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.
Key Facts About Next Candle Prediction Strategy:
- 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 interpreting various chart patterns, such as the Bullish Engulfing Pattern, Hammer, and Inverted Hammer, which indicate an uptrend. Other patterns like Side by Side Lines and Tasuki Gap help traders forecast market trends. Let’s begin with the basics before delving deeper into each of these strategies.
Candlestick charts, originally popular in Japan, have gained widespread use in the Western world due to their effectiveness in tracking market movements and analyzing data for future predictions. Based on the position, size, and volume of the candlesticks, these patterns provide valuable insights into resistance and support levels, allowing traders to make informed decisions and reduce risk when trading binary options.
Candlestick charts typically consist of several candlesticks, each representing the price of an asset over a specific time frame. The candlestick’s body shows the asset’s opening and closing prices, while the wick or shadow highlights the asset’s highest and lowest prices during that period. For instance, a green candlestick indicates a price increase, while a red one signals a price decrease.
The patterns of these candlesticks help traders understand buying and selling opportunities – the predictions of the next candlestick help to understand whether the market is bullish or bearish.
How Do You Predict the Next Candle With Binary Options?
If you want to make profits in the trading market, you are advised to trade in the market’s direction. Before starting with the deep details, the best method to interpret a candlestick is to analyze its position, volume, and relative size.
#1 Rising Three Methods
The three rising methods are among the easiest candlestick patterns to identify. Once you grasp the basics, you’ll quickly spot this pattern as it begins to form on the chart.
This pattern consists of five candlesticks, with the last one closely following the fourth candle to remain valid. It can signal either a bullish or bearish trend. The first candlestick is always a white (green) candle, closing near the top, whether shaved or unshaved.
The next three candles are small spinning tops, either white or black, that appear to fall for three days without dropping below the first candle’s low. The fifth candlestick opens above the first candle’s low and closes at the highest level of the five. This pattern has a 70% success rate, with an expiry typically set for 2-5 candles after the trade entry.
#2 Side-By-Side Lines
Side-by-side lines are a pattern known for its high success rate. This pattern consists of two adjacent candlesticks of the same color, positioned next to each other on the chart.
When the trend is upward, the first candlestick is always a white (green) candle that closes at a high point for the day. This signifies good volume and a moderate price increase. The second candle, also white, starts at the same level as the first and closes near its high, or sometimes even surpasses the first candle’s length.
The presence of two strong white candlesticks with solid volume indicates growing market strength, which is likely to continue. Traders closely watch for this pattern as it signals potential momentum.
Tip: The reliability of the signals depends on the time frame. Signals on a 5-minute chart may have more noise, whereas signals on a daily chart tend to be more dependable.
#3 Tatsuki Gap
Similar to the three rising methods, the Tasuki Gap pattern involves up to five candles. It can form in bullish and bearish markets, with the key characteristic being a noticeable gap that signals market resistance or support.
This pattern typically emerges when a price gap aligns with the overall market direction. For example, in a bearish market, the gap will also be downward, while in a bullish market, the gap will be upward. In a downtrend, the first candle is usually black, with high volume, closing near or at the day’s low.
Subsequent candles will open above the first, testing the market’s resistance. Traders may consider going long based on this indicator, but a confirmed resistance will indicate a possible second drop in the market. This pattern has a 65% success rate in predicting market movement.
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 pattern or heuristic signal used by traders to analyze market trends. By examining factors such as volume, price, and open interest of a contract or security, traders generate technical indicators to guide their analysis.
Technical analysis allows traders to predict future price movements in binary options trading. This involves using these indicators to anticipate how prices will change. Some of the most commonly used technical indicators for forecasting binary options outcomes include:
- 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 Predicting 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 implies, oscillators are technical indicators that move between a local maximum and minimum, typically displayed above or below a price chart. Examples of oscillators include the Stochastic Oscillator, Moving Average Convergence Divergence (MACD), and Relative Strength Index (RSI).
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. Pivot point analysis is highly valuable for identifying trends and price directions within a specific timeframe. Its flexibility and ease of use make it a popular choice among traders for predicting future movements in binary options. This analysis is especially useful when trading major liquid currencies.
CCI or Commodity Channel Index
The Commodity Channel Index (CCI) helps traders assess an asset’s current price relative to its average price over a specific timeframe. The moving average typically represents the mean price level, and traders can adjust the period to suit their preferences. 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 typically track the momentum or speed of price movements, with changes in momentum occurring before the price itself. This key characteristic highlights extreme oversold and overbought conditions, helping traders spot potential reversals during both bearish and bullish phases. Binary options traders have the flexibility to adjust timeframes as needed beyond the standard 14-day period.
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
To succeed with this strategy, you need to practice consistently. This article has provided the tools to read and predict candlestick patterns, which will improve your analytical skills over time. With regular practice and experimentation, you can advance your trading abilities and reduce risks by taking calculated steps.
See my other articles about strategies here.
Most commonly asked questions about next candle prediction strategy:
What is the Candlestick Prediction Strategy in Binary Trading?
The Candlestick Prediction Strategy in binary trading involves analyzing chart patterns like the Bullish Engulfing Pattern, Hammer, and Inverted Hammer to predict market movements. Traders use these patterns to identify potential uptrends or downtrends in the market, helping them make more informed decisions. By studying the size, position, and volume of candlesticks, traders can forecast the direction of price movements.
What are the key candlestick patterns used for predicting a bullish market?
Key candlestick patterns for predicting a bullish market include the Bullish Engulfing Pattern, Hammer, and Inverted Hammer. These patterns signal a potential reversal from a downtrend to an uptrend, with increased buying pressure and a possible rise in market prices.
How can candlestick patterns help predict a bearish market?
Candlestick patterns like the Bearish Engulfing Pattern, Shooting Star, and Hanging Man are used to predict a bearish market. These patterns indicate that the selling pressure is increasing, and the market may reverse from an uptrend to a downtrend, signaling a potential decline in prices.
How do Rising Three Methods and Tasuki Gap patterns work?
The Rising Three Methods pattern consists of five candlesticks and signals a bullish trend when the last candlestick closes at a higher level than the previous four. The Tasuki Gap pattern shows a gap between the first candlestick and subsequent candles, indicating market resistance or support. Both patterns help traders forecast potential price movements in either a bullish or bearish direction.
What technical indicators can enhance candlestick predictions in binary options?
Several technical indicators, such as the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and Bollinger Bands, can enhance candlestick predictions. These indicators help traders analyze market momentum, volatility, and trend strength, providing additional insights to support candlestick pattern analysis and improve trading decisions.
