One of the biggest mistakes traders make is assuming that a single large candle automatically starts a new trend.
In reality, large candles often create uncertainty, trap emotional traders, and establish a temporary trading range before the market decides on its next direction.
In today’s video, we’ll examine exactly what happened after a sudden large bearish candle appeared on the chart and discuss how professional price action traders approach these situations.
Could It Be a Bad Tick?
Before making any trading decisions, ask yourself one simple question:
Did this candle actually happen?
Occasionally data providers produce what’s called a bad tick, creating an abnormal candle that never truly existed in the market.
The first thing I recommend is reloading your chart data.
Whether you’re using:
- NinjaTrader
- TradingView
- MultiCharts
- Sierra Chart
or another platform, refreshing the historical data confirms whether you’re looking at legitimate market activity.
In this example, the candle was real.
Large Candles Often Create Trading Ranges
One huge candle does not automatically mean:
- a new downtrend
- a new uptrend
- continuation
- support and resistance
- market structure
Instead, it frequently creates a temporary range.
Notice how price spent approximately an hour trading inside the high and low of that single candle.
This is exactly where many traders become frustrated.
They buy.
They get stopped out.
They sell.
They get stopped out again.
The result is unnecessary losses caused by trading inside uncertainty.
Wait for Confirmation
When Day Trading, rather than guessing, allow the market to provide confirmation, and learn howTrading Psychology plays into trading.
After an unusually large candle, wait for multiple candles to close:
- above the high
- or below the low
This demonstrates that buyers or sellers have actually gained control.
Patience is often the highest-probability strategy.
Don’t Assume One Candle Creates a Trend
Many retail traders see one large red candle and immediately assume:
“The market is crashing.”
Professional traders understand something different.
Large candles frequently represent:
- exhaustion
- emotional selling
- panic
- liquidity events
That doesn’t necessarily mean the trend will continue.
Sometimes those aggressive sellers become trapped, creating a powerful reversal.
Watch Volatility
Another useful tool is the Average True Range (ATR).
As the ATR decreases following a large candle, volatility contracts.
Markets frequently transition from expansion to contraction before making another directional move.
This information helps traders avoid unnecessary trades while conditions remain uncertain.
Final Thoughts
Whenever you encounter a large unexpected candle:
✔ Verify your data.
✔ Avoid emotional decisions.
✔ Recognize the newly established trading range.
✔ Wait for confirmation.
✔ Let the market reveal its direction before entering.
These simple principles can help reduce whipsaws and improve decision making using price action.
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FAQ
Large candles are commonly caused by institutional buying or selling, economic news, earnings reports, geopolitical events, unexpected announcements, or sudden changes in market sentiment. Occasionally, they can also result from bad market data known as a “bad tick.”
A bad tick is incorrect market data that creates an abnormal price movement on a chart. Reloading historical data often removes bad ticks if they are not genuine market transactions.
In many cases, it’s better to wait. Large candles frequently create temporary trading ranges and increased uncertainty. Waiting for confirmation can reduce the likelihood of being whipsawed.
A trading range occurs when price moves between support and resistance without establishing a clear trend.
An exhaustion candle is a large price move that may represent the final burst of buying or selling before the market reverses or consolidates.
Whipsaws occur when traders enter too early during uncertain market conditions, causing repeated stop losses as price rapidly changes direction.
Yes. These price action concepts can be applied using NinjaTrader, TradingView, and most professional charting platforms.
About DayTradeToWin
DayTradeToWin provides price action trading education, software, and trading methods for active traders. Founded by John Paul, DayTradeToWin focuses on helping traders understand market movement using practical price action concepts rather than relying on overly complicated charts.
DayTradeToWin offers trading tools and educational programs for traders using platforms including NinjaTrader and TradingView. Methods include ATO 2, the Sonic Trading System, Trade Scalper, Atlas Line, and additional price action trading software.
Traders can also sign up for a free member account to explore selected DayTradeToWin software and educational resources.
Risk Disclaimer
Trading Disclaimer: Futures, stocks, options, forex, and other financial instruments involve substantial risk and are not suitable for every investor. There is a possibility that you could sustain a loss of some or all of your initial investment. You should not invest money that you cannot afford to lose.
Past performance is not necessarily indicative of future results. No trading system, software, indicator, strategy, or methodology can guarantee profits or eliminate the risk of loss. Examples shown are for educational and demonstration purposes only and should not be considered financial or investment advice.
Simulated or hypothetical performance results have inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading and may undercompensate or overcompensate for the impact of certain market factors, including lack of liquidity.
Always understand the risks involved and consider your financial situation before trading.
John Paul is the founder of DayTradeToWin, a trading education and software platform established in 2008 with thousands of members worldwide. He specializes in price action-based futures trading strategies and structured market analysis.
DayTradeToWin provides trading education, indicators, and software tools designed to help traders apply disciplined, rule-based price action decision-making across global futures markets.
John Paul is the creator of several trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, used by traders to identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC).
Official website: https://daytradetowin.com
