candles · TRADING LEARNING GUIDE
Previous candle: strict low close break
What is this concept?
This custom rule requires a completed bullish candle, followed by a completed bearish candle closing below the previous low. It is not a body-engulfing rule; equality and wick-only breaks do not qualify.
Step by step
Write C1>O1, C2<O2 and C2<L1. Wait for completion. Define next-open or explicit retest entry, stop, range projection and costs beforehand. This is a hypothesis, not a validated edge.
From observation to decision
Record the instrument, venue, session and timeframe. Classify the observation using the definition, then write at least one alternative interpretation. Decide what evidence would invalidate your idea before entry. Mark missing information explicitly. Examples are hypothetical. Collect paper observations, including failures. Include fees, spread, slippage and timestamp alignment when measuring outcomes. Recognizing a chart shape and establishing a profitable trading rule are separate tasks.
Worked example
First O100 C106 H108 L99; second O105 C98 H106 L97 satisfies the rule. Previous range 9 gives hypothetical short entry 98 and target 89. Stop 109 means risk 11, reward 9, about 0.82R before costs.
Common mistakes and limits
Do not confuse L2<L1 with a close break, call equality strictly below or present a projected target as guaranteed return.
Practice
Create wick-only, equal-close and strict-break cases. Change entry and stop in the interactive guide and compare measured risk.
Resources and further reading
These sources explain definitions and underlying mechanics. Worked examples are original illustrations; a source does not establish the profitability of a custom pattern.
Further reading / foundational context. Worked examples on this page are original illustrations, not source performance claims.
Further reading / foundational context. Worked examples on this page are original illustrations, not source performance claims.