Forex Tips – Advanced Master Candle Trading

Over the past few months my trading has been evolving. I have started looking away from simple S+R line trading and looking more at candles. Don’t get me wrong S+R lines still make up a big part of my trading but they have taken a back seat to candle patterns.

This is because I have been delving into price action analysis. This is the analysis of the movement of price as it is happening. The major benefits of price action analysis are:

1. It isn’t lagging. You trade based on what is happening right this second.
2. You can adapt to changing market conditions quickly.
3. You can trade at pretty much any time.

The main forms of price action analysis I am using are reversal trading and master candles (MCs).

I am already doing a few videos on reversal trading. I released the first last Friday and will release another tomorrow. So I thought I would do a few posts on master candle trading. I will also start doing MC analysis for some of the main pairs daily.

First let’s take a look at how I trade MCs. I will not go over the basics in this post as they are already covered in the master candle e-Book. Instead here I will discuss a more advanced technique. I have tested it extensively and it works amazingly well at filtering out some of the bad master candle trades.

Filtering Out Bad Master Candle Trades

This was contributed by forum users Samarkand, djcash, and Wombles.

Master candles tend to give a lot of false breaks especially on volatile JPY pairs such as g/j and e/j.

One thing you should look out for is Scouting Parties these are candles that break through the MC line, reverse, and close. Check out the example below.

Scouting Parties can cost you some serious pips. For this reason some traders do not enter on the first MC break. They wait for a Scouting Party to form and then place a limit order with a 5-10 pip buffer just beyond the bounds of the Scouting Party candle. This way they only enter the trade after the Scouting Party candle is broken.

As you see in the picture above. When the price broke the scouting party high it pushed through and it ended up being a +50 pip trade.

I will be doing a few more posts soon discussing some more awesome master candle techniques. As I said I will also be posting some master candle set-ups daily. So keep an eye out on the blog for master candle analysis.