What’s an Indecision Candle?

What’s an Indecision Candle?

Indecision candles occur when neither buyers or sellers can gain and maintain control of price. They are common, but if used in the right way, they can be very powerful.
Take a look at this bullish trend (yellow highlight), it is a strong trend, there are several bullish candles heading towards an area of resistance. The big bullish candles tell us that during the highlighted period buyers were in complete control of price.

When price hits resistance we get an indecision candle forming (green highlight).
Let’s break this candle down into a story so you understand why it indicates indecision.

Large Upper Wick (Blue Highlight)
A large upper wick shows that buyers tried to continue the bullish trend but failed. Sellers took control of price and pushed it down.
Small Bearish Body (Green Highlight)
The small bearish body shows that sellers were able to close lower than the open. This is significant because in the three candles before this price consistently closed higher than open. This shows us that buyers are losing power.
Small Lower Wick (Red Highlight)
The small lower wick shows us that sellers were not able to gain much ground either. This tells us that sellers are not strong enough to turn price around completely. However, they are strong enough to stall further buyer movement.
All together this indecision candle forming right after strong bullish candles suggests that power has shifted from a decidedly bullish (buyer) market to an undecided market. While sellers are not in control, neither are buyers.
But there is one more thing we need to look at…
… The indecision candle is forming on top of a resistance area. Let’s looks at this chart again.

If you remember, in the previous chapter we talked about resistance being a sell area and support being a buy area.
So the image above shows us three strong bullish candles heading into a resistance area. And then…
BAM!
Price stalls and we get indecision forming on top of that area.
This tells us that the sell area is working. When price pushed into that area sell orders triggered and buyers could no longer continue up.
That is the story of price for this chart.
And this story gives us a nice little price action trade setup.