Price Action Reversals - Part 4 - The Long Wick Reversal Candle - by Nigel Price

Price Action Reversals – The Long Wick Reversal Candle – By Nigel Price

So far we have looked at how to identify preceding trends and strong reversal candles.

In this part, we are going to look at another type of reversal  – this time it’s the Long Wick Reversal Candle.

As usual, we always try to make sure that there is an existing trend in place before looking for both strong reversals and Long Wick Reversals. If we are looking for a reversal to take place, there must be something first to reverse!

Similar to the strong reversal candle, we are once again looking for some evidence that whoever is in control of the market, be it buyers in an uptrend or sellers in a downtrend, is beginning to lose their power.

Long Wick

As the Long Wick Reversal candle forms, the buyers push price up, assuming that the previous trend is going to continue. But for whatever reason, before the end of the trading session, the sellers aggressively push back, wiping out most of the earlier gains.

We are left with a long wick (blue arrow) on the candle, and a small body (red arrow).

The long wick therefore is an indication that the immediate momentum has now switched to the sellers and that the buyers are on the back foot.

[notify_box font_size=”15px” style=”blue”]Consider looking for wicks that are least 50% of the total candle size.  Thus, if the high of the candle is 9800 and the low is 9500 (a difference of 300 PIPs) then look for wicks of at least 150 PIPs or more.[/notify_box]

Take half an hour now and browse through your charts to see if you can find any good examples of a strong preceding trend followed by a Long Wick Reversal candle. Observe what price does afterwards – look for examples of price reversing and changing direction, and also look for examples of the pattern failing, with price continuing to move in its original direction.

Remember, practice makes perfect!

Good trading!

Now lets look at The Two Candle Reversal