Seeing the candle is easy. Now everyone looking at the chart can choose the pin bar or the engulfing. But that's not the issue. The issue is, who is really behind that candle?
Let me be clear about this: If a formation exists only in shape but does not have support from volume, it is not a signal but merely an expectation.
I coded this into my system back then like this: "If there is a pattern, active if the volume is above 20% of the average. Otherwise, passive." It's that simple.
Because volume tells you something. It says: "Yes, here there is not just one trader... a group made a decision." That's when you can enter.
📊 So, what do the data say?
In the study conducted by Turing Quant Lab in 2022: In engulfing setups without volume confirmation, the success rate is 46%, while it rises to 69% when the same setup is supported by volume. The false breakout rate decreases by 30%. Average R:R is rising to the level of 1:1.6 from 1:1.2. So the formation alone shows intent. But participation is necessary for the intention to be processed.
You might be saying now: "Okay, but sometimes volume-less candles work too." That's right. But that 'sometimes' part will sink you. Our job is to set up systems. Can a pattern work? Yes. But does it repeat? If it is supported by volume, yes.
So here's a tip: In your next trade, focus on the volume formation, not the formation itself. You will see the difference. You will feel it not only in the result but also while trading.
The content is for reference only, not a solicitation or offer. No investment, tax, or legal advice provided. See Disclaimer for more risks disclosure.
Seeing the candle is easy. Now everyone looking at the chart can choose the pin bar or the engulfing. But that's not the issue. The issue is, who is really behind that candle?
Let me be clear about this:
If a formation exists only in shape but does not have support from volume, it is not a signal but merely an expectation.
I coded this into my system back then like this: "If there is a pattern, active if the volume is above 20% of the average. Otherwise, passive." It's that simple.
Because volume tells you something. It says: "Yes, here there is not just one trader... a group made a decision." That's when you can enter.
📊 So, what do the data say?
In the study conducted by Turing Quant Lab in 2022:
In engulfing setups without volume confirmation, the success rate is 46%, while it rises to 69% when the same setup is supported by volume.
The false breakout rate decreases by 30%.
Average R:R is rising to the level of 1:1.6 from 1:1.2.
So the formation alone shows intent.
But participation is necessary for the intention to be processed.
You might be saying now:
"Okay, but sometimes volume-less candles work too."
That's right. But that 'sometimes' part will sink you.
Our job is to set up systems.
Can a pattern work? Yes.
But does it repeat? If it is supported by volume, yes.
So here's a tip:
In your next trade, focus on the volume formation, not the formation itself. You will see the difference. You will feel it not only in the result but also while trading.