What Is The Master Candle Pattern & How To Trade With It

The Master Candle pattern is a breakout pattern that compromises of highs and lows of the next four candles. These four candles are present right after the formation of the Master Candle. Also, the Master is bigger than the following four candles.

The name of the pattern familiarizes with the Master controlling its assistants.

What is the Master Candle pattern?

The Master Candle allows breakouts without considering the main trend. This means a trader can look for the breakout points inside the trend when the Master Candle emerges on the chart.

The four candles that come after the Master describes the pattern. These four candles are called the setup candles. Breakouts are considered valid only if the setup candles break the Master Candle highs and lows. These highs and lows define support and resistance levels.

This is how the pattern forms on the chart:

Master Candle pattern on a chart
Master Candle pattern on a chart

The Master Candle or MC is traded on the H1 timeframe and works best for intraday and day-trading breakouts.

In forex trading, it has a pip range depending on the pair. For example, pairs like GBP/USD or GBP/JPY has a range of 40 to 105 pips. The MC has a pip range between 30 to 150.

There is a confusion among traders about the identification of the Master Candle. For the development of the MC, the next four candles should be inside the pattern. In other words, the four candles should be aligned with the Master Candle.

Master Candle Pattern identification
Master Candle Pattern identification

How to use the Master Candle pattern?

To implement the Master Candle, there are a few guidelines if a trader wants to follow them. These are:

  1. A trader shouldn’t trade near the support and resistance levels.
  2. Trading positions shouldn’t be closer to the Master’s height.
  3. Go long or short only if the Master breaks the high or low.
  4. Traders shouldn’t trade outside the above-mentioned pip range.

After following these rules, traders may wish take long positions above the high of Master Candle. Conversely, they can take short positions below the low of MC. The stop-losses should be set at the Master Candle’s highs or lows.

To exit the Master Candle, a trader needs to target its size. For example, if the MC has a size of 50 pips, a trader could leave at the 50 pip mark.

A keynote to add here is that the Master Candle can produce false breakouts. The candles may reverse after the breaking points. This is especially true when trading volatile currency pairs.

However, there is a way to try and help solve this issue. Traders could wait for the formation of the four candles following MC, and then take positions after it if they wanted to.

Master Candle pattern trading strategy

The Master Candle is a simple and effective chart pattern. Traders may look for the Master Candle pattern on any timeframe according to their own individual trading needs.

Master Candle pattern buy strategy

  • Locate the pattern on shorter timeframes.
  • Wait for the price bar to go bullish before entering.
  • Enter the trade after the formation of setup candles.
  • Set a stop-loss at the MC’s low.
  • Exit the trade according to the size of Master Candle.

Master Candle pattern sell strategy

  • Look for the pattern on shorter timeframes.
  • Wait for the price bar to go bearish before entering.
  • Enter the trade after the formation of setup candles.
  • Set a stop-loss at the MC’s high.
  • Exit the trade according to the size of the Master candle.

Master Candle pattern conclusion

The Master Candle Pattern is a simple pattern that can give exact breaking points and can be used on your trading platform charts to help filter potential trading signals as part of an overall trading strategy.

I would prefer to use the majority of candlestick patterns such as the Master Candle Pattern on the 1-hour charts and above. I tend to find that these charts contain less market noise than the lower time frames and thus give more reliable signals for my forex trading strategies. This also means that I spend less time staring at charts and can also set alert notifications to let me know when price has reached certain levels, candlestick pattern has been formed or a particular indicator value has been reached.

The Master Candle Pattern is just one method of market analysis amongst thousands. I would not build a trading system alone, but rather combine with other technical indicators such as moving averages, Parabolic SAR, Stochastic Oscillator, RSI, ADX and price action analysis.

Of course, every trading system will generate false signals which is why money management is so important. I would personally be implementing sensible money management and only take traders that give me a favorable risk to reward ratio, ideally of at least 1:3. This means that one losing trade does not wipe out consecutive winners.

The methods of implementing the Master Candle Pattern into a trading strategy that are outlined within this article are just ideas. I would always ensure that I have good money management, trading discipline and a trading plan when using any forex strategy.

Furthermore, I would combine multiple technical analysis, fundamental analysis, price action analysis and sentiment analysis to filter all entries. You should trade forex in a way that suits your own individual style, needs and goals.

If you would like to practice trading with the Master Candle Pattern, you can open an account with a forex broker and download a trading platform. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration.

Happy trading!