Indecision Candlestick Examples
It might be surprising to use indecision candle patterns like the doji when making trading decisions — but what might not be surprising is how they are actually used. Related reading: High Wave Candle Pattern.
[AFF-CTA: pending]
As the name suggests, an indecision candle is a candle with no particular directional bias. In other words, its presence does not hint at the market’s likely path forward the way a bullish or bearish hammer candle does, for example.
These candles usually form during sideways trends, but they can also appear at support or resistance, since they are a sign that neither buyers nor sellers are in control of price during that particular period.
How Do I Handle an Indecision Candle?
The short answer is that I do not do anything — but that question touches on something critical to your success as a forex trader: your ability to spot unclear price action and step away from it.
It also comes down to finding good trade ideas and acting on them, but that is easier said than done.
The good news is that the tips I have put together in today’s article will help you recognize what to follow and what to avoid. Essentially, I will share everything it takes to find the best trade setups in the least amount of time possible.
The basic rule I use when thinking about a potential trade is whether it is worth the risk — or probably is not.
To figure that out, say EUR/USD retests support and forms a relatively small bullish candle. You might find yourself wondering whether you should take the trade or not — the doji or pin bar caught your attention, but its small size makes you doubt whether it is actionable.
Here, this second observation alone should be enough to keep you out of the trade — unless it is part of the highest-quality setups in your strategy, in which case there is no need to second-guess it.
What an Indecision Candle Looks Like:
The indecision candle, like the doji, is an example of unresolved price action as mentioned earlier — it does not offer insight into whether buyers or sellers are in control of the market, leaving you guessing about the market’s next move.
In these cases, it is usually best to stay on the sidelines and not enter trades — at least that is how I handle unclear price action. But before you make that call, let me show you what indecision looks like in the forex market.
As you can see in the chart above, EUR/USD printed several days of indecision candle patterns. Notice how the shaded area above is full of small candles with relatively long wicks in both directions.
Any time you see price action like this, it is a sign of hesitation and indecision, and it is also a good idea to stay out at least until the market breaks out and confirms a move up or down. Also notice the difference between a bullish indecision candle, a bearish one, and the period of hesitation.
The bottom line is that you need to let your trading tools confirm price action, and it is always best to be watching the chart live in real time so you do not have to question its validity. Your tools should always provide evidence about the market’s likely path so you can make profitable trading decisions.
In other words, you will know exactly what to do the moment you see confirmed signals — though education matters a great deal for those who are just starting out. Either way, the most useful candlestick patterns are the ones that stand out within strong price action, not choppy price action.
Making the Decision When an Indecision Candle Appears:
It helps to have a few things that keep you patient and help you make the best decisions. To be clear, this means staying away from indecision candles and putting capital to work only on strong signals with a clear directional bias, which protects your capital and helps you succeed and turn a profit in trading. Here are a few basics that will help you make decisions, especially when an indecision candle shows up:
First: Use the daily timeframe only to make decisions when the market is hesitant. An indecision candle can show up on smaller timeframes too, but the daily timeframe works better.
Second: Stay away from intraday charts when an indecision candle appears, and do not rely on them for decisive decisions. Do not even look at intraday timeframes, because doing so will almost certainly lead to more mistakes.
Over time, everyone has proven the idea that if you trade higher timeframes you need to drop down to a one-hour chart or lower to fine-tune your entries — this simply is not true.
If I find a high-quality setup on the daily timeframe, I never drop to a lower one, and that holds true roughly 80% to 90% of the time. So is it possible to fine-tune entries or spot other day-trading opportunities from a smaller intraday timeframe?
Sure, that is possible — but if you have not mastered daily charts, you have no business being on a 4-hour or 1-hour chart, because that is like trying to run before you can walk.
I can tell you that after more than a decade of trading experience, I have found the daily timeframe works best when an indecision candle appears, especially for those who are still learning to trade.
Third: Limit yourself to trading a single asset each week — you do not need a large number of trades every week to make significant money from the forex market.
At first, this might sound a little crazy, especially to those who analyze using 5- or 15-minute charts. You might even wonder how you can call yourself a trader if you are sitting without opening trades for several days at a time.
Here I will say that if you want to be a professional trader in forex, stocks, and other markets, you need the ability to enter winning trades, or at least ones that do not carry much risk.
And if you want to be part of the five to ten percent of successful traders, you need to stop following the crowd. Just because everyone on your favorite forum trades 40 times a month does not mean you should too — in fact, it probably means you should do the opposite.
Fourth: Find something else to occupy your time — you should not be busy trading all the time, right? Honestly, the time you spend on your regular job, on social media, or on educational sites, tutorials, and signal services far outweighs the time you actually spend trading.
Many professionals reckon it only takes about 20 to 30 minutes a day on average to manage any open trades and check for new opportunities.
So having a hobby outside of trading can improve your trading performance over the years. On a personal level, even after twelve years of trading currencies and commodities, I am still looking for ways to improve my own strategy.
As we know well, checking your charts too often can hurt your success and lead to overtrading and emotional decisions, two of the most common account destroyers. So you need to find something else to occupy your time.
To be clear, you should read some trading books and spend time studying price action, but staring at charts all day hoping a suitable trade magically appears is not just a waste of time — it also hurts your overall performance as a trader.
Conclusion:
As a professional trader, I do use indecision candle patterns, but not to form an opinion about which direction the market might move next. Instead, I use them as a signal to stay on the sidelines and wait for a better opportunity.
The best price action signals will show up on the chart on their own — you should not have to go looking for them. And if you find yourself debating whether an opportunity is a winner, it probably is not.
Protecting your capital is the key to becoming a successful forex trader, which is why I always say your first job is to protect your capital, and making money always comes second.
Using the daily timeframe is also one of the best ways to spot an indecision candle and free yourself from overtrading, and it also produces some of the more reliable and profitable opportunities and trades on any timeframe.
Tip: if you find yourself struggling to stay patient, find something else to occupy your time until a strong opportunity shows up in the markets. Finding things to do outside of trading will help you slow down your trading pace, which leads to higher-quality, more profitable opportunities.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. Trading forex and CFDs with leverage carries a high level of risk and may not be suitable for all investors; you can lose more than your initial deposit. Candlestick patterns discussed above are analytical tools, not guarantees, and past performance does not predict future results. This page may contain affiliate links, and we may earn a commission if you open an account through them, at no extra cost to you.
التعليقات مغلقة.