Estimating Next-Candle Direction from Abnormal Candle Range

Summary

This indicator estimates whether the next candlestick may move in the same direction as the current one. It calculates a candle measure from the difference between close and open divided by volume, scales that value, and compares it with its moving average over a configurable period. When the current measure exceeds the average multiplied by a configurable threshold, the indicator signals continuation in the current candle’s direction.

The method has two parameters: the lookback period used for the average and the multiplier that sets the threshold. The document describes the calculation and intended interpretation, but supplies no validation results, trading rules, or evidence that the next candle reliably follows the signal. Because the measure is signed and volume-scaled, its behavior may depend on how negative values, low volume, and averaging are handled. It should be understood as a heuristic indicator, not a demonstrated forecast or standalone strategy.

Key ideas

• The indicator compares a volume-scaled candle direction measure with its moving average.
• A configurable multiplier sets how large the current measure must be to trigger a continuation signal.
• The signal predicts that the next candle may share the current candle’s direction.
• No empirical validation or complete trading strategy is provided.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.