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What is High Wave Candlestick?

The High Wave Candlestick pattern occurs in a highly fluctuating market and provides traders with entry and exit levels in the current trend. The candlestick usually forms at the support and resistance price levels, indicating trend reversals. In this article, we take an in-depth look into the High Wave Candlestick.

What is the High Wave Candlestick pattern?

A High Wave Candlestick pattern indicates price breakouts during an uptrend or downtrend. It consists of longer lower shadows and upper shadows with a small body that indicates fluctuating prices during the trading period. Since both the supply side and demand side of the currency pair prices witness rapid fluctuations, buyers try to increase the currency pair prices but are met with the opposite decision of sellers to cut down the prices. This leads to overall indecision until the market finally crosses the resistance price level or falls below the support level and marks a trend reversal.

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How to identify the High Wave Candlestick?

A High Wave Candlestick pattern usually consists of only a single candlestick near the resistance or support level, where the size of the candlestick is more than the size of the previous 20 candlesticks in the pattern. This indicates a big market move during the trading period.

  • The body of the candlestick is smaller when compared to the size of its shadows (wicks). A High Wave Candlestick is equal to or less than 20% of the total size of the wick.
  • A High Wave Candlestick can either be a green-coloured candlestick, occurring in a bullish trend, or a red-coloured candlestick, occurring in a bearish trend.
  • The upper and lower wick’s size should be at least two times the size of the body. The larger the size, the better it is, as larger wicks indicate a higher indecision level in the market.
Graphic

What does the High Wave Candlestick pattern indicate?

The High Wave Candlestick pattern indicates indecision in the market since both buyers and sellers try to move the currency pair prices in their favour. However, since the support and resistance levels in the market are decision-making points, when the pattern is formed at these levels, it indicates possible market reversals.

  • When the pattern forms near the support price level during a downtrend, it indicates a bullish reversal and signals to place buy or long orders.
  • When the pattern forms near the resistance price level of the currency pair during an uptrend, it indicates a bearish reversal and signals to place sell or short orders.

How to trade the High Wave Candlestick pattern?

When you identify a High Wave Candlestick pattern in the market, analysing the historical price fluctuations and volume can help you place orders in the current trend. It is advised to monitor the pattern through technical analysis for at least one trading day to confirm the market indecision.

  • When the current currency pair price breaks above the high price level of the pattern, traders can long the trade due to an expected uptrend, which is confirmed when the pattern forms near the resistance level.
  • When the current currency pair price falls below the low price level of the chart pattern, the trader can short the trade due to an expected downtrend, which is confirmed when the pattern forms near the support level.
  • You can place the buy stop order at the high price level of the candlestick pattern to maximise profits and a sell stop order below the low price level of this pattern to minimise losses.
  • The take profit level can be set at the low of the downtrend to ensure that if the market fails to reverse after an uptrend, you are able to get out of the trade at an ideal exit price level.

You can also combine the High Wave Candlestick pattern with the Relative Strength Index to identify the oversold and overbought market conditions through the RSI values and trade these situations for placing successful orders.

  • When the pattern forms near the support level, the RSI indicator provides oversold market condition that can confirm the uptrend reversal, enabling you to place long orders.
  • When the pattern forms near the resistance level, the RSI indicator provides an overbought market condition that can confirm the downtrend reversal, enabling you to place short orders.

Trade with the High Wave Candlestick pattern today

The High Wave Candlestick is easily identifiable as it is accompanied by extremely long wicks and a very small body. Traders can analyse this pattern with previous trends, historical price moves, and the support and resistance placement to confirm the reversal signals. Start trading with our forex trading platform today to enjoy a seamless trading experience. Sign up for a live trading account or try a risk-free demo account on Blueberry Markets.

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