The oldest myth that exists in the world of financial market says that trend is your friend. How that applies in the market is that you are more prone to go with the flow of the river then against it i.e. trading with the market direction and using the trend following signals. If you get what we mean then you will also be interested in how to do that. Well one way is by using the reversal signals which will help you in pinpointing the corrective peaks and falls during a given timeline of the current trend and thus enabling you to predict entries. This is what you do in an unpredictable market but what if market has a very strong flow in one direction? What strategy to follow then. The best way out is to follow continuation signals. Continuation signals will give you an indication of the underlying strength that the market has and then you can follow through current trends.
In this blog we will tell you about three continuation signals that binary traders should have knowledge about.
Rising three methods- An optimistic candlestick pattern that is helpful to envisage the continuation of an upward trend. We tell you how to predict one. The first candle in the pattern should be a long one in white color inside a defined uptrend. The next thing that should follow is 3 small red candles within the range of the first long one. The last one in the line should again be a long white candle. Remember that the pattern requires a closing by the final candle to be a valid one.
The thing why we like it is because it is easy to spot. The pattern is bullish. We can say that this type of signal 70% success rate. The expiry period varies from 2 to 5 candles from the purchase. So roughly an expiry time of about 10 to 25 minutes.
Side by Side Lines – This pattern guarantees a high rate of success. You can predict it when two long white or black candles exist side by side. When the trend is upward the first candle will appear at a high movement. It will be a long one, will close when day is high and will come with high volume. The first candle will repeat the same pattern but may even go above the first candle. Such a pattern of candles indicate the building strength of the market.
A word of advice here is that signal strength is dependent on time frame. Larger time frames have stronger signals. For example in one hour vs. ten minutes or one day vs. one hour.
Tatsuki Gap- This is also a multi-candle formation like the rising three methods which can take 5 candles to form. It can appear in either bullish or bearish market. It will feature two things a gap and a test of support resistance. There are also two types of it: Upward and Downward. In a defined uptrend the bar is a long white candlestick. The second bar is gapped above the previous one. The last candlestick will fill the gap between the previous two.
For the downward Tasuki Gap the first will be a red candle stick. The second bar will be another red stick with a gap. The third one will fill the gap between these two. The signal has around 65% success rate.
Last but not the least. Candle signals have three criteria’s on which one can predict them. Size, volume and location. Remember to look out for candles which are relatively larger or smaller than the average size. Bullish signals are to be taken when prices are rising from support or they break the resistance, bearish when prices are falling from resistance or breaking through support.