PriceAction

For new traders, the market can seem unpredictable. However, by focusing on price action, specifically the daily candle, you can gain a significant edge. The Inner Circle Trader (ICT) methodology emphasizes understanding how institutional players (the "smart money") influence the market. A key part of this is recognizing how the close of the previous day's candle provides clues for the next day's price movement.
The Significance of the Daily Close
The daily candle encapsulates a full day of market psychology. Its high, low, open, and close tell a story of where price went, where it was rejected, and where it settled. According to ICT principles, the previous day's close is a critical reference point. It represents a temporary equilibrium between buyers and sellers at the end of the trading session. What happens in relation to this level the next day often signals the market's true intent.
Here's a breakdown of how to interpret it:
A Bullish Close: If the previous day's candle closed strongly bullish (near its high), it suggests that buyers were in control. The next day, you can often expect the price to continue its upward momentum, possibly seeking out new highs or "liquidity" above previous resistance levels.A Bearish Close: Conversely, a strong bearish close (near its low) indicates that sellers dominated the day. The following day's price action is likely to continue downward, aiming for lower lows or areas of "sell-side liquidity" below key support levels.
These expectations don't guarantee a specific outcome, but they create a high-probability bias for the day. You're not just guessing; you're trading with the flow that institutional traders have initiated.
Using the Daily Close to Anticipate Movement
The magic happens when the current day's price interacts with the previous day's candle range.
Consider these two high-probability scenarios:
Reversal:
If the market opens and quickly pushes below the previous day's low, it
may be a "liquidity grab" or a "stop hunt" designed to trigger stop-losses from buyers. After this move, price often reverses and pushes back up, sometimes even reclaiming the previous day's low and continuing to the upside.Continuation:
If the price opens and stays above the previous day's high, it is a sign of strong momentum. The previous day's high now acts as a support level, and you can look for opportunities to enter a long position with the expectation of a sustained move.
These patterns are not random. They are a reflection of
institutional order flow—the large-scale buying and selling that moves the
market. By watching how the current day's price respects or violates the
structure of the previous daily candle, you can align your trades with the most
likely direction.
Remember, the goal is not to predict every single move, but
to find high-probability scenarios. The daily chart's price action,
particularly the closing candle, provides a powerful and consistent roadmap for
navigating the markets like an insider.
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Stop chasing a thousand indicators! The real secret to success in trading is mastering a few high-probability setups. I used just one powerful combination to turn a small $120 capital into a whopping $30,000. Here’s the exact blueprint. 💡
1️⃣ The Double Bottom (DB): The First Clue
After a sharp downtrend, the market forms two distinct lows at roughly the same price level. This "W" shape is a strong signal that sellers are losing power and a reversal might be imminent. I waited for this pattern to form, confirming that a major support level was holding.
2️⃣ The Inverse Head & Shoulders (I H&S): The Confirmation
This pattern is the ultimate trend reversal signal. It consists of a deep low ("Head") flanked by two shallower lows ("Shoulders"). It’s a road map showing the shift from a downtrend to a potential new bull market. The key is the "Neckline"—a resistance line connecting the highs between the shoulders.
3️⃣ The Retest: Your Golden Entry
This is where most traders fail! They chase the initial breakout. I patiently waited for the price to pull back and "retest" the Neckline. This retest turns the old resistance into new support, providing a low-risk, high-reward entry point. This is the moment to enter with confidence. 🎯
4️⃣ The Bullish Move: The Payoff
Once the retest holds, the momentum shifts dramatically. The price explodes upward, confirming the new trend. By combining the Double Bottom's strength with the Inverse Head & Shoulders' clear reversal signal and waiting for a perfect retest entry, I was able to capitalize on a major move. My small capital compounded, leading to life-changing gains. 💰
Don't overcomplicate your trading. Master these powerful patterns, and you can change your entire journey.
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