If you want to understand how a daily candle forms, you must understand the "Power of 3" (also known as AMD: Accumulation, Manipulation, Distribution). The algorithmic markets do not move randomly. They follow a highly engineered 3-step sequence designed to induce retail traders into taking the wrong side of the market before the real move happens.
This phase usually happens during the Asian Session or the pre-market hours before the New York open. Price consolidates in a tight range. To retail traders, it looks like a market lacking momentum. To institutions, this is the phase where they are silently accumulating positions and building a pool of stop losses above and below the range.
As the London or New York session opens, price breaks aggressively out of the accumulation range. This is the "Judas Swing." Retail breakout traders jump in, and retail range traders get stopped out. This phase is essentially a massive Liquidity Sweep. The move is entirely fake, designed to trigger the liquidity needed for the institutions to execute their true positions.
After the manipulation phase traps the retail money, a Change in State of Delivery (CISD) occurs, and price reverses aggressively in the opposite direction. This is the true, sustained move of the day where the institutions distribute their accumulated positions for profit. As a trader, this is the only phase you want to participate in.
To know which way the manipulation phase is going to fake out, you must know the macro draw on liquidity. Read: ICT Daily Bias: How to Predict Market Direction.
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