Strong determination

Fig. 1: Here the representation of a candle that is often referred to as a strong long input signal

 A candle with a defined body (shadow/body relationship >2 and > ATR X peiorod) can identify a strong determination of the trend in the direction that prices have shown; but the truth is that this is not an immediate indication that it is the right moment to enter the market.

Now let's go to our demonstration and consider the hypothesis for which it might be true that candles like the one shown in Figure 1 indicate a trend; but our idea is that after a similar day there was not much left immediately, this means that we would prefer to follow our breakout only after days in which indecision is shown, that is, days when the distance between opening and closing is much lower than the whole range.

Fig. 2: a day like this shows indecision, prices have opened at a certain level, fluctuated up and down but ended up close not far from the opening

The first configuration that we can test is to place the trade only if the distance between the opening and closing of the previous day is 50% lower (optimizable value) than the whole range.

To show that filtering the exchanges with a pattern of indecision improves the results we can also go to extreme levels where the difference between opening and closing of the day is less than 25% of the range, placing trades only in this case.

Stop loss and take profit optimizable and calculated in pips.