In H1 breakout trading, the signal candle’s attributes are as important as the breakout candle. We know that a breakout candle means a lot. So is the breakout confirmation or signal candle. In today’s article, we are going to demonstrate an example of this. Let us get started.
The price after being bearish gets caught within a horizontal channel. However, the last candle comes out as a bearish engulfing candle. It seems that the sellers may take control soon. It all depends on the breakout at the level of support followed by breakout confirmation.
The next candle comes out as a bearish candle as well closing within the level of support. The sellers are to wait longer. On the other hand, the buyers would love to get a bullish reversal right here. The battle is on.
The bear wins. The last candle comes out as a bearish engulfing candle closing well below the level of support. This is what H1 breakout traders want. If the next candle closes well below the breakout candle, the sellers may trigger a short entry.
The next candle comes out as a bearish doji candle. It closes below the breakout candle. The sellers may trigger a short entry. However, this is not an ideal candle showing strong bearish momentum. If a candle like this confirms a breakout, the price may not go towards the take profit level that we would love to see.
After triggering the entry, the chart produces two bullish candles. It looks extremely ominous. Most probably, the entry is going to get us a loss. Taking a loss is a usual thing in the Forex trading. However, the last two candles may be produced because of the fragile confirmation candle. This is where H1 breakout traders shall be a bit careful. If the confirmation candle does not come out as a strong candle, the price may go another way round. Let us find out from the next chart what the price does here.
Oh! It is about to hit the stop loss. It produces a bearish engulfing candle again. The price may head towards the downside and hit take profit level. It is still 50-50 since the price is trading within the level of last swing low. Let us find out how it ends.
Yes, it hits the target at last. However, this is what the price does not usually do when the H1 chart makes a breakout and confirms it. As mentioned, it often happens when the breakout and confirmation candle come out as weak candles. Thus, we may consider this when trading H1 breakout strategy next time.