Colour change stratefy for beginners:
A colour change trading strategy typically refers to a method of analyzing candlestick charts, where traders make decisions based on the change in color of candlesticks — often from red to green (bearish to bullish) or green to red (bullish to bearish). It's a form of momentum or reversal strategy.
Here’s a simple outline of a colour change trading strategy:
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1. Candlestick Colors
Green candle (bullish): Close price > Open price
Red candle (bearish): Close price < Open price
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2. Basic Strategy Concept
Buy signal (long position):
A red candle is followed by a green candle.
The green candle closes above the high of the red candle.
This signals a potential bullish reversal or momentum.
Sell signal (short position):
A green candle is followed by a red candle.
The red candle closes below the low of the green candle.
This signals potential bearish reversal.
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3. Entry and Exit Rules
Entry:
Enter long on the break above the high of the green candle.
Enter short on the break below the low of the red candle.
Stop-Loss:
Place stop-loss below the low of the reversal candle (for long).
Above the high of the reversal candle (for short).
Take-Profit:
Use risk-reward ratio (e.g., 1:2).
Or use support/resistance or moving averages as exit guides.
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4. Timeframes
Can work on multiple timeframes (5min, 1h, daily).
Shorter timeframes = more signals but more noise.
Longer timeframes = fewer but stronger signals.
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5. Extra Confirmation (Optional)
Volume increase on colour change.
RSI divergence or overbought/oversold zones.
Use with moving averages (e.g., price crossing over 20 EMA).
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