When you are trying to search for highs and lows to predict trend direction. Are you supposed to count just the body or the wick? I am very confused because i’ve seen other traders use the wick and I’ve seen others say it’s better to use the body. Which is the proper way to do it? It’s a bit annoying because of course because it’s hard to find any youtube videos on it.
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One could say that, by definition, a higher high (lower low) means the extreme of the candle’s range, i.e. the wick.
But that is not the entire story. Reading price movement is more an art than an exact science. For example, if you see a daily candle setting a new high (e.g. after an economic data release) but then closing below the close on the previous candle then one could conclude that the trend is reaching exhaustion rather than extending.
It is the same issue when drawing trendlines. Should we connect the extremes of the wicks or just the bodies!
Personally, at least on a daily TF, I prefer to place more importance on the body rather than the wick
extremes. This, because the daily close excludes day traders, whereas the intraday price extremes can often include short term factors such as, shall we say, over-exuberant price chasers, stoploss hits, etc .
For the same reasons, I wouldn’t place a great deal of significance on intraday TF highs, lows, or trendlines.
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There is no definite answer here because there are many factors involved. It’s really a matter of preference and what best suits your strategy.
I personally agree with the previous poster and place the most emphasis on the candle body itself. However, if your strategy is scalping on shorter timeframes then you would probably include the wicks.
If you’re using the ATR to place your stops then you would use the wicks.
Wicks are considered to some as just ‘noise’, however, you can sometimes fit many daily bars inside a monthly bars’ wick.
Switching to a Line graph cuts out the wicks. I used to draw my lines this way with good results, but this was a long-term strategy, so ‘noise’ didn’t matter too much.
Best thing to do is practice, practice, practice, and eventually you will find a way that works best for you.
Good luck.
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Pay real attention to what @SovoS says.
But I will add a thought also. I use the extremes of the day’s range to find the highs and lows, so that means including the wicks and for this purpose I disregard where the body lies. if I want to enter an uptrend, I almost always do it by a pre-set order based on the most recent lower high, but never by a live buy submitted at the close. So if price continues the uptrend it will hit my entry order as it breaches the previous day’s lower high and I will be long. It follows that price is less likely to breach a prior high if the day’s closes was very near the day’s low - that would suggest the momentum is downwards. What that would mean is that my order would be untriggered and I would be able then to simply lower it to the new lower high. So I don’t have to be right, I am setting the order where the market will tell me if I am right or wrong. And the market is never wrong.
The moral of the story is that the candle’s body is important if its important to you.
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Thanks for your answer, great information!
Thanks man I’m taking in all this info
You can try to read the price movements accurately by looking up some videos or learning it from scratch. You can look for a course here as well. Good luck.
It is important to read the price movements carefully. If you’re struggling with this so much, you can take a course here. Got nothing to lose.
There is no exact answer to this, as for the uptrend you see if the highs or lows are growing and for the downtrend, you will see that the new highs or lows are lower than the previous ones. You can focus on the shadows to make it easy. It comes with practice as there is no general rule to draw the trend lines and predict it. But i can share the simple guide with you that is - when you draw an uptrend line, you connect higher lows, so the line will be below the price and for the downtrend you connect lower highs so the price will be above the price. Make sure that you check that your trend line has any significance at all.