When you look back in history on your chart, you can note that during ranging times, market cannot close outside of a specific area.
Here the concept: If price cannot close outside the highest and lowest value of a candle, market is potentially ranging.
More than a thousand words, here are some screenshots explaining the concept:
In this screenshot, EURUSD weekly chart, you can note that the price was not able to close above or below the weekly candle opened on the 19 June 2016.
Even if the price try to break this candle, price closed inside this candle area.
I am using Weekly candle examples as, the longer the timeframe, the more powerful the pattern.
In Blast, you can find buttons to identify potential Master Candles on 4 timeframes: Weekly, Daily, H4 and H1.
Here is how Blast would display this previous Master Candle:
A rectangle is formed to highlight this master candle until a candle close above or below this candle. The white dotted lines are drawn according to the master candle range to highlight the 20 % upper zone and 20 % lower zone (arbitrary value which can be modified in the indicator inputs).
The 20% upper zone is highlighted in red, when the 20% lower zone is highlighted in green.
Here is the same Weekly Master Candle but this time on the Daily chart.
In the Master Candle settings, you can find an option to limit the look back days to a specific date to avoid abnormal events which have occurred like the Brexit or the Swiss drop.
Those Master Candles can be used in different ways.
Trade the range
Those zones can be useful to identify potential ranging trades, which must be confirmed by other criteria’s.
On the screenshot above we can easily identify potential trading areas to trade the range. The MC Master Candle Mid-Point and the opposite zone can be used as Take Profit areas.
Trade the Breakout
In the latest update of Blast, I have also included an option to display the previous period Master Candle (Click on the Ms button). What I mean by previous period MC is that if a MC was existing on the last previous period (e.g: previous week) and do not exist anymore, it means that a breakout occurred.
Those breakouts trades can be really rewarding.
In order to enter a trade, you want further confirmations or wait for a pullback after a breakout confirmation.