Volatility bias.
Many traders become to trade move actively after volatility breaks, in other words they tend to be more active after «trending» days – days with extended trading range. But if you analyze market statistics for at least last 5 years, you will see that more often market tend to consolidate within a body of the elongated candlestick (of course, I’m talking now about daily charts) for 2-3 days.
Role of candlesticks In Strong volitality breakouts
There is a very simple explanation for such market mechanics. Big market participants rarely come to the market and drive it to a new prices, instead they prefer to act as a market makers – to provide liquidity. In other words – they don’t chase running market, they try to accumulate position in consolidation before (most frequently) or after (more rarely) the breakout to make sure that their average fill will not be the worst.
On Forex market, days with extended volatility often don’t mean anything, it can be simply a «shakeout» or a single player stepping in the market without intention to continue pushing it to whatever side.
Solution: Don’t chase the market, find accurate trade location after market settles or when breakout is ready to occur, not after that.