What it looks like
A big candle compared with recent ones, with a tiny body and very long upper and lower wicks. The body can be any colour. It is wider in range than a normal spinning top.
What it means
Neither side won the candle. After a strong move, that hesitation can be the first sign the move is tiring, because the side that had been in control could not finish the candle on its terms. In a quiet, sideways market the same candle means nothing, which is why the break of its high or low matters more than the candle itself.
How to trade it
- 1
Never trade it on its own. Mark the candle's high and low.
- 2
Confirmation: a later candle closes above the high (buy signal) or below the low (sell signal).
- 3
Entry: at the close of that breakout candle.
- 4
Stop: on the other side of the high wave. Example on NAS100: a high wave candle forms from 25,350 to 25,550 after news. A candle closes at 25,560 above the high. Buy at 25,560, stop at 25,340, a 220 point risk.
- 5
Target: the next key level, or 2 times the stop.
Price closes back inside the candle's range after breaking out of it.
Where it works best
After a strong move into a key level on 1 hour to daily charts, where hesitation actually means something.
WickSpeak spots every high wave automatically and names it on the candle that made it. The note says what it is, that it should not be traded alone, how to trade the break of its high or low and what proves that break wrong. In Playbook you can use it as a condition in a play, alone or alongside other patterns and indicators (any of the 146 patterns can be a condition), and backtest it on past candles with your own costs.
Common mistakes
- Trading it straight away instead of waiting for a break.
- Forgetting that the stop on the far side may be very wide.
- Treating it as a reversal when it is simply a confused, volatile candle.
Related patterns
Questions traders ask
What is a high wave candle?
A big candle with a tiny body and very long wicks on both sides. Price swung hard both ways and ended almost where it started.
What does a high wave candle mean?
Confusion. After a strong move it can be an early warning that the move is tiring.
How do you trade a high wave candle?
Wait for a close beyond its high (buy) or low (sell), with the stop on the other side of the candle.
What proves the breakout wrong?
A close back inside the candle after breaking out.