
Frequently Asked Questions:
How is the range of a bullish candlestick calculated?
The range of the bullish candlestick is calculated by measuring the distance between the upper shadow and the lower shadow. It will highlight the price move during that particular duration. You can also subtract the lower price from the higher price to measure the range.
What is a bearish doji candlestick?
The bearish market is represented by the Bearish Doji Star that highlights a reversal pattern in the market. The first reading is a long green candle that is followed by a fall in price. It indicates the selling of assets on the chart during the downtrend market.
What are candlestick charts in binary trading?
Candlestick charts are technical tools in binary trading that show price movements of an asset within a specific timeframe, using patterns to indicate market trends.
How do you predict the next candle in binary options?
Predicting the next candle involves analyzing candlestick patterns, volume, and position. Patterns like Rising Three Methods, Side by Side Lines, and Tasuki Gap are commonly used for predictions.
What indicates a bullish market in candlestick charts?
A bullish market is indicated by patterns like the Bullish Engulfing Pattern, Hammer, and Inverted Hammer, suggesting a potential uptrend in prices.
What signifies a bearish market in candlestick charts?
Bearish market trends are shown by patterns such as the Bearish Engulfing Pattern, Shooting Star, and Hanging Man, indicating a potential downtrend in prices.
