One YTC chapter covers Candle Sentiment analysis. Watching where 'close' of the candle happens can give early hints about future market action. Most of time you get those hints before the indicators provide it.
So there are two ways to look at candles:
1. Close Sentiment
This is single-candle analysis. Divide entire range of a candle (low to high) into 3 equal parts. The candle is:
- "High Close" - if 'close' is in the upper 1/3
- "Mid Close" - if 'close' is in the middle 1/3
- "Low Close" - if 'close' is in the lower 1/3
This is illustrated by the blue plot on "YTC Sentiment" indicator.
2. Close Comparison
Compare position of 'close' with entire range of the previous candle. The candle is:
- Bull Candle - if 'close' is above 'high' of the previous candle
- Range Candle - if 'close' is between 'high' and 'low' of the previous candle
- Bear Candle - if 'close' is below 'low' of the previous candle
This is illustrated by the background on "YTC Sentiment" indicator.
What can you do with this? It gives very good and early reversal hints. Mid/ranging signals should be considered "no signals" - in other words: market will continue in the same direction.
This indicator should be used as confirmation to other signals (as a standalone YTC Sentiment produces too many reversal signals).
Forex / Indices / traders who want to start AUTO-TRADING might want to take a look at http://www.tradingconnector.com, which allows no-latency trades execution from TradingView to MT4.
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.
range = H - L
part = range / 3
mid1 = H - part // mid bound 1
mid2 = H - part * 2 // mid bound 2
hc = C < H and C > mid1 // high close
mc = C < mid1 and C > mid2 // mid close
lc = C < mid2 and C > L // low close
csent = hc ? 1 : mc ? 0 : lc ? -1 : na // candle sentiment
hc = C >= mid1
mc = C < mid1 and C > mid2
lc = C <= mid2