Power Course Instructor’s Response:
I like that you said "potential" reversal...nothing is for sure.
Yes long wicks, especially several of them in succession, can show that potential for reversal. The reason is that price spiked up or down dramatically but the buying or selling pressure was not strong enough to sustain that level. Hence, the potential for a turn in price action is present. Take a look at the chart below for a visual on this.
Try looking for long wicked candles on a chart of at least a time frame of one hour or better. Minute charts, especially one as small as five minutes, can reflect quite a bit of "market noise" and provide signals that are not as reliable as one would like. As always, if the signal takes the trade in the direction of the trend on a Daily chart, that trade will have a higher probability of success.
The best procedure to look for a pair to trade is by first checking the Daily 1 Year chart to find a pair that shows a strong trend in either direction. Once you find a pair having a strong trend on the Daily chart, look at a 4 Hour 40 Day chart on the same pair. On this chart you want to locate an entry into the trade in the direction of the trend that you identified on the Daily chart. To further "fine tune" this strategy, look at a 1 Hour 10 Day chart for your entry in the direction of the trend on the Daily chart.
We do not recommend using any chart with less than an Hour time frame to make trading decisions. On minute charts you will find more "market noise" than actual tradable data. The longer the time frame, the more data points on the chart the more accurate the information will be.
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