The Purple Candle (PC) announces a sharp liquidity dump led by large institutional sellers. It is an advanced detection algorithm that captures the moment supply overpowers demand, based on order-flow delta.
Its value lies in exposing market-maker traps and pinpointing where buying liquidity dissolves — giving you the head start to build shorts from the highest possible tops.
Structural classification and the programmatic confirmation mechanism:
🔴 PREMIUM PC (confirming expensive price areas):
This zone is confirmed specifically when price posts a clear close on the very first candle after the Purple Candle. That close, breaking the Purple Candle’s levels downward, is strong evidence of bearish momentum and establishes the Premium PC as a legitimate, ideal short zone ✅.
⚡ STRONG PREMIUM PC (extreme selling momentum and a liquidity retest):
Among the strongest patterns of all. It forms when price bounces back up to retest the sell zone, touches the BEST ENTRY area, then drops hard and breaks the Purple Candle’s low again.
The cumulative-strength rule: Every time price returns and touches the selling BEST ENTRY, Strong Premium PC gains greater bearish momentum — the textbook opportunity to scale into the short while moving the stop loss above this new protective zone 📉.
🟢 DISCOUNT PC (cheap price areas, close to a bounce):
It forms at low levels (bottoms). It is formally confirmed when the next candle breaks the Purple Candle’s high and closes decisively above it — a sign that sellers are weakening and supportive buying liquidity is entering.
💡 How to handle the zone:
- Don’t sell at the lows: a warning to refrain from opening new shorts at the lows.
- Planning the re-entry short: wait for a corrective rally that brings price back to the BEST ENTRY area.
- Catching the counter-trend long: it sometimes coincides with institutional buy zones on higher timeframes, making it an opportunity for a long targeting the upper BEST ENTRY 📈.
🚫 The strict protection rule: if a Purple Candle appears near a major buy zone, wait for confirmation that it has turned into a Discount PC — by breaking its high and closing above it — before any decision.