Candle Shadow Indicator

The Candle Shadow Indicator plots red and green bars to indicate bullish and bearish momentum. In this guide, we’ll mention the indicator and how you can trade it.

What is the Candle Shadow Indicator?

The Candle Shadow Indicator plots colored bars above and below candlesticks to indicate bullish or bearish momentum. The bars are color-coded, with green bars indicating bullish momentum and red bars indicating bearish momentum.

The length of the bars represents the strength of the momentum, with longer bars indicating stronger momentum.

The indicator comprises two moving averages, one for the bullish and one for the bearish momentum. The MAs are calculated based on the closing price of each candlestick.

Candle Shadow Indicator
Candle Shadow Indicator

Candle Shadow Indicator Strategy

The Candle Shadow Indicator strategy is based on identifying bullish and bearish momentum in the market using the green and red bars of the indicator.


When the Candle Shadow Indicator displays a series of green bars, it suggests bullish momentum. On the other hand, when the Candle Shadow Indicator illustrates a series of red bars, it suggests bearish momentum.

You can also use the indicator for finding reversals. When a bullish trend starts to lose momentum, the green bars of the indicator may start to shorten, and the red bars may start to increase in length. It indicates a bearish reversal.

Conversely, when a bearish trend loses momentum, the green bars start to appear, signifying a bullish reversal.

However, it is important to note that the Candle Shadow Indicator should not be used in isolation. You should also confirm potential signals with other technical analysis tools like support and resistance or indicators like the RSI or MACD.

The indicator may work on all timeframes. However, applying it on longer timeframes is better to limit market noise.


Buy Signal

  • The indicator must plot green bars.
  • Wait for the price to go upwards and then enter the trade.
  • Set a stop-loss at the recent low.
  • Place profit-target at the recent high or exit the trade when the red bar appears.
Candle Shadow Indicator buy signals
Candle Shadow Indicator buy signals

Sell Signal

  • The indicator must plot red bars.
  • Wait for the price to go downwards and then enter the trade.
  • Set a stop-loss at the recent high.
  • Place profit-target at the recent low or exit the trade when the green bar appears.
Candle Shadow Indicator sell signals
Candle Shadow Indicator sell signals

Candle Shadow Indicator Pros & Cons

Pros

  • The colored bars above and below the candlesticks visually represent the prevailing trend in the market.
  • The Candle Shadow Indicator is relatively easy to use.
  • The indicator can identify entry and exit points.

Cons

  • The indicator may not work well in certain market conditions, such as when the market is ranging or low volatility.
  • The Candle Shadow Indicator is based on moving averages, which are lagging indicators. This means that the signals provided by the indicator may be delayed.

Conclusion

The Candle Shadow Indicator is used to identify trends and potential entry and exit points in the market. It is relatively easy to use. However, the Candle Shadow Indicator should be used with other analysis tools to confirm signals and traders should not rely solely on it.

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