How to predict volatility?

Hi folks,

Do you know more than 90% of traders lose money due to crazy moves of price during high volatility, this is predictable with the help of a proper understanding of candlestick patterns!



I am a price action player & candles guide me 'what to expect next'.

The below-posted case study will help you understand it.Down pointing backhand index

1)
It gives a bearish engulfing on the higher side of bank nifty... so, perfect short? NO!, 'coz there is a wick that breaks below the last 2 candles but could not sustain there which means there is not enough selling pressure to sustain at those lower areas.

2)
Then what happened? It again recovered and came down with a kind of evening star pattern (bearish pattern), and earlier we had that wick which was a weak one, right... so, the maximum logical target can be that only?

3)
The same thing happened and it again recovered from those areas where selling pressure is low, but this time the bullish candle is very powerful that it engulfs all the previous ones... What say, a perfect long?

4)
So, yes it was... But we should never forget that we are getting bogus selling structures from the higher side, it can be dramatic there and bulls also have limited patience!

5)
The overall trend is intact but we can see how the last red candle is breaking lows of previous candles and sustaining above like it was just waiting for the perfect time to decide the next move...
Well, this is volatility & if you can read this, understand this, then for sure you will be able to save your capital.


What did we learn out of this case?

-> Volatility comes when the price needs to spend time on a specific range for some time & it never gives any satisfactory signal to ride the trade but trades choose the trade with a similar kind of pattern with the hope of being right!

-> Whenever we get certain bullish/bearish structures but their wick indicates the opposite sense, that is the time we should stay on the sidelines or reduce position sizing. Volatility will pay with weak emotions and cut nearby stop-loss faster!

___________________
Sahil Saini
Location: India

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