Direct from the desk of Dane Williams.
Master Candles was an old forex trading strategy that relied on momentum in the markets.
But as I’m sure you’ve quickly figured out, markets chop more than they trade in a single direction, making the strategy not as effective as it could have been.
So I have modified the original strategy to take this into account!
Instead of trading breakouts that rely on momentum, I now primarily fade Master Candles.
With success!
This was a forex trading strategy originally penned on the old forex4noobs forums.
If you missed the days where forums were king, you missed out.
Damn they were a lot of fun.
Anyway, enough reminiscing, you can find a copy of the original eBook on Scribd.
A Master Candle is basically a H1 candle whose high and low engulfs the next 4 candles.
Take a look at what I mean here 👇
With that being said, my take on the strategy ignores what I call scouting wicks that break the master candle’s high or low.
As long as they close back within the bounds of the original master candle, the master candle is still valid.
Candles are named MC (Master Candle), C1 (candle 1), C2, C3, C4 etc.
Followed by B1 (breakout candle 1), B2, B3 etc.
Until your stop loss or take profit has been hit.
Put simply, Master Candles work because they’re short term areas of support and resistance.
If you zoom into a lower time frame chart, the Master Candle is nothing more than price stuck in a range.
So trading Master Candles is exactly the same as if you were trading around any other level of support/resistance.
Like any other support/resistance trading strategy, they work… some of the time.
Support and resistance is NOT an impenetrable brick wall.
They do nothing more than show you areas on a chart where trading has occurred in the past and is therefore likely to occur again in the future.
Ultimately offering you a place to manage your risk around and therefore profit over the long term.
So while my Master Candles strategy is mechanical, you still have to apply some level of discretion to your risk management if you want to make money.
Trading Master Candles is easy.
Here are the different scenarios you will face.
Fade clean Master Candles with no scouting party wicks, no matter what.
Enter 5 ticks above or below the extremities of the Master Candle.
Target the opposite end of the Master Candle with your take profit.
Place your stop loss at 1:1.
If the breakout candle is the candle immediately following the lowest/highest wick or the breakout candle closes without triggering the breakout trade, then immediately fade.
Target the opposite end of the Master Candle with your take profit.
Place your stop loss at 1:1.
If the breakout candle is NOT the candle immediately following the lowest/highest wick, then trade the breakout.
This time place your stop loss at the opposite end of the master candle.
Target 1:1.
You’re going to find that the majority of Master Candles will be faded.
But the scenario where I trade in the direction of momentum, is often a really high probability setup.
Here are some of the major factors contributing to the strength or weakness of a Master Candle setup:
Do you want to see my Master Candles strategy (crypto edition) applied to crypto markets like BTC/USD and traded live?
Join me on leofinance.io/threads and search for the #mastercandles tag.
Use that tag and I’ll be happy to jump in and answer any questions you may have!
Best of probabilities to you.
