Never miss a story from Richard Krivo

Subscribe to recieve updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from Daily FX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Richard Krivo

You can manage you subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

When we are looking at price action on a candlestick chart in our live webinars, long wicked candles can definitely provide some insight as to price movementon the pair.

Take a look at this historical 1 hour chart of the GBPJPY below for a visual…

Forex price move in the opposite direction of the long wicks

What does a long wick tell us in forex?

Note the rectangles that are highlighting some of the longer wicks on this chart. Also note that after a long wick makes an appearance, oftentimes price will move in the oppositedirection of the long wick for a time. In other words, if the longer wick was below the body of the candle, price has a tendency to move up. Conversely, if the longer wick is above the body of the candle, price has tendency to move down.

These extended wicks, those that are longer relative to other wicks on the chart, provide valuable information for the trader.

A long wick at the bottom of the candle signifies that sellers were able to push the price down significantly and that is what creates the long wick.

However, the seller’s numbers were not great enough to keep the price at that low level. The buyers were able to push price back up from that low level thereby showing strength. Since the buyers triumphed in that sense, there exists the potential that their strength will carry forward and given that strength the price may rise. (In the case of long wicks above the body of a candle, the opposite scenario would be true.)

How can a trader use long wicks in their trading?

As always, we must first take note of the Daily trend. If the trend is down, seeing a candle (or several candles for that matter would even be better), with long wicks on the top, that points to a stronger potential for price to move down in the direction that the market has been taking the pair.

So, to continue with the downtrend example, if the pair retraces…that is, against the trend…and stalls at a level of resistance or a Fib level, I am going to be looking for long wicks at the tops of the candles forming along that resistance line for two reasons.

  1. Those long wicks indicate the potential for the pair to trade to the downside back in the direction of the Daily trend.
  2. The top of that extended wick provides a very prudent level for a trader to place their stop. The rationale for that stop placement being that buyers pushed price to the top of that wick but could not push it beyond that point. Hence, placing the stop just above that wick is a level that has a lower likelihood of getting hit.

Bottom Line: Taking note of long wicks forming at levels of support or resistance, especially when they signal movement in the direction of the daily trend, can create a beneficial “edge” for the trader.

Interested in learning more about Forex trading and strategy development? Get started with this Free New to Forex Guide to help you get up to speed on a variety of trading topics.

Next: Heiken Ashi (4 of 47)

Previous: Higher Probability Candlestick Entries