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What causes Power Candles?
news trading vs price action trading
There is an age-old argument between fundamental traders and technical traders, and each side will argue that their way is better.
There is no doubt that news related trading variables have a high impact on market movement, but it’s our opinion that news trading is dangerous, stressful, and can give a trader anxiety issues. This is no state to be in when you’re in front of the charts.
Bottom line, all the different economic and fundamental variables that are constantly been fed into the markets are being reflected in the raw price action on the charts.
We can observe the outcome of the markets response to the news by looking at how candlesticks close, not by trying to quickly make sense of the NFP data that has just been released and jumping in with dangerous volatility.
Power Candles are definitely one way to catch movement caused by fundamental variables without having to understand how the economics of the world affects the global market movements.
It’s very clear from the anatomy and structure of a Power Candle that they are caused by a very decisive and aggressive move in one clear direction. Power Candles can frequently be fueled by a high-impact news event that has taken place, which has caused a surge of orders in a specific direction.
Examples include an economy’s GDP figure release, interest rate statements, or a government official may give a speech about their country’s financial situation, and suggested or implemented new policy changes.
Now, understanding the impacts of major economic releases is important, BUT: we don’t have to predict how this data affects the market; you just need to look at the candlestick patterns and you can see that a market is bearish, bullish, or neutral on the event.