Candle floating is a term used in forex trading to describe a phenomenon where a single candlestick pattern appears to be floating above or below the surrounding price action on a chart. This pattern can be either bullish or bearish and is often used by traders to identify potential opportunities for profitable trades.
To understand candle floating, it is necessary to first understand candlestick charts. These charts are commonly used in forex trading and consist of a series of vertical lines (candles) that represent price movements over a specific time period. Each candlestick is composed of a body, which represents the opening and closing prices, and two wicks or shadows, which show the highest and lowest prices reached during the period.
Candle floating occurs when a single candlestick pattern stands out from the surrounding price action, appearing to float above or below the other candles on the chart. This pattern can be bullish or bearish, depending on whether the body of the candle is above or below the surrounding candles.
When a bullish candle is floating, it indicates that buyers have taken control of the market and are pushing prices higher. Conversely, when a bearish candle is floating, it suggests that sellers are in control and pushing prices lower. In either case, traders may look for opportunities to enter a long or short position, depending on the direction of the trend.
One of the most common bullish candlestick patterns that can lead to candle floating is the hammer pattern. This pattern consists of a small body and a long lower shadow, indicating that buyers have stepped in to push prices higher after a period of selling pressure. When this pattern appears above the surrounding candles on a chart, it can be a strong signal to traders that a reversal is imminent.
Similarly, the inverted hammer pattern can lead to bearish candle floating. This pattern has a small body and a long upper shadow, indicating that sellers have stepped in to push prices lower after a period of buying pressure. When this pattern appears below the surrounding candles on a chart, it can be a signal that a reversal is on the horizon.
While candle floating can be a useful tool for forex traders, it is important to note that it is not infallible. Like any technical analysis tool, it should be used in conjunction with other indicators and market analysis to make informed trading decisions.
In conclusion, candle floating is a term used in forex trading to describe a phenomenon where a single candlestick pattern appears to be floating above or below the surrounding price action on a chart. This pattern can be bullish or bearish and is often used by traders to identify potential opportunities for profitable trades. While it is not infallible, it can be a useful tool when used in conjunction with other indicators and market analysis.
