The Ultimate Candle Rule for Trading
35sThis simple yet counterintuitive rule about candle opens is a quick, actionable tip that traders love to debate and test.
▶ Play ClipAI Summary
This video presents a simple trading rule based on the daily candle's opening price to improve entry timing and reduce stop-loss hits. The rule suggests taking long trades only below the daily open and short trades only above it, using any preferred entry strategy like fair value gaps.
Chapters
[00:00]
Core Trading Rule
Only take long trades below the daily candle's opening price and short trades above it.
[00:12]
Application on Daily Timeframe
Mark the daily candle's open with a horizontal line on the chart to visualize the rule.
[00:25]
Combining with Entry Strategies
Use any existing entry strategy (e.g., fair value gaps) as long as it aligns with the daily open rule.
[00:40]
Example with Fair Value Gap
A one-hour fair value gap below the daily open led to a winning trade targeting higher liquidity.
[00:54]
Benefits of the Rule
Following this rule improves entries, risk management, and reduces stop-loss hits.
The daily open rule is a simple yet effective filter for trade entries, helping traders avoid poor setups and improve overall risk management.
Tutorial Checklist
Study Flashcards (4)
What is the rule for long trades based on the daily candle open?
easy
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What is the rule for long trades based on the daily candle open?
easy
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Only take long trades below the daily candle's opening price.
What is the rule for short trades based on the daily candle open?
easy
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What is the rule for short trades based on the daily candle open?
easy
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Only take short trades above the daily candle's opening price.
How do you apply the daily open rule on a chart?
easy
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How do you apply the daily open rule on a chart?
easy
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Mark the opening price of the daily candle with a horizontal line.
00:12
What entry strategy was used in the example?
medium
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What entry strategy was used in the example?
medium
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A fair value gap on the one-hour timeframe.
00:40
💡 Key Takeaways
🔧
Simple Entry Filter
Provides a clear, objective rule that can be applied to any trading strategy.
💡
Improved Risk Management
Emphasizes that following the rule reduces stop-loss hits, a key benefit for traders.
00:54Full Transcript
[00:00] Follow this one rule and price won't hit your stop loss as much. Every single candle has an open, a close, a high, and a low. The rule is you only want to take long trades below the opening price of a candle.
[00:13] And you only want to take short trades above the opening price of a candle. An easy way to do this is by going to your chart and going to the daily time frame. Here we can see we have a green candle on the daily time frame.
[00:25] So we mark the open of the candle by putting a line right here. We then go to a smaller time frame like the one hour. We only look for indications to enter a trade if price is below this line.
[00:37] These indications can be whatever strategy you're currently trading with. Fair value gaps, order blocks, indicators, whatever. Here we have a fair value gap on the one hour time frame. It also coincides with our rule of being below the opening price of the daily candle.
[00:52] Price respects our fair value gap and targets higher liquidity, giving us a winning trade. Follow this rule and you'll get way more successful trades.
