Author: Tareq Sikder

Tareq Sikder has been engaged with Forex trading as well as Forex writing since 2010. He mainly is a Technical Analyst and a Price Action Trader. He is an author of E-book, a Live Webinar Speaker. Expertise: Candlestick, Channel Trading, Fibonacci Trading.

Categories
Forex Basic Strategies

No Breakout Confirmation or No Consolidation Means No Entry

Price Action traders crave for the breakout. Breakout is one of the most important components of price action trading. However, there is another equally important thing, which is breakout confirmation. Since the Forex market is very action-packed, it is often found that the price does not come up to the breakout level to confirm the breakout. It consolidates and produces a reversal candle to offer entry. The question is, does it always consolidate and offer an entry.

Price Action traders crave for the breakout. Breakout is one of the most important components of price action trading. However, there is another equally important thing, which is breakout confirmation. Since the Forex market is very action-packed, it is often found that the price does not come up to the breakout level to confirm the breakout. It consolidates and produces a reversal candle to offer entry. The question is, does it always consolidate and offer an entry.

Price Action traders crave for the breakout. Breakout is one of the most important components of price action trading. However, there is another equally important thing, which is breakout confirmation. Since the Forex market is very action-packed, it is often found that the price does not come up to the breakout level to confirm the breakout. It consolidates and produces a reversal candle to offer entry. The question is, does it always consolidate and offer an entry.

Let us find out.

The price headed towards the South and seems to have found its support. It has been heading towards the North now. The price is at the last swing high. Thus, the buyers are to wait for an upside breakout and breakout confirmation to take a long entry.

The price makes a breakout, but at the time of confirmation, it comes back in. Thus, the breakout is void. It goes towards the upside again. This time it gets rejected from the last swing high. Thus, the price does not make any breakout here.

This time it does. A huge bullish engulfing candle breaches the last swing high. That is a Double Top resistance as well. The buyers are to wait for the price to come back at the breakout level and get a bullish reversal candle right there. Alternatively, it may consolidate somewhere in between the highest high and the breakout level.

It keeps going up. Let us not give up but keep eyeing on the pair. It has gone too far up. It may not come back at the breakout level. It may rather consolidate. Let us find out what it does.

It keeps going towards the North. There is no sign of consolidation yet. A swing high on the chart is evident, which is nearby. As things stand, risk-reward is getting less lucrative.

As expected, the price has found its resistance before the level of the last swing high. The price action gets choppy. Traders are to wait for the price to give them the next direction. In a word, price action traders do not keep this kind of chart on their watch list.

The Bottom Line

A chart looked extremely good and was about to give us an entry ended up being a choppy chart. What more frustrating is it went towards the desired direction, but it did not offer us entry. Some traders may think it would be good if an entry is taken. At least some pips can be achieved. Please note, do not even think about it. After breakout, the price must confirm the breakout or consolidate. To sum up the whole equation, no confirmation or no consolidation means no entry.

Categories
Forex Basic Strategies

Is Drawing One Trendline Enough?

The Trendline is an excellent trading tool that the price action traders love using on their charts. Drawing trendline as accurate as it can get and adjustment with spikes are two factors that traders are to look after before using trendline. Another factor trendline traders often need to do is drawing multiple trendlines on the same chart. In this lesson, we are going to demonstrate an example of that.

The Trendline is an excellent trading tool that the price action traders love using on their charts. Drawing trendline as accurate as it can get and adjustment with spikes are two factors that traders are to look after before using trendline. Another factor trendline traders often need to do is drawing multiple trendlines on the same chart. In this lesson, we are going to demonstrate an example of that.

The Trendline is an excellent trading tool that the price action traders love using on their charts. Drawing trendline as accurate as it can get and adjustment with spikes are two factors that traders are to look after before using trendline. Another factor trendline traders often need to do is drawing multiple trendlines on the same chart. In this lesson, we are going to demonstrate an example of that.

The chart shows that the price after finding its support at the trendline heads towards the North and makes a new highest high. Thus, this is a valid trendline. Ideally, the buyers are to wait for the price to come back to the trendline again and to produce a bullish reversal candle to go long on the pair. Let us proceed to find out what happens next.

The price does not come at the trendline. It finds its support well above the trendline and heads towards the North again. This is annoying, is not it? Do not get annoyed. Concentrate on the chart. Do you see anything interesting? Have a look at the next chart.

We can draw another trendline on the same chart since the price has a bounce and makes a new highest high. Traders are to wait again for the price to come back at the trendline and to produce a bullish reversal candle to offer them a long entry.

Wow, this time, the price comes at the trendline and produces a bullish reversal candle. Traders have been waiting for such price action. By flipping over to the next chart and an upside breakout, traders may grab some green pips.

The chart shows that the price comes back near the trendline’s support again, then heads towards the North. It consolidates hard on the minor charts, as it seems. The point here is that the price does not come at the first drawn trendline or produces a bullish reversal candle. It comes at the second drawn line, and this time, it creates the bullish reversal candle right at the trendline’s support. It heads towards the North and may have offered entry as well.

The Bottom Line

In most cases, the price does not come at the first drawn trendline. It has the tendency to come at the second drawn trendline more. It is often seen that the price obeys the third drawn trendline as well. Thus, if we are to trade on the trendline, we may keep an eye on the chart to draw a trendline as many times as we need to.

Categories
Forex Basics Forex Daily Topic

A Breakout Brings More Momentum than any Other Trading Factor

A Breakout Brings More Momentum than any Other Trading Factor

A Breakout Brings More Momentum than any Other Trading Factor

A Breakout Brings More Momentum than any Other Trading Factor

A bearish engulfing candle at a Double Top or consolidation resistance is an excellent signal to go short. However, if a bearish engulfing candle closes right within the support level, it sometimes may create an upside momentum on the minor charts. In today’s article, we are going to demonstrate an example of that.

The price heads towards the North with strong bullish momentum. Ideally, traders are to look for opportunities to go long here upon consolidation, followed by upside breakout. The last candle comes out as a bearish candle. It may consolidate and make an upside breakout as things look. Let us go to the next chart to find out what happens next.

The pair produces a bearish engulfing candle. Several rejections and a bearish engulfing candle suggest that traders may want to go short on the pair. If they’re going to go short from here, they are to flip over to the H1 chart since it is an H4 chart. For a reason, I am not showing the H1 chart since the H4 chart itself tells the story that I want to share. Let us look at the H4 chart with another equation.

The candle closes right at a level where the price has bounced earlier. This is an explicit support level, which may play an essential part in the minor charts. Soon we find out how the pair reacts from here.

Look at the last candle. The candle comes out as a bearish engulfing candle. However, look at the upper shadow. It goes up to the consolidation resistance. With some brokers, because of the high spread factor, some traders’ Stop Loss may be swept away. The last candle, after having a strong rejection at around the resistance level, closes below the support. The sellers are to flip over to the H1 chart, wait for consolidation and bearish breakout to go short on the pair.

Again, I am presenting the H4 chart to show the next price movement.

The price does not look back this time. It heads towards the South with strong bearish momentum. The H1 chart may have offered some entries, as well. What lesson do we get from these examples?

  1. In an H4-H1 combination, after an H4 reversal candle, traders are to flip over to the H1 chart to take an entry.
  2. The last swing high or swing low on the H4 chart is to be counted.
  3. If the reversal candle closes right within the last swing high or swing low, it may push the price towards another direction, produce spike and sweep away our Stop Losses.
Categories
Forex Psychology

What Wastage of Time!

The H4-H1 combination is one of the best combinations to trade for intraday traders. The H4 chart is the most consistent intraday chart in the Forex market. The H1 chart integration with the H4 chart offers many reliable entries. However, it is often seen that the H4 chart doest its part, but the signal never comes on the H1 chart. In today’s lesson, we are going to demonstrate an example of an H4-H1 chart combination, which is about to give us entry, but it ends up not producing a trading signal. Let us find out how the story goes.

The H4-H1 combination is one of the best combinations to trade for intraday traders. The H4 chart is the most consistent intraday chart in the Forex market. The H1 chart integration with the H4 chart offers many reliable entries. However, it is often seen that the H4 chart doest its part, but the signal never comes on the H1 chart. In today’s lesson, we are going to demonstrate an example of an H4-H1 chart combination, which is about to give us entry, but it ends up not producing a trading signal. Let us find out how the story goes.

The H4-H1 combination is one of the best combinations to trade for intraday traders. The H4 chart is the most consistent intraday chart in the Forex market. The H1 chart integration with the H4 chart offers many reliable entries. However, it is often seen that the H4 chart doest its part, but the signal never comes on the H1 chart. In today’s lesson, we are going to demonstrate an example of an H4-H1 chart combination, which is about to give us entry, but it ends up not producing a trading signal. Let us find out how the story goes.

The price after being bullish on the H4 chart, it has several rejections at a level. The last bearish candle gets rejected at a Double Top resistance. The sellers are to flip over the H1 chart and wait for the H1 consolidation and H1 bearish breakout to go short. However, it is an Inside Bar. It may not attract the sellers that much. Let us proceed to the next chart.

This is the H4 chart, as well. The price does not head towards the South on the H1 chart. It rather produces an H4 bullish candle followed by an H4 bearish engulfing candle. This time it may attract more sellers to be keen on selling opportunities. They are to flip over to the H1 chart again. Let us have a look at how the H1 chart looks.

This is the H1 chart. The last candle comes out as a bearish engulfing candle. The sellers are to stick with the chart to wait for consolidation and to get a breakout to go short. The waiting game starts.

The price keeps going towards the South without having any consolidation. Since the sellers do not find new resistance, thus there is no entry for them yet. Let us not give up but wait for consolidation.

The consolidation starts, but it does not make any H1 breakout to make the new lowest low. It rather finds a level of support where it has several bounces. It is a ‘Double Bottom’ support. The way things look now, it may head towards the North if the price breaches the neckline. All anticipations and hopes have gone in vain. Some traders may think, “what wastage of time.”

If you think it is a wastage of time, you are far away from being a professional trader. 70% of your trade setup like this may end up not offering an entry. Never think it is a waste of time. Take it easy. Each potential setup does not offer an entry. Concentrate and find out more setups in other pairs. It must be round the corner.

Categories
Forex Chart Basics

An Inverted Hammer at a Double Bottom

The Double Bottom is a pattern, where the buyers eagerly wait to get a bullish reversal candle at. Typically, a Bullish Engulfing Candle, a Bullish Pin Bar,  a Bullish Truck

The Double Bottom is a pattern, where the buyers eagerly wait to get a bullish reversal candle at. Typically, a Bullish Engulfing Candle, a Bullish Pin Bar,  a Bullish Truck

The Double Bottom is a pattern, where the buyers eagerly wait to get a bullish reversal candle at. Typically, a Bullish Engulfing Candle, a Bullish Pin Bar,  a Bullish Truck Rail are considered the strongest bullish reversal candle pattern. Usually, a Bullish Inside Bar and an Inverted Hammer are the weakest reversal pattern. In today’s lesson, we demonstrate an example of how a Daily Inverted Hammer candle offers a long entry.

This is the daily chart. It shows that the price has been roaming around within two horizontal levels. It is at the support and produces an Inverted Hammer. An Inverted Hammer is a bullish reversal candle but not a very strong one. Look at the upper shadow. It suggests that the price has a strong rejection at a level of resistance.

To some extent, it signifies intraday buyers’ less confidence. However, it is the daily chart, and the bullish reversal candle forms right at a double bottom’s support. Thus, let us flip over to the H4 chart to find out whether it offers us an entry.

The H4 chart shows that the price is on consolidation. The last candle looks ominous for the buyers. Nevertheless, traders on this chart combination are to look for long opportunities as long as the support holds the price. Let us go to the next chart to find out what happens.

The price finds its support and produces two consecutive bullish candles. One of them breaches the resistance and closes well above the resistance. A long entry may be triggered here by setting the Stop Loss below the consolidation support.

The price heads towards the North with good bullish momentum after triggering the breakout. The last candle on this chart comes out as a bearish candle with some gap. The buyers may consider closing the entry and come out with the total profit. On the other hand, some traders may want to take partial profit and ride on the wave up to the resistance. Have a look at the chart below.

The price may go up to the marked resistance level since this is the last swing high. If we consider the risk-reward, it is an amazing trade. The reward is about five times the risk. Do you remember how it started, though? It began with a Daily Inverted Hammer Candle (relatively weaker bullish reversal) at a Double Bottom’s support. Yes, this is what support of Double Bottom can do.

Categories
Forex Psychology

Having the Mindset to Deal with a Frustrating Situation

Patience is one of the most essential components of Forex traders. Traders are to keep patience in every single second. Before triggering an entry, a trader is to find out

Patience is one of the most essential components of Forex traders. Traders are to keep patience in every single second. Before triggering an entry, a trader is to find out

Patience is one of the most essential components of Forex traders. Traders are to keep patience in every single second. Before triggering an entry, a trader is to find out a trend, key levels, momentum, news events, etc. After all this hard work, he may not be able to take the entry. It is frustrating, but for Forex traders, it is a usual thing. A trader must accept it simply. In today’s lesson, we are going to demonstrate an example of that.

The price heads towards the South; it consolidates and heads towards the North. The price breaches a level of resistance, which the buyers are to keep an eye at for a bullish reversal. Let us proceed to find out how the next chart looks.

The buyers were waiting for the red-marked level to hold the price and produce a bullish reversal. If the level had held the price and pushed the price towards the North breaching the highest high, the buyers would have taken a long entry. They must have waited eagerly, but all went in vain.

The price headed towards the South further and found its support. After finding the support, it heads towards the North again. On its way, it makes a breakout at the highest high of the last bearish wave. The buyers are to keep an eye on this pair again to find a long entry. To take the long entry, the price is to come back at the breakout level, to produce a bullish reversal candle, and to breach the highest high of the last wave.

This time it looks good. A candle closes within the level of support. The buyers are to keep an eye to get a bullish reversal candle first. This means they have to be patient again. Let us proceed to find out what happens next.

The level produced a bullish reversal candle, but it did not breach the highest high. It instead came down and breached the support level. In a word, all efforts have gone in vain. What wastage of time!

                   The Bottom Line

If you want to take trading seriously as a business or a consistent source of income, you must not think that it is a wastage of your time. It is an investment. Traders must be patient and not be frustrated when opportunities are lost or do not come as per expectation. They must deal with it professionally.

The bad thing is it does not come with practice or experience. The good thing is it is all about mindset. Even a beginner may have a mindset to deal with a situation like this, whereas it might frustrate a trader with five years of experience. We must remember that if it frustrates too much, it hurts trading performance.

 

Categories
Forex Basic Strategies

The H4-H1, an Action-Packed Combination

In today’s lesson, we are going to demonstrate an example of the H4 and the H1 chart combination for taking entries. Both are intraday charts. A large number of traders

In today’s lesson, we are going to demonstrate an example of the H4 and the H1 chart combination for taking entries. Both are intraday charts. A large number of traders

In today’s lesson, we are going to demonstrate an example of the H4 and the H1 chart combination for taking entries. Both are intraday charts. A large number of traders do the job using those two charts. Thus, it is an excellent combination to trade in the Forex market.

Let us get started.

This is an H4 chart. The chart shows that the price heads towards the North. On its way, it made an upside breakout, which may play a vital role in pushing the price towards the North further. Despite having a long lower shadow, the last candle comes out as an Engulfing candle. The price may start its correction this time.

As expected, the price comes down to the flipped support and produces a bullish engulfing candle. The last swing high is far enough to offer a 1:1 risk-reward. However, we do not take an entry right after the candle H4 closes. We rather switch over to the H1 chart.

This is how the H1 chart looks. It shows that the price starts having correction by producing a Doji candle. An engulfing bullish candle closing above the Doji candle is the signal to go long here. Let us wait for a Marubozu bullish candle.

This is one good-looking Marubozu bullish candle. However, it closes right at the resistance zone. Risk-reward is 100:0 here. We must wait for an H1 consolidation and breakout towards the upside to take a long entry.

Here they come. The price consolidates and produces an H1 bullish candle, which closes above the resistance. Traders may trigger a long entry right after the candle closes by setting stop loss below the last support. The H1 chart does not show any resistance nearby. Thus, the price may head towards the North with good bullish momentum. It may get us 1:2 risk-reward or even more. Usually, the price reverses once 1:1 risk-reward is achieved. Let us find out what happens here.

The price consolidates much earlier than our expectations. Our reward is not achieved. Thus, we keep holding our position. We are risking a loss here. However, we must keep our patience.

The price makes another upside breakout and heads towards the North. The wave gets us our expected reward and starts having a pullback. If we have not set our take profit, we may manually close it; or we may use a trailing stop loss. We will demonstrate some examples of using trailing stop loss in this combination in upcoming lessons.

The Bottom Line

The H4-H1 combination is an eventful combination. A Trader needs to have skill, expertise, experience, and patience to handle it. Once he learns it well, it may have his hands full in making money by trading.

Categories
Forex Basic Strategies Forex Daily Topic

A Story of an Early Exit

Risk-Reward is a factor, which every successful trader takes care of. Before choosing a chart to take an entry, the first thing that is to be considered is the trend

Risk-Reward is a factor, which every successful trader takes care of. Before choosing a chart to take an entry, the first thing that is to be considered is the trend

Risk-Reward is a factor, which every successful trader takes care of. Before choosing a chart to take an entry, the first thing that is to be considered is the trend, then the risk-reward factor. Once we have set our Take Profit and Stop Loss level, we shall leave the entry either to hit the Stop Loss or the Profit Target. However, today, we are going to demonstrate an example of an early exit.

This is an H4 chart. The chart shows that the price has found its support as well as a resistance zone. After having a final rejection, it makes a move towards the downside. Then, it heads towards the North now (see the next image). Another rejection and bearish reversal candle at the resistance zone may produce a short entry.

The last H4 candle is bullish. However, the candle closes within the resistance zone. It may go either way. The buyers may get an upside breakout; the sellers may get a bearish reversal. Let us proceed to find out what happens next.

In the above chart, we can see one good-looking bearish Marubozu candle. The candle suggests that the sellers may wait for consolidation and downside breakout to take a short entry. The candle forms at a Double Top resistance as well. The price may consolidate around the neckline level.

As expected, the price starts having correction around the neckline level. It needs to find its resistance and produce an H4 bearish reversal candle along with a breakout at the neckline.

Here it comes. The last candle engulfs all the candles by closing below the neckline. An entry may be triggered right after the candle closes. The price has enough space to travel down to the red-marked line, which allows an excellent risk-reward. However, there is a support level in between, that may hold the price for a while.

The price heads towards that level with good bearish momentum. The way it has been going, it may hit the red-marked level within four/five H4 candles. This means one more trading day may be required to hit the original Take-Profit level.

The in-between level is a vital level, which produces the H4 bullish reversal candle. The price has reacted several times at that level earlier. Usually, we must stick with our original Profit-taking target. However, it is also legit to close our entry right after the last candle closes. A question may be raised “why do we close our entry here?”

Reasons for Early Exit

There are two reasons

  1. The support level is significantly strong
  2. The current bar is the last H4 Friday’s candle, which means the market closes once the candle is finished.

The Bottom Line

When using the Weekly and the Daily charts, traders are to let their opened positions to reach the target during the weekend. However, intraday traders should consider closing their floating trade before the week’s end. Mondays often start with a big gap, which may hurt intraday Stop Losses.

 

Categories
Forex Basics Forex Daily Topic

A Winner is Not Always a Good Trade

Price action traders use chart combinations such as Weekly-Daily, Daily-H4, H4-H1, and H1-15M, etc. Intraday minor charts’ traders such as the H1, 15M, 5M do not have an undeviating relation

Price action traders use chart combinations such as Weekly-Daily, Daily-H4, H4-H1, and H1-15M, etc. Intraday minor charts’ traders such as the H1, 15M, 5M do not have an undeviating relation

Price action traders use chart combinations such as Weekly-Daily, Daily-H4, H4-H1, and H1-15M, etc. Intraday minor charts’ traders such as the H1, 15M, 5M do not have an undeviating relation with the daily chart. However, it is often seen that if the daily price action is choppy, it gets tough to find out a good entry for the intraday traders. Notably, on a choppy daily chat, it gets extremely tough for the H4 traders to find an entry with good risk-reward. Thus, even a trade that gets us profit may not always be a good one. Let us demonstrate an example of that.

This is a daily chart, which shows that the price action has been choppy. It gets caught within a bullish rectangle. The daily traders are to wait for a breakout. However, the H4 traders know the range. Thus, they are to wait for a daily bearish reversal at the resistance zone and bullish reversal at the support zone. Let us see where it produces the next reversal.

The chart produces an Inverted Hammer right at the resistance. The H4 traders are to flip over the chart; wait for consolidation and bearish breakout to take a short entry. The risk-reward looks good here.

The H4 chart shows the last candle comes out as a bearish candle. If the price consolidates with the support of the candle’s lowest low, a bearish breakout will be the signal to go short.

The next candle comes out as another bearish candle. The candle has a bounce at H4 support, as well. If the price consolidates and makes a bearish breakout, the sellers may take a short entry. There is still space for the price to travel towards the downside.

The price consolidates and makes a breakout at the support. The breakout candle looks good. By setting Stop Loss at the consolidation resistance, a short entry may be triggered right after the last candle closes. Take Profit shall be placed at the red-marked level. Let us find out whether it hits Take Profit.

It does. It gets us profit. The question is whether it is a good trade or not. As far as risk-reward is concerned, it is not a good entry. It gets us less reward than the risk. Thus, traders shall skip taking that entry in the first place.

The Bottom Line

Price action traders may find many trade setups that match with all the norms for taking an entry. However, they must consider risk-reward on every single trade. If it offers less than 1:1 risk-reward, they shall avoid taking that entry. In most cases, an entry offering less than 1:1 risk-reward has less chance to be a winning trade as well. In this example, it is a winner. However, considering entire facts, it is not a good entry.

Categories
Forex Psychology

Experiencing a Losing Trade

A losing trade hurts. Beginners find it tough to encounter losing trades. However, in the Forex market, losing is inevitable. The market is so action-packed that even an experienced trader

A losing trade hurts. Beginners find it tough to encounter losing trades. However, in the Forex market, losing is inevitable. The market is so action-packed that even an experienced trader

A losing trade hurts. Beginners find it tough to encounter losing trades. However, in the Forex market, losing is inevitable. The market is so action-packed that even an experienced trader often makes mistakes. Sometimes, even a good entry may not get us any profit. In today’s lesson, we are going to demonstrate an example of a good entry, which ends up being a losing trade in the end.

The price heads towards the North and makes a pullback. Traders are to wait for an upside breakout to take a long entry. A bullish Engulfing candle follows a Doji candle. As things stand, the buyers are to take the control soon upon an upside breakout.

Things are different now. The price comes down instead, by making a Double Top. It starts having the correction as well. Consolidation and bearish breakout shall attract the sellers to go short on the pair. Let us see the next chart.

The chart shows that the price is having a correction, where it had a bounce earlier. The equation is very simple here. A bullish reversal attracts the buyers, and a bearish breakout attracts the sellers to go short.

It makes a bearish breakout. The breakout candle looks good. As far as price action and candlestick pattern are concerned, this is an A+ short entry. Concentrate on the marked Stop Loss and Entry levels.

The next candle comes out as a bullish candle. The price may take out some of our entries because of the spread factor. With some brokers, traders pay more spread. Some of our trade (the same entry) may still survive. However, let us not get into this argument but proceed to the next chart. The following chart has an interesting scenario to present.

This should conclude the argument. The price hits the Stop Loss and heads towards the South again. The entry looks to be an A+ entry, but it has ended up bringing us a loss. As usual, beginners with average knowledge of price action may think that something must be wrong with his strategy.

This is not the case. An entry like this would bring us profit at least on 70% occasions. It hurts more since the candle, which hits our Stop Loss itself a strong bearish candle. This is how this market plays. We have to accept it. We must not let our losing trades occupy our thoughts. It is a game of probability of winning and losing. With knowledge, experience, and hard work, a trader can increase the likelihood of winning for sure.

Categories
Forex Basics Forex Daily Topic

Attributes of the Signal Candle Not to be Ignored

After choosing a pair to trade, traders wait for the signal candle at the desired zone/level to take an entry. The attributes of the signal candle are important. Ideally, a

After choosing a pair to trade, traders wait for the signal candle at the desired zone/level to take an entry. The attributes of the signal candle are important. Ideally, a

After choosing a pair to trade, traders wait for the signal candle at the desired zone/level to take an entry. The attributes of the signal candle are important. Ideally, a signal candle is to be a Marubozu candle, barely having an upper or lower shadow, and longer than other candles around. In today’s lesson, we are going to show an example of how attributes of a signal candle affect the market. Let us proceed.

The price after being bearish finds its support. A long consolidation suggests that a breakout towards either side makes the chart lively again. An upside breakout and the confirmation offer good risk-reward considering the last swing high. A downside breakout seems even more rewarding. Let us find out which way the breakout takes place.

It is an upside breakout. The breakout candle looks fantastic. Buyers are to wait for consolidation and breakout at the highest high to go long on the pair. However, buyers shall calculate that the last swing high is not too far away now.

The price continues its bullish journey towards the last swing high, and it consolidates. Flipped support is to be adjusted here considering the Inside bar. However, an upper shadow at the previous swing high holds the price as well up to the Inside bar. The last candle comes out from the zone, though. Look at its attributes

  • It is a bullish engulfing candle
  • It breaches the resistance zone
  • It is a Bullish Marubozu candle

Many of us may trigger an entry here by setting Stop Loss below the lowest low of the candle. Let us find out what happens next.

The price comes down again. It may have swept away many Stop Losses. Thus, the last entry gets the buyers loss. What do you think about the last candle?

  • It is a bullish engulfing candle
  • It breaches the resistance zone
  • It is a Bullish Marubozu candle and
  • It breaches the last swing high

 

Traders may want to trigger an entry here. Let us go to the next chart to see how it goes.

This time it works excellently well. A question may arise here: what the difference is between these two candles?. The only difference that can be observed is, “It breaches the last swing high.”

The Bottom Line

We have demonstrated an example today and learned a lesson. Traders are to be immaculate in making a decision, and they have to calculate every single aspect that is related to the trading decision.

 

Categories
Forex Basics Forex Daily Topic

Using Trailing Stop: An Art to Be Learned by Traders

Using a trailing stop is a way to lock a profit in trading, at least with some profit. A floating profit trade may not always hit its Take-Profit level. Thus

Using a trailing stop is a way to lock a profit in trading, at least with some profit. A floating profit trade may not always hit its Take-Profit level. Thus

Using a trailing stop is a way to lock a profit in trading, at least with some profit. A floating profit trade may not always hit its Take-Profit level. Thus, traders use Trailing Stop to lock-in some profits and let it run to hit the target. Otherwise, some trades may result in a loss instead.

In today’s lesson, we are going to demonstrate an example of that.

The price heads towards the North with good bullish momentum. The buyers are to wait for price correction and bullish reversal candle to go long on the pair. Let us proceed to the next chart to find more about the correction.

The correction looks very bearish. However, a flipped support level holds the price. Thus, it is going to be an interesting battle between the bull and the bear. Let us find out who wins. Does it make a downside breakout or a bullish reversal candle?

The chart produces a bullish reversal candle. We can see that this is an Inside Bar, which is the weakest reversal candle. A flipped support creates a bullish reversal candle but does not make any breakout. The buyers are to flip over to the trigger chart to get consolidation and breakout to go long on this. This is the daily chart. Let us flip over to the H4 chart.

The H4 chart looks suitable for the buyers. The level of support produces a bullish engulfing candle. It has started the price correction. An upside breakout from a good level of support is the signal to trigger a long entry.

The price goes upward and consolidates. Upon finding support, the last candle breaches the level of resistance. Setting Stop Loss below the level of support, an entry may be triggered right after the last candle closes. The Take Profit shall be placed at the highest high of the previous bearish wave.

The price continues to go towards the upside for a while. It has started having consolidation. The price has found its support. An upside breakout is to push the price towards the North further. On the other hand, a downside breakout may push the price towards the South and even change the whole equation. Thus, the buyers are to move their Stop Loss. Have a look at the chart below.

The buyers shall move their Stop Loss below the level of support and hope it makes another upside breakout to hit the Take Profit. Let us find out what happens next.

This is what Forex trading is all about. You never know what exactly happens next. The price comes down. It would hit the Stop-Loss, where it was set at the very outset. By using Trailing Stop, the buyers have made some profit. Otherwise, they would have to encounter some loss.

The Bottom Line

Using Trailing Stop is an art. It needs a lot of practice to be master at it. Without knowing how to use it properly, it may hurt a trader instead. Since it is an important trading feature to save us from encountering a loss with a profit trade, a trader must study/work hard on this.

Categories
Forex Basics Forex Daily Topic

The Simpler the Better

Financial traders follow many charts, patterns, and trading strategies. Each one has its own advantages and disadvantages. Nevertheless, there is a saying, ‘the simpler, the better.’ In the financial markets

Financial traders follow many charts, patterns, and trading strategies. Each one has its own advantages and disadvantages. Nevertheless, there is a saying, ‘the simpler, the better.’ In the financial markets

Financial traders follow many charts, patterns, and trading strategies. Each one has its own advantages and disadvantages. Nevertheless, there is a saying, ‘the simpler, the better.’ In the financial markets, especially in the Forex market, a trader cannot deny this truth.

Let us demonstrate an example of this.

The price heads down with strong bearish momentum. The sellers are to wait for an upside correction and a breakout at the support to make it more bearish. Let us proceed with what happens next.

The price has an upside correction, but it did not make a breakout at the support. It instead produces a huge bullish engulfing candle at Double Bottom support. Things are different now. Traders are to look for a long opportunity on the chart.

The price is bullish, but it gets caught within an ascending channel. A breakout at either side attracts traders to trade in this chart. The chart shows that the price makes an explicit breakout towards the upside. Ideally, the buyers shall flip over to their trigger chart to find a long entry. Let us find out whether they find any on the next candle.

The price does not make a breakout at the highest high of the breakout candle. Thus, the traders do not find an entry on the triggered chart. However, see the second candle (bullish candle). It makes a breakout (horizontally) at the highest high of those two candles. The buyers are to flip over the trigger chart again to find an entry. Do they see an entry this time? Let us find out.

 

Yes, they do. The price heads towards the North with good bullish momentum, and it does not come down to the support of the breakout candle. By flipping over to the trigger chart for an upside breakout to trigger an entry, a trader makes some green pips.

In this chart, the price makes a breakout at ascending channel’s resistance just a candle earlier. That breakout does not create bullish momentum. However, when it makes a breakout at the horizontal resistance, it creates the momentum that the buyers look for. I am not saying a breakout at ascending channel’s support/resistance does not offer entry at all. It does. A breakout at horizontal support/resistance offers more entries than the channel’s support/resistance breakout. It is because; it is simple and easy to be noticed by most of the traders.

The Bottom Line

Does that mean we stop looking entries on a channel or other pattern breakout? No, we shall eye on those breakouts; flip over to the trigger chart and trigger an entry if the trigger candle makes a new higher high or lower low. It is just the probability that a breakout at horizontal support/resistance offers more than any other chart pattern. After all, it is simple, and we know “the simpler, the better’.

Categories
Forex Psychology

A Lesson from a Failed Entry

In today’s lesson, we are going to demonstrate an example of a failed entry. We usually explain winning trade setups in our lessons. It teaches us how to win a

In today’s lesson, we are going to demonstrate an example of a failed entry. We usually explain winning trade setups in our lessons. It teaches us how to win a

In today’s lesson, we are going to demonstrate an example of a failed entry. We usually explain winning trade setups in our lessons. It teaches us how to win a trade on a setup like that and gives us more confidence as well. We are going to talk about a failed entry, which may hurt our confidence. However, the lesson that it teaches that may help us be a batter trader.

The price heads towards the North with good bullish momentum. Ideally, we shall look for long opportunities here upon consolidation and at a breakout at resistance. Let us find out what happens next.

The price consolidates, but it does not make any breakout. The last candle looks very bearish. The door is open for both the bull and the bear. Traders shall go long on an upside breakout and go short on a downside breakout. Let us find out which way it makes its next breakout.

 

The price heads towards the downside after making a breakout at support. It is a different ball game now. Traders are to look for short opportunities upon consolidation and downside breakout. Let us proceed to the next chart to find out what happens next.

Here comes the corrective candle. It is an Inside Bar. Thus, to sum up, the whole equation, the price consolidates after being bullish, makes a breakout at the support, the trend continues, produces a corrective candle (an Inside Bar). A bearish engulfing candle closing below the lowest low is the signal to go short here.

This is what I have meant. A bearish engulfing candle forms right after the corrective candle. The candle closes below the support, where the price reacted three times recently. If we consider the momentum of the last bearish candle, that gets ten on ten as well. Let us trigger a short entry.

Oh! The price goes another way round than our expectations. It hits the Stop Loss. We are to encounter a loss here. The first thing we shall do after a losing trade, we shall write all the details about the trade in our journal. If there is anything that we have missed from our trading strategy, we must find that out and write it in our journal.

As far as I am concerned, there is not anything wrong with the entry. It is an entry; I would take ten times out of ten opportunities. I have been working with the strategy for a long time. Thus, I can assure you I would win at least six entries out of those 10. This is the faith that a trader needs to have. A trader must not lose his faith in his proven strategy.

The Bottom Line

Never lose your faith in yourself and in your proven strategy. Do not let a losing trade hurt you psychologically.

Categories
Forex Psychology

Do Not Change Your Demonstrated Strategy Out of the Blue

Forex market is appealing to the traders. It operates 24/5, and it is the most liquidate financial market. It offers numerous trading opportunities to traders of all sorts. Since it

Forex market is appealing to the traders. It operates 24/5, and it is the most liquidate financial market. It offers numerous trading opportunities to traders of all sorts. Since it

Forex market is appealing to the traders. It operates 24/5, and it is the most liquidate financial market. It offers numerous trading opportunities to traders of all sorts. Since it has so much to offer, investors love investing in the market. However, these benefits often work against traders. Statistics suggest that 95% of traders lose their money in the Forex market.

A question may be raised here why most of the investors are unsuccessful in this market. There are quite a few to mention. However, today, I am going to talk about a very common factor that makes many traders unsuccessful.

We know winning trade and losing trade go hand by hand in the financial market. In the Forex market, it goes more frequently than other financial markets. Ideally, if a trader wins his 60% trades even with a 1:1 risk-reward ratio, he is considered a good trader. At the end of the day, he is making profit matters. By losing 40% of trades, he is still able to make money. It is simple math. Let us now dig into this simple math and find out how it could make a trader unsuccessful.

Let us assume a trader has learned or found out a strategy that offers 1:1 risk-reward with a 60% winning rate. He takes six entries in a week, and all of them hit Take Profit. In the following week, he takes four entries, and all of them hit Stop Loss (For the sake of statistics). He starts thinking something must be wrong with his strategy. He forgets the whole picture. Psychologically, he is down. Thus, he would have more problems with the strategy. He abandons his proven approach and starts looking for a new one, though, there is not anything wrong with the strategy.

As far as statistics are concerned, if on average a trade strategy gets us 40% losers, it means that 16% of the time (one every three losing streaks) a trader will encounter two losers in a row, 7% of the time he will get 3 consecutive losers, 3% of the occasions he will experience four losers. Are you already pondering? Here is the last data to be presented in front of you; about 1 in 100 trades, he will encounter five losers in a row. A trader needs to accept the fact because it is inherent to the statistical properties of his game.

We know a trader needs to do a lot of back-testing, study, demo trading before using it in live trading. This process consumes time. Moreover, a good strategy does not mean that it would suit every single trader. The new one may not be his cup of tea. Assume what happens next. He starts looking for another one.

Meanwhile, he starts losing his faith in him and this market. The consequence is obvious. He becomes a member of that ‘95% Club’.

The Bottom Line

It does not matter how good a trader someone is; he is to accept losing trades. The entire result is to be calculated. A trader must not worry about one or two losing trades, but must have faith in his strategy (which he uses after hours of back-testing, study) as long as it brings him consistent profit.

Categories
Forex Basics

Importance of Timing in Trading

Timing is an essential factor in trading. Price action traders take entry on signal candle’s/bar’s attributes and support/resistance breakout. Many traders ignore the timing factor. However, it is an important

Timing is an essential factor in trading. Price action traders take entry on signal candle’s/bar’s attributes and support/resistance breakout. Many traders ignore the timing factor. However, it is an important

Timing is an essential factor in trading. Price action traders take entry on signal candle’s/bar’s attributes and support/resistance breakout. Many traders ignore the timing factor. However, it is an important factor when the signal candle is produced. In this article, we are going to demonstrate an example of the importance of timing in trading.

This is a daily chart. The price keeps going towards the South. Traders shall only look for selling opportunities in this chart on upward price correction/consolidation. Let us go to the next chart and find out what happens next.

The chart produces an engulfing bullish candle. It is a sign that the price may go towards the North. Intraday buyers such as 5M, 15M, H1 traders may look for long opportunities in this chart. The daily chart traders must wait for the correction/consolidation to get over upon a daily bearish reversal candle.

The price heads towards the North with good bullish momentum. The intraday buyers have made full use of the engulfing candle here. However, upper shadow and an Inside Bar suggest that a bearish reversal may come soon.

Here it is. A bearish engulfing candle suggests that it is time to look for short opportunities. It is a daily chart, so we shall flip over to the H4 chart to look for short opportunities.

The H4 chart shows that the price consolidates and makes a bearish move. However, support is still intact. The sellers must wait for a breakout at the support to go short on this chart. Let us draw the support line on the chart.

With an upward adjustment, the support lies at the black marked level. One of the H4 bearish candles is to breach the level for the sellers to get engaged in selling. Let us proceed to the next chart.

Concentrate on the chart. The chart has produced six candles since we have flipped over to the H4 chart. Six H4 candles mean a trading day is passed. Does it have any message to give us? We dig into the message later. Let us proceed to the next chart.

Wow! We have a breakout. Some traders may want to trigger an entry right after the candle closes. Let us find out what happens next.

The price starts heading towards the North. The price hits the Stop Loss. It even breaches the highest high of the wave. This is a different ball game now. If it were a technically right entry, we would not have talked about it. The thing is this one was a wrong entry, as the signal candle forms at the wrong time.

The signal candle does not form within the next trading day. It takes nine H4 candles to make the breakout. If the signal came within the first six candles, it would have been a valid trade. Since it comes at the ninth candle, it means the support has become daily support. Thus, an H4 breakout is not enough to drive the price towards the South. It goes towards the upside instead. The lesson we have learned here is, “A breakout is not a breakout if it does not take place at the right time.”

Categories
Forex Basic Strategies

Even a Choppy Price Action Offers Entries

The market moves in three ways upward, downward, and sideways. In today’s lesson, we are going to demonstrate an example of a Rectangle breakout and an entry from a choppy

The market moves in three ways upward, downward, and sideways. In today’s lesson, we are going to demonstrate an example of a Rectangle breakout and an entry from a choppy

The market moves in three ways upward, downward, and sideways. In today’s lesson, we are going to demonstrate an example of a Rectangle breakout and an entry from a choppy price action. Let us have a look at the chart below.

The price action is choppy in this chart. Typically, traders avoid this kind of price movement. However, if we want to take trading as a full-time business, we are to widen our eyes. An entry can be found even in this market. Concentrate on the rectangle drawn here. After all these bounces, rejections the price finds its support and resistance within the rectangle.

The chart produces a bearish engulfing candle right at the resistance of the rectangle. This is a sign that something may happen. Let us assume a bearish move may occur. The first candle of the bearish trend looks good. A downside breakout with good momentum is the second thing that the sellers may wait to get.

The next candle comes out as a bearish candle followed by an Inside Bar. Things are getting better for the sellers. A bearish engulfing candle closing below the support would be the signal to go short for the sellers.

Here it is. The breakout candle is a bearish Marubozu candle. We may trigger a short entry right after the candle closes. Let us find out where we will set our Stop Loss.

Many traders may suggest setting the Stop Loss above the resistance of the rectangle and setting the Take Profit with the same distance. This is a good idea. However, we may set our stop-loss just above the resistance of the last consolidation. The reason is the price consolidates before making the breakout at the support. If the price made a breakout without the consolidation, we would have set our Stop Loss differently. By setting Stop Loss above the last consolidation’s resistance, we are to keep an eye with our Take Profit level.

We may set our Take Profit all the way down at the last swing low. The price may have kept going towards the major support. Look at the chart above. What do you think? The price is still very bearish but it produces a bullish reversal. That is too with a gap. The price action traders do not like price gaps. Considering the fact that we have set our Stop Loss as close as it can get, thus it may be the time to close our trade and come out with the profit.

The Bottom Line

Even a choppy market ends up producing an excellent trading signal. Our first choice shall be trending markets to look for entries. However, if we can spot out some entries from the choppy market, it would surely make us be more profitable.

Categories
Forex Basics Forex Daily Topic

Stop Loss: An Art to be Learned Well by Traders

Setting Take Profit and Stop loss in the right areas are essential factors in trading. A trader does not survive in the market by placing Stop Loss and Take Profit

Setting Take Profit and Stop loss in the right areas are essential factors in trading. A trader does not survive in the market by placing Stop Loss and Take Profit

Setting Take Profit and Stop loss in the right areas are essential factors in trading. A trader does not survive in the market by placing Stop Loss and Take Profit at the wrong places. In today’s lesson, we are going to demonstrate an example of an entry with the level of Stop Loss and Take Profit.

This is a daily chart. The price heads towards the North with good bullish momentum. The buyers are to look for long opportunities at the pullback. Let us wait for the price to make a pullback.

The price starts having a downside correction with an Inside Bar. It produces two more candles that are bearish. After that, it forms a Spinning Top right at a flipped support. This is a bullish reversal candle but not a strong one. A breakout at the top of the Spinning Top attracts the minor charts’ buyers to go long on the pair. However, major charts’ traders may want to wait for a stronger daily bullish reversal candle.

The next candle comes out as an Engulfing candle. This reversal candle attracts more traders to look for long opportunities here. Since it has not made an upside breakout, thus, to take an entry, traders shall flip over to the H4 chart.

This is the H4 chart. The price has a rejection at the red marked level on the daily chart. Thus, this is the level where the price may find its resistance on the H4 chart. This shall be the level to count in setting Take Profit. The H4 chart shows that the price starts having a pullback. Things are getting better for the buyers.

Let us draw the resistance. If the price consolidates and makes a breakout at the black marked level, a long entry may be triggered. However, the buyers must wait to get the level of support.

Here it comes. A bullish reversal candle forms at a flipped support followed by a breakout candle. A long entry shall be triggered right after the last candle closes. Stop Loss may be placed right below the support where the price forms the bullish reversal candle. Many traders set their stop loss right below the breakout candle. In my experience, this offers a better risk-reward, but it often brings more losing trades.

Have you noticed that the price came back and then headed towards the North? If we had set our Stop Loss right below the breakout candle, our Stop Loss would have been hit. Rather than making some profit, we would make a loss here.

The Bottom Line

Setting Take Profit is important, but setting Stop Loss is more important. In my opinion, it is an art. It needs a lot of practice to be well acquainted with the art of setting Stop Loss as immaculate as it can get.

Categories
Forex Price-Action Strategies

An Engulfing Candle at a Flipped Resistance

An Engulfing candle is a strong bearish reversal candlestick. This makes traders look for trading opportunities. In today’s lesson, we are going to demonstrate an example of how an Engulfing

An Engulfing candle is a strong bearish reversal candlestick. This makes traders look for trading opportunities. In today’s lesson, we are going to demonstrate an example of how an Engulfing

An Engulfing candle is a strong bearish reversal candlestick. This makes traders look for trading opportunities. In today’s lesson, we are going to demonstrate an example of how an Engulfing candle creates an entry. Let us proceed.

This is a daily chart. The price heads towards the downside with good bearish momentum. Traders shall wait for the price to have consolidation or an upside correction followed by a bearish reversal candle or pattern.

The price starts having the correction. It produces a bearish reversal candle after three consecutive bullish candles. The bearish reversal candle is an Inside Bar. This is not a strong bearish reversal candle. However, we still may flip over to the H4 chart (this is a daily chart) and wait for an entry.  The H4 chart does not produce any bearish momentum. Thus, the price goes towards the upside instead. Have a look at the chart below.

This is one strong bullish candle. However, the candle closed within the level, which the price breached earlier. Traders must be patient here to find out what the price does around this level. Does it make an upside breakout or produce a bearish reversal pattern?

It produces a Doji candle right at the flipped resistance followed by an Engulfing candle. This surely attracts traders to keep an eye on the pair to look for short opportunities. The question is, how do we find out entries? When the price is at correction, if we have such a bearish reversal candle at the valuable area, we shall flip over to a minor chart. This is a daily chart. Thus, we shall flip over to the H4 chart. Let us flip over to the H4 chart and find out how that looks.

The H4 chart looks bearish. We are to wait for consolidation and a downside breakout to take a short entry. This is what comes out after a while.

The price produces two bearish candles followed by a bullish one. Any bearish reversal candle breaches the support of the consolidation is the signal to go short here.

This is it. A bearish engulfing candle breaches the support of consolidation. A short entry may be triggered right after the candle closes. Let us find out how the trade looks like in a nutshell.

We may set our Stop Loss above the resistance of consolidation. The Entry-level is very explicit, as it has been explained a bit earlier. We may set our Take Profit at the last lowest low where the price started its correction on the daily chart. Alternatively, we may wait for the price to produce a bullish reversal candle. In this chart, we may come out with our profit right after the last candle (bullish) closes. The choice is yours regarding ‘Take Profit.’ Both have merits and demerits.

The Bottom Line

In the above examples, we have learned what to wait for when to flip over a chart, and on what entry shall be triggered. It does look and sound easy. Trust me. It’s never as easy as it looks when you are to deal with the live market. However, having a lot of practice, and with experience, it surely becomes easier.

Categories
Forex Price-Action Strategies

Trading is the Hardest Way to Make the Easiest Money

Financial traders need to be very alert and patient to deal with the market. These two components are vital for a trader to be successful in trading. In today’s lesson

Financial traders need to be very alert and patient to deal with the market. These two components are vital for a trader to be successful in trading. In today’s lesson

Financial traders need to be very alert and patient to deal with the market. These two components are vital for a trader to be successful in trading. In today’s lesson, we are going to demonstrate an example of alertness and patience. Let us get started.

The price heads towards the South. Ideally, a trader shall look for short opportunities in a chart like this. The last candle comes out as a bullish reversal candle. It is time for consolidation and waiting to get a downside breakout to take a short entry.

The price seems to go too far. It consolidates and produces a bearish engulfing candle. We may flip over to the H4 chart to find an entry since this is a daily chart. The support level looks strong since it created a long bullish move. The price may play around the level for a while.

As expected, the price stalls at the level of support. Things are different now. A downside breakout would make the pair bearish. A bullish reversal candle would make the traders look for long opportunities. This is where traders must be alert and never be rigid with their initial thought.

A bullish reversal candle forms right at the level of support. Traders may want to flip over to the H4 chart to look for long opportunities. We are not flipping over to the H4 chart this time since I know what happens afterward. Our trading lesson today is going to emphasizes something else.

The price heads towards the South instead. The H4 chart does not offer any entry after that daily bullish engulfing candle. Now, the price action is choppy. It seems that it is a chart to avoid for a while.

Not really, be alert. The price obeys a down-trending channel. Thus, any rejection at the upper band may create short opportunities. The price heads towards the resistance. Let us wait for a bearish reversal candle at the upper band (resistance of the channel).

The price makes a breakout at the upper band instead. It consolidates and produces a Spinning Top. Again, we are to change our trading direction. This time we are to go long.

The last candle breaches the horizontal resistance after consolidation. A long entry may be triggered right after the candle closes. Let us proceed to find out what happens next.

Two consecutive bullish candles form right after the breakout candle. Formation of a bearish reversal candle signals that it may be time to come out with a profit. At last, we make some green pips by going long.

The Bottom Line

This is an example of why we must not be rigid with our direction and how important it is to be alert with price patterns. Trading is never easy. As they say, “Trading is the hardest way to make the easiest money”. If we work hard in learning, only then we will be able to make money easily.

Categories
Forex Basic Strategies

A Twist in the Tale

The Forex market can be very unpredictable. It is a game of probability. With more experience and knowledge, a trader increases the chance to be right in making a trading

The Forex market can be very unpredictable. It is a game of probability. With more experience and knowledge, a trader increases the chance to be right in making a trading

The Forex market can be very unpredictable. It is a game of probability. With more experience and knowledge, a trader increases the chance to be right in making a trading decision. Having immaculate risk management is another aspect that keeps a trader safe with his investment. In today’s lesson, we are going to talk about the unpredictability of the market.

Let us start with a daily chart of a Forex pair.

The price makes a bullish move and finds its resistance. After four daily candles, the daily chart produces a bullish engulfing daily candle. This is a powerful bullish reversal candle, which forms right at a flipped support. Have a look at the chart below.

The chart above shows that the bullish engulfing candle forms at the flipped support. This means buyers on this chart are to go long on a chart pattern called ‘ABC’ or ‘123’. This is a lucrative and consistent chart pattern, which price action traders love to trade. Let us find out what happens next.

The price stalls and has a rejection at the same level. The buyers would love to get a breakout here to go long and grab some green pips. However, the chart produces a bearish engulfing candle instead. What do you think a trader should do here?

He shall start looking for short opportunities. This is the daily chart. Thus, he shall flip over to the H4 chart to find out a short opportunity.

This is how the H4 chart looks. A very strong bearish candle followed by a little Inside Bar. The trader (the seller) is to wait for consolidation and a bearish reversal candle to go short.

The price consolidates more. It produces a good-looking bullish candle. Let us find out how the next candle comes out. Do not forget that the sellers are waiting to get a bearish reversal candle breaching the lowest low.

This is it. A bearish engulfing candle closes below the level of support. The sellers have been waiting to get a signal candle like this. A short entry may be triggered right after the last candle closes. Let us find out what happens next.

As expected, the price heads towards the South with good bearish momentum. We see the first H4 bullish reversal candle forming at the daily support as well. This may be time to take out the profit.

The Bottom Line

Do you notice how things change within a candle? Before that bearish engulfing daily candle, the pair looks extremely good for the buyers. An upside breakout would make them go long on the pair and push the price towards the North. However, that does not happen, but the price comes down instead. This is what I call “Twist in the tale.” Forex traders often get these twists.

Categories
Forex Price-Action Strategies

A Breakout and the Confirmation

Support and Resistance, also known as Supply and Demand, have long been used in the financial markets. The most characteristic feature of support/resistance is a level of support becomes resistance

Support and Resistance, also known as Supply and Demand, have long been used in the financial markets. The most characteristic feature of support/resistance is a level of support becomes resistance

Support and Resistance, also known as Supply and Demand, have long been used in the financial markets. The most characteristic feature of support/resistance is a level of support becomes resistance, and a level of resistance becomes support. The price after making a breakout comes back to the level and makes a move towards the established trend. The price does not always confirm all the breakout levels, though. Traders do not know which broken level is going to produce a trading signal. In reality, they do not even have to know or guess. They have to make decisions according to the price movement or Price Action. Let us have a demonstration of this.

The price is up trending. Traders shall look for long opportunities. To be honest, the last candle on the chart is a buy signal. It was a week ending candle, which must have held the buyers back. Let us wait for a while to get more clues.

The last candle came out as a bearish engulfing candle. Such price action usually makes a pair choppy. The buyers may want to wait for an upside breakout to go long. However, a bearish engulfing candle may not let that happen.

A strong bullish candle closes within the resistance. It seems that the chart may produce a Double Top. Thus, the bear may come and dominate. Let us draw the Neck Line and resistance of the Double Top.

The equation is very simple here. A breakout at the neckline attracts the sellers, which is more likely. On the other hand, an upside breakout attracts buyers. Let us find out which way the price heads to.

The price makes a breakout at the Neckline. However, it does not consolidate around the Neckline after the breakout. Unfortunately, the sellers do not get an opportunity to go short here. It often happens with the traders. Traders’ life is never easy!

Here is a question. Do you see anything interesting? Has the price made another breakout?

It has made a breakout at the red-marked level. It goes back to the level to confirm the breakout, as well. Moreover, it has produced a bearish engulfing candle with a long upper shadow. Things look good for the sellers. A breakout at the lowest low would be the signal to go short.

Here comes the breakout. A bearish Marubozu candle breached the lowest low. The sellers may want to trigger a short entry right after the last candle closes. Let us find out how far down it goes before producing any bullish reversal candle.

Here comes the breakout. A bearish Marubozu candle breached the lowest low. The sellers may want to trigger a short entry right after the last candle closes. Let us find out how far down it goes before producing any bullish reversal candle.

The price heads toward the downside with good bearish momentum. It produces a Doji Candle. It may be time to come out with a profit.

The Bottom Line

The price does not confirm all the breakouts. That does not mean we should start pulling our hair. Concentrate hard and calculate well. The next opportunity is just around the corner.

Categories
Forex Basics

Do not be Biased with Your Anticipation

Financial markets keep going up and down. Traders make money out of those moves. To take an entry, a trader is to do a lot of calculations, such as detecting

Financial markets keep going up and down. Traders make money out of those moves. To take an entry, a trader is to do a lot of calculations, such as detecting

Financial markets keep going up and down. Traders make money out of those moves. To take an entry, a trader is to do a lot of calculations, such as detecting a trend, waiting for the price to go to the right zone, market psychology, and signal candle, etc.

In trading, we often find ourselves in a situation in which we were waiting for a long entry from a support zone, all of a sudden the price makes a breakout at the support and heads towards the South instead. We feel deprived. However, this should not be like this. In trading, we are to get ready to sell and to buy since the market can go anywhere. We are to stick with the rules to take an entry.

Let us demonstrate an example.

The price heads towards the North with good buying pressure. It seems that the price finds its resistance as well. The buyers are to wait for a bullish reversal candle and a breakout at the resistance to go long again on the pair.

The price keeps being bearish. It seems that the price is going to have a long correction instead of consolidation. The price is at a flipped support. This is where a battle is going to take place between the bull and the bear. Traders are to wait for a downside breakout to sell the pair. On the other hand, a bullish reversal candle is going to attract them to keep an eye for an upside breakout and buy the pair.

The bull wins here. An engulfing bullish candle right at the flipped support means traders shall wait for an upside breakout to buy the pair. The momentum looks good. If the breakout takes place within the next candle, it will be an excellent buy signal. If it takes two candles to make the breakout, that will be a good buy signal as well. Let us proceed to find out what happens next.

The bull has lost the momentum. Traders are to wait for an upside breakout to go long. A good-looking bullish engulfing candle at the support area shall attract the buyers on the minor time frames to push the price towards the upside. That would eventually help the price make an upside breakout on this chart. Let us wait and find what happens next.

What do you see here? A bearish engulfing candle is right at the resistance level. This is a Double Top resistance level as well. If you have been waiting to go long, please change your mind. Get ready to look for short opportunities. This is how the market changes its complexion. You know what you have to do to deal with it. Yes, you must not be biased with your anticipation/calculation — Trade what you see, not what you think.

 

Categories
Forex Chart Basics

Why Mark Support/Resistance Zone Along with Line?

Most traders use a horizontal line on their trading chart to mark support/resistance levels. Support and Resistance lines are the most basic trading tools, which traders use to make a

Most traders use a horizontal line on their trading chart to mark support/resistance levels. Support and Resistance lines are the most basic trading tools, which traders use to make a

Most traders use a horizontal line on their trading chart to mark support/resistance levels. Support and Resistance lines are the most basic trading tools, which traders use to make a trading decision. However, traders often find that the price does not react right at the drawn level.  It is because of candles’ wicks and candles’ bodies. We may see that sometimes the price reacts at the level where the candles’ bodies are, and sometimes the price reacts where the wicks are. Thus, it is a good practice that we mark the support/resistance zone instead of marking the level only.

Let us demonstrate an example of that.

The price is being bullish after producing a Pin Bar. We know that a bullish Pin Bar has a long lower shadow. This means it reacts from a zone not only from a particular horizontal line.

The price is on the correction. Look at those Spinning Tops with long upper and lower wicks. Do you notice that one of the flipped support holds the bodies of the candles? However, those shadows often play an essential role, especially when the price is to confirm a breakout. We will reveal that soon.

The flipped support does not hold the price at last. The price comes towards the South further to find its support. The last bullish candle suggests it finds one strong support for sure. Do you notice that this is where the price has bounced earlier and produced spikes?

This time we have marked out the resistance zone. A bullish candle breaches the zone. The buyers need to wait for consolidation. The question is which level to hold the price as the level of support. Is it the level where the wicks are or where the bodies close or both?

Both levels hold the price as support. On this chart, the level, which is drawn on the wicks, holds the price as the support. On its smaller time frames, the level that is drawn on candles’ bodies holds the price as support. If we draw just one level here, we may get confused. Thus, we must mark out the support/resistance zone. Since the buyers are waiting for a bullish reversal candle to go long, it may be produced where the price is now. The price may as well come down at the lower level of the support zone and create a buy signal. Both are valid signals. Let us find out where the signal is produced.

The buyers may want to trigger a long entry right after the last candle closes. Assume only the red line was drawn here. Some buyers would have been confused that the signal did not come from the right level. Thus, drawing the support/resistance zone comes out handy for the traders. Support/Resistance zone helps traders take a better trading decision.

Categories
Forex Price-Action Strategies

Using Multiple Time Frames to Get Multiple Entries

We know using multiple time frames is an essential aspect of trading. Traders use the bigger time frame to find out the trend, breakout, vital support/resistance levels, and relatively smaller

We know using multiple time frames is an essential aspect of trading. Traders use the bigger time frame to find out the trend, breakout, vital support/resistance levels, and relatively smaller

We know using multiple time frames is an essential aspect of trading. Traders use the bigger time frame to find out the trend, breakout, vital support/resistance levels, and relatively smaller time frames to trigger an entry. In this lesson, we are going to learn how the trigger chart can be used as the analyzing chart to find out more entries.

This is a Daily chart, which is being used as the trigger chart. The weekly chart is used as the analyzing chart. It is a combination of Weekly-Daily. The price heads towards the North. Traders are to wait for the price to produce a bullish reversal candle.

A Spinning Top daily candle at a flipped support, the buyers have a lot to be optimistic here. One of the daily candles is to breach the daily resistance to go long on the pair. Let us draw the support and resistance on the chart to get a clearer picture.

This is how the chart looks like with support and resistance levels. If one of the daily candles breaches the resistance with good buying momentum, the daily traders are to trigger a long entry.

The next daily candle breaches the resistance. The buyer may take a long entry right after the breakout candle closes. An entry on the daily chart means that the trader shall leave the trade/chart for three to four trading days by setting Stop Loss and Take Profit.

However, if a trader uses the same daily chart as the trend-detecting chart and flips over to the H4 chart to find another entry, it surely would be more rewarding.

Let us flip over to the H4 chart.

Previously, the daily chart shows an upside breakout. Thus, the trend is bullish. The H4 chart shows that the price starts having consolidation. If the breakout level holds the H4 candles and makes an upside breakout, the H4 buyers are going to go long on the pair as well.

This is the H4 chart with the support and resistance of consolidation. The buyers must wait for an upside H4 breakout to go long on the pair. Let us proceed to the next chart.

Here it comes. An H4 bullish engulfing candle breaches the resistance. The H4 traders may want to trigger a long entry right after the candle closes.

The H4 chart shows the price may have consolidation again. The H4 buyers may want to cash in their profit. However, the entry, which is taken on the daily chart, traders are still to hold their positions until they get a bearish daily reversal candle.

At the end of the day, price action trading works very similarly on the Weekly, Daily, H4, and H1 chart. Today’s examples show that a Weekly-Daily combination offers an entry. After the daily breakout, the Daily-H4 combination offers an entry, as well. With a lot of practice, dedication, and hard work, a trader can trade both of them. This will surely beget more profit.

Categories
Forex Basics

What leads a Breakout to be Nullified?

Price action traders consider the breakout as one of the most important factors. It is, once it is confirmed. However, momentum, overall psychology are essential aspects of breakout that less

Price action traders consider the breakout as one of the most important factors. It is, once it is confirmed. However, momentum, overall psychology are essential aspects of breakout that less

Price action traders consider the breakout as one of the most important factors. It is, once it is confirmed. However, momentum, overall psychology are essential aspects of breakout that less experienced traders often misapprehend. In this lesson, we are going to demonstrate an example of a breakout with less momentum. Let us get started.

The chart shows that the price is up trending with good buying pressure. The price makes a breakout at the last swing. This is an ideal chart for the buyers to look for buying opportunities. They are to buy the pair on the pullback. Let us proceed to the next scene.

The price starts having a correction and comes back up to the breakout level (the last swing high). It produces an engulfing candle, which is a strong sign that it may keep going towards the upside, makes a breakout, and offers a long entry.

The price does not find a strong buying momentum. It goes towards the upside and comes back again to the support. It seems the buyers may have to wait longer than they thought.

Things look a bit different now. Rather than making an upside breakout, it has a strong rejection at the resistance. The support is being tested again.

No downside breakout, but the support holds the price. The price gets caught within two horizontal levels. To be precise, the price gets caught within a rectangle. Ideally, both the sellers and the buyers love to keep this chart in their watch list; get a breakout at either side to take an entry.

Two consecutive bullish candles right at the support suggest that the buyers have the upper hand. The buying momentum looks good here. If it continues going towards the upside and makes a breakout, the buyers may dominate here. Let us see what happens next.

Oh no, the price heads towards the North with less buying pressure. The bullish move has much less speed than the last bearish move. This sort of price action usually makes the price have another bearish move and head towards the support. Let us find out what happens next.

An upside breakout this is! After the breakout, if the price consolidates and makes another bullish move from the breakout level, it would be a buying market again. However, the question is whether it makes the buyers interested in buying or not.

  1. The last bullish wave does not have the drive.
  2. The resistance level is strong

Let us find out what happens next.

It does not produce a bullish reversal after the breakout. Instead, it comes back in. The breakout is not valid anymore. What may have been a strong buying market has become a choppy market again.

The Bottom Line

The breakout may have offered us entry if it produces a bullish reversal candle at the breakout level. That does not happen. We cannot precisely tell why that happens here. However, the less momentum to begin the potential trend is one of the reasons among many. It represents that psychologically, the buyers are not confident about the breakout and continuation, which makes that a nullified breakout in the end.

Categories
Forex Price-Action Strategies

Using Multiple Time Frames in Trading

Price action traders combine multiple time frames to trade. In most cases, they use a time frame to determine the trend and use the next one to trigger an entry.

Price action traders combine multiple time frames to trade. In most cases, they use a time frame to determine the trend and use the next one to trigger an entry.

Price action traders combine multiple time frames to trade. In most cases, they use a time frame to determine the trend and use the next one to trigger an entry. The most important factor in using multiple time frames is the combination. Usually, the combinations are Daily Chart with H4 Chart, H4 Chart with H1 Chart, H1 Chart with 15M Chart, and 15M Chart with 5M Chart. In today’s lesson, we are going to demonstrate an example of the combination of Daily and H4 Chart produces an entry.

This is a daily chart. In an uptrend, the price had a pullback. It produces a Doji candle followed by an engulfing candle (arrowed). The buyers may want to draw a support level here. Please note, it is not a Morning Star.

It is neither a Moring Star nor a Double Bottom. The price heads towards the North with good buying momentum. Many of us may think we miss an opportunity. The pair may have offered entries on minor time frames, but the daily chart does not provide anything yet.

Here we are. The price heads towards the support again. As far as the Daily chart is concerned, the price had a bounce at the level earlier. Thus, if the level produces a daily bullish reversal candle, the buyers are going to get themselves busy to look for long opportunities. Let us proceed to find out what happens next.

The last bearish candle closes within the marked level. This is a sign that the price may obey the support. However, we never know unless it produces a bullish daily reversal candle.

Here we are. The level produces an Inside Bar. It is not a robust bullish reversal candle. Nevertheless, it is a reversal candle. Do you know what the price action traders do next? They flip over to the H4 chart. Have a look at the H4 chart.

Since we are analyzing the daily chart, the trigger chart shall be the H4 chart. The H4 chart shows that the price is on consolidation. The buyers need to wait for bullish momentum.

The chart produces an H4 bullish reversal candle, although the resistance is still intact. Thus, the buyers need a breakout at that level. They must wait for it.

Here it comes. A Marubozu bullish candle breaches the resistance. The buyers may trigger a long entry right after the candle closes. Let us proceed to find out what the price does next.

As expected, the price heads toward the North with good buying momentum. There is enough space for the price to travel. It may go further North as well. Anyway, let us concentrate on what we have learned from these examples.

  1. Using multiple time frames is one of the key components of price action trading.
  2. The right combination of multiple time frames is essential.

We are going to learn more about using multiple time frames in our forthcoming lessons. Stay tuned.

 

Categories
Forex Price-Action Strategies

What Is Rectangle and How to Trade on It

The price after making a strong bullish or bearish move, it makes correction/ consolidation. The price consolidates within two horizontal lines. In the financial market, this is called Rectangle. In

The price after making a strong bullish or bearish move, it makes correction/ consolidation. The price consolidates within two horizontal lines. In the financial market, this is called Rectangle. In

The price after making a strong bullish or bearish move, it makes correction/ consolidation. The price consolidates within two horizontal lines. In the financial market, this is called Rectangle. In today’s lesson, we are going to demonstrate some examples of the bullish and bearish rectangle.

Let us start with a bullish rectangle.

The price heads towards the upside with good bullish momentum. At the top, the price seems to start having consolidation. A buyer may want to keep an eye for an upside breakout to go long from here. However, the price continues to consolidate.

The price consolidates within two horizontal lines. We can draw a rectangle here since the price produces the rectangle after a bullish move, so it is called ‘Bullish Rectangle.’ Traders are to wait for a breakout to take an entry. A downside breakout offers a short entry, and an upside breakout offers a long entry. Let us find out which way the next breakout takes place and the price heads to.

The price makes a downside breakout and heads towards the South. At rectangle breakout, the price usually travels at least the same distance of the consolidation length. It seems the price travels 1.5X distance of the consolidation length here. Let us concentrate on the next chart below.

The price consolidates getting trapped within horizontal support and resistance. Do you find anything interesting here? Yes, we find another rectangle. This time it is a bearish rectangle. Let us draw those two lines here.

Again, traders must wait for a breakout to find out its next direction. The price has several bounces and rejections within those two horizontal lines. It is a bearish rectangle, but we know a breakout can take place either way. There is no point in guessing. Let us wait and find out.

The price makes a downside breakout and heads toward the South with good enough selling momentum.

We have demonstrated two examples here. The first one is a bullish rectangle where the price makes a downside breakout. The second one is a bearish rectangle, on which the price makes a downside breakout as well. Breakout direction does not depend on the bullish or bearish rectangle. Trader’s job is to wait for the breakout and breakout confirmation. Entry is to be taken only when the breakout is confirmed. We can spot rectangles almost in all the time frames. However, it is often seen on the H1, H4, and Daily charts. Have some practice on the demo account or do some backtesting to get well acquainted with the pattern to make green pips.

Categories
Forex Basics

Even a Combination of Double Top and Engulfing Fails

Double Top/Double Bottom is one of the most robust patterns that price action traders wait to take entries. When the price is rejected twice at a resistance level, it forms

Double Top/Double Bottom is one of the most robust patterns that price action traders wait to take entries. When the price is rejected twice at a resistance level, it forms

Double Top/Double Bottom is one of the most robust patterns that price action traders wait to take entries. When the price is rejected twice at a resistance level, it forms a Double Top. As far as the candlestick pattern is concerned, an engulfing candle is the most reliable reversal candle that traders usually love to take an entry from a value area.

A combination of Double Top and a bearish engulfing candle attracts sellers to go short. Since it is an outstanding price action combination, it does not usually go wrong. However, in today’s lesson, we are going to demonstrate that even a great flourishing price action combination can go wrong, as well.

The price consolidates at the marked resistance and heads towards the downside. It then goes back towards the resistance. The sellers are to get ready to get a bearish reversal candle. The red-marked level is the resistance level, where we don’t consider the upper shadows. Since the price has several rejections at the marked level, and it is a valuable area for the sellers, the price most probably may respect the area and produce the bearish reversal candle.

The price does not respect the red-marked level, but it does not make an upside breakout either. Instead, it closes within the upper shadows. Traders are to adjust here. Let us see how it looks now.

The level where the last candle closes has some significance. One of the bullish candles closes within the marked level. This level may work as a resistance level and ends up producing a bearish reversal candle.

Here it comes. The Double Top’s resistance level produces a bearish engulfing candle. We have found the resistance level at last. So all the equations to go short from here seem to match as far as price action trading is concerned.

  1. The price produces a Double Top.
  2. The price produces a bearish engulfing candle right at the resistance of the Double Top.

The swing low is far enough, which offers good Risk-Reward as well. All seems to be okay to trigger a short entry.

After triggering the entry, the next candle comes out as a bearish Doji candle. Things still look good. The sellers are going to grab some green pips!

No! The next candle comes out as a bullish Marubozu candle, which breaches the resistance of the Double Top. It wipes off the Sellers Stop Loss. The buyers may take control once the breakout is confirmed.

The Lesson

It does not matter how good a trade setup looks: it may fail. Thus, there is no reason to be too optimistic about any entry. We must calculate our Risk-Reward and have immaculate risk management with every single entry that we take in the market.

Categories
Forex Price Action

Price Action, Market Psychology, and Adjustment

Price action traders are to get clues from what the price has been doing. Horizontal Support/ Resistance, Trend Line Support/Resistance, Fibonacci Levels, Equidistant Channel along with Candlestick Pattern are price

Price action traders are to get clues from what the price has been doing. Horizontal Support/ Resistance, Trend Line Support/Resistance, Fibonacci Levels, Equidistant Channel along with Candlestick Pattern are price

Price action traders are to get clues from what the price has been doing. Horizontal Support/ Resistance, Trend Line Support/Resistance, Fibonacci Levels, Equidistant Channel along with Candlestick Pattern are price action trader’s main weapons. A trader must know how to use these tools as far as price action trading is concerned. Moreover, traders often need to adjust to marking levels, which are to be integrated with price action and market psychology. In today’s lesson, we are going to show an example of that.

The price has been heading towards the downside with strong bearish momentum. Ideally, traders are to look for short opportunities at upside pullback. See the first reversal candle. The candle closes within the support of the last bearish candle. Thus, the traders must wait to go short since the support holds the price. Let us see what happens next.

At the last candle, the price goes towards the downside but comes back within the support again. Equations are different now. Long lower shadow and proven support suggest that the traders may have to wait longer than they thought.

As expected, the price consolidates on choppy price action, which makes traders wait. Traders find horizontal support. Let us draw it.

The price obeys the support level several times. However, do not forget that the price had a strong rejection. This is where traders may need to make an adjustment.

 

The price has been heading towards the adjusted support. Risk-Reward does not look right here. It is better to wait for either a downside breakout or a bullish reversal to go long. Let us see what happens next.

 

We have a bullish reversal here. A bullish engulfing candle right at the support level suggests that the traders may have to look for long opportunities here. The question is, shall we take an entry right after the last candle closes or not. The answer is ‘No”. We have to wait for an upside breakout. Can you guess where the breakout level is? Think for a minute, and then proceed to the chart below.

The price has been obeying a down-trending Trend line producing a Descending Triangle. Thus, the breakout at the Trend line resistance is a signal to go long here. All the buyers need here a breakout by a bullish Marubozu candle.

Here comes the breakout that the price action traders shall wait for. The buyers may trigger a long entry right after the breakout candle closes. Stop Loss is to be set below the horizontal support. Let us find out how it proceeds.

The price heads towards the North and provides 1:1 Risk-Reward. So far here, it seems that it is having consolidation. Some traders may want to come out with their profit. Some may shift their Stop Loss at the breakeven and take some profit out targeting to go all the way towards the swing high. This depends on how a trader wants to manage his trade. With these above charts and examples, we have realized the importance of adjustment in marking support/resistance.

 

Categories
Forex Daily Topic Forex Psychology

Taking Forex Trading as a Business

Forex trading is a hard business. A trader has to work hard to learn the algorithm of it as well as psychologically strong enough to apply them when it comes

Forex trading is a hard business. A trader has to work hard to learn the algorithm of it as well as psychologically strong enough to apply them when it comes

Forex trading is a hard business. A trader has to work hard to learn the algorithm of it as well as psychologically strong enough to apply them when it comes to making money out of it. Some individuals may have enormous knowledge as far as trading is concerned, but they do not do well in trading. It is because they are not capable of dealing with the real heat.

Having losses is another inevitable issue with trading, which every trader is to encounter. It does not matter how good a trader is; he or she must face losses. In trading when a trader loses a trade, he loses in two ways

  1. He loses his money
  2. He loses faith in his calculation or belief

Losing the Money

When a trader loses money in trading, I do not think it needs an explanation of how bad it feels. Losing money on any occasion hurts. Traders are bound to err because this is a game of chances, so they sometimes lose money. In the Forex markets, a trader can lose an unlimited amount of money. He can lose an amount of money he even cannot think of. Experienced traders do err as well.

In most cases, it is not about making mistakes. The market can be unpredictable from time to time. Even excellent trade setups don’t always work. This fact may make a trader believe something wrong with the strategy. He starts adding/changing more things with the strategy; runs after Holy Grail. We know what the last consequence is. He quits after losing valuable time and invested money. Statistics show that only around 5% of investors are successful in the Forex market.

How to Overcome It?

A trader must be ready to take losses. He should look at trading as a business, and count his losses as business expenditure. Let us consider. If we run a business, we have to pay utility, rent, wage, miscellaneous spending. A trader may count his losses as an expenditure of his trading business.

Losing on Own Belief

We often ignore this issue at the time of analyzing traders’ psychology. I find this to be a severe issue. When a trader takes an entry, he throws his skill, experience, belief in it. If it goes wrong, he loses a trade on his calculation. Psychologically, it hurts a lot. We can compare the feeling when our favorite team loses a match against an archrival. Losing on own belief is often more painful than losing the money only.

How to Overcome It?

It is a severe psychological trading issue. To overcome this issue, a trader must remember that there is no such strategy in the Forex market, which is 100% successful. Even the best of the best strategy is bound to encounter losses. Typically, if a strategy is successful even in 60% cases, the market analysts consider it as a good strategy.

The Bottom Line

A trader is to take trading as a business. The market is not an ATM. Making money consistently does not mean a trader makes money on every single trading day. A trader is to have some good days and some bad days. There is no point in jumping with joy on good days or being grumpy on bad days. Just take them professionally.

Categories
Forex Price-Action Strategies

When A Breakout Occurs by More than One Candle

Price action traders’ main job is to watch the price action and find out the message out of it. The message comes from candles, various charts, momentum, as well as

Price action traders’ main job is to watch the price action and find out the message out of it. The message comes from candles, various charts, momentum, as well as

Price action traders’ main job is to watch the price action and find out the message out of it. The message comes from candles, various charts, momentum, as well as the attributes of breakouts. In this lesson, we are going to demonstrate an example of a breakout, which occurs with more than one candle. Let us find out whether a breakout with multiple candles gives us any message or not.

The price finds its support at the marked level and heads towards the North with good buying pressure. Price action traders start eyeing on the pair to go long on the pair. The first thing they would want is consolidation. Let us proceed to the next chart.

It seems that the price may have started having a pullback. The price is to come about 38% of the trend’s length to attract the buyers to watch for an upside breakout. Let us see what happens next.

The last candle seems to have covered a good distance. The buyers are going to be keen to get a bullish reversal candle on the chart now. If a reversal candle makes a breakout itself, it attracts traders more. Eventually, it pushes the price towards the trend’s direction at a good pace. Let us find out what happens here.

Here it comes. The bullish reversal candle is here. It is a ‘Track Rail,’ which is the second strongest reversal candle after the Engulfing candle. Traders are to wait for an important event. You know what that is, right?

‘The Breakout’!

The breakout occurs here by a Marubozu candle. Price action trader shall trigger a long entry right after the candle closes. Before triggering the entry, a trader must know where to set his Stop Loss and Take Profit. Stop Loss level is obvious here, which is below the support of the consolidation zone. Where the Take Profit level is to be set? Ideally, a 1:1 risk-reward ratio is the first target in any entry. However, there seems to be enough space for the price to travel. We may go for 1:2 risk-reward here. Does a trader go for a 1:3 risk-reward ratio or even more here? We get the answer later. Meanwhile, let us continue watching the drama.

The plan seems to be working amazingly well. The price heads towards the North with good buying momentum. 1:1 risk and reward ratio is easily achieved within the next candle. 1:2 risk-reward is achieved as well. Some may start splitting the hair for not setting the target with a 1:3 risk-reward ratio. Let us proceed.

The price has produced an Evening Star. This surely is not a good sign for the buyers. Those who set their Take Profit with a 1:3 risk-reward ratio must be in a pensive mood.

The price does not hit the Stop Loss, but there is no profit left for the buyers that are holding the positions. Targeting a 1:3 risk-reward ratio does not bring more pips. It rather makes them lose some pips that they could have earned.

Price Action breakout attributes suggest that if a breakout occurs with multiple candles, the trend often loses its impetus early. Thus, it is best to target 1:1 (in most cases), 1:2 (if there is enough space) risk-reward ratio when a breakout occurs by more than one candle.

Categories
Forex Price-Action Strategies

Breakout by a Single Candle Generate More Impetus

Breakout is one of the most important factors in trading. Attributes of a breakout give clues with what traders can manage their opened position to make more profit. Price action

Breakout is one of the most important factors in trading. Attributes of a breakout give clues with what traders can manage their opened position to make more profit. Price action

Breakout is one of the most important factors in trading. Attributes of a breakout give clues with what traders can manage their opened position to make more profit. Price action traders, in particular, love to compute the attributes of a breakout to determine their take profit level.

In this section, we are going to demonstrate an example of a single candle breakout and its impact afterwards. Have a look at the chart below.

The price finds support at the red market level and heads towards the North. The price action suggests that the buyers are going to control the pair. A downward correction/consolidation followed by a bullish reversal candle at a value zone is what they need to wait for. Let us find out what happens next.

The price seems to have started having a pullback. The first corrective candle comes out as an Inside Bar, which is a good sign for the buyers. The buyers wait for the price to come back at a level of support with a reasonable distance from the resistance. Let us see how far it comes up to.

The price has crossed a good distance from resistance. The buyers are to wait for a bullish reversal candle. Ideally, a bullish engulfing candle is the first choice for the buyers. Other candles such as Inside bar, Spinning Top do the job as well, but an engulfing candle’s signal attracts more traders, and it brings more liquidity. Let us see what happens next.

Price action traders dream of such a reversal candle. This is not only a bullish engulfing candle but also an engulfing candle, which breaches the highest high of the last wave. Let us draw the consolidation zone on the chart.

The reversal candle makes the breakout with good momentum. A trader shall trigger a buy entry shall right after the candle closes. When a reversal candle itself makes a breakout, it makes the fore coming move go towards the trend’s direction with good momentum. Look at the chart below.

Look at the pace of the bullish move after the breakout. Here is another very important factor that traders must remember. A single candle breakout usually offers a 1:2 risk-reward ratio. This means traders shall add some extra pips with their profit target when they get such price action. The drama remains. Have a look at the chart below.

The price makes a correction and seems to have found support again. It suggests that the buyers are still in control. Smart buyers take their Partial profit and let the rest of the trade run to earn more pips.

As mentioned, breakout attributes give clues about the trend’s strength. Eventually, this helps traders manage their trade nicely and make more money out of trading.

Categories
Forex Basics

Let Profit Trade Run

There is a saying in the financial market, “Cut your losses short and let your profit run.” Letting the profit trade run is not as easy as it sounds. Traders

There is a saying in the financial market, “Cut your losses short and let your profit run.” Letting the profit trade run is not as easy as it sounds. Traders

There is a saying in the financial market, “Cut your losses short and let your profit run.” Letting the profit trade run is not as easy as it sounds. Traders try to do it in many different ways, such as taking partial profit, using a trailing stop, etc. Both are very handy, but traders are to use them sensibly.

At the time of entering a trade, a trader has to determine the next level of support/resistance (take profit) at where the price may lose its momentum. If the price hits the level, he gets the reward. The length difference between the entry point and the support/resistance (stop loss) is the risk. The risk and reward ratio shall be at least 1:1. The more, the better it is.

Let us think of an example. A trader is about to take a long entry. He measures the next level of resistance offers enough space for the price to travel towards the upside. The price reacts at a level of support and is about to produce a bullish reversal candle. Let us assume the Risk-Reward ratio is 1:1, which he is happy with. He takes the entry, and the price heads towards the direction according to his anticipation. The trend looks strong, and he decides that he would let the trade run.

Traders can do it in many ways. Let us get acquainted with two popular ways to do it.

Trailing Stop Loss: Though his initial calculation offers him a 1:1 risk and reward ratio, he sets Take Profit far away. He makes sure that he sets Stop loss where he planned before initiating the trade. Once the price has gained some profit, he shifts the Stop Loss along with the price by having enough gap. This is how he gives himself a chance to grab some extra pips.

To do that accordingly, minor time frames may be used to spot out support level. Using trailing Stop Loss is not always that rewarding. However, if it works well, it may give you a huge return.

Taking partial profit: Taking partial profit is another way that he can let his profit run. Once the price is at the first resistance, he shall take half of the profit; let the rest of it run and shifts the Stop Loss at the breakeven point. This means he has free trade, which does not have anything to lose. He has already taken some profit (50%) out. Let us assume that the first resistance level gets broken and the price heads towards the second resistance level. What does he do?

Think for twenty seconds, what would you do?

He takes some part of the profit again, shifts his Stop Loss up, and lets the rest of it run. This is what he keeps doing with at least 10% of his original trade until the Stop Loss gets hits by the price.

If a trader can do it accordingly, he maximizes his chances to grab some extra pips. Both of them need a lot of practice. Backtesting, demo trading, or letting a very tiny part of the profit, such as a 5% run, can help us learn the art of taking partial profit.

 

Categories
Forex Price-Action Strategies

Trade What You See on the Chart

Price Action traders are to look at a chart and make a trading decision according to that. They have to understand the language of it, which reflects the psychology of

Price Action traders are to look at a chart and make a trading decision according to that. They have to understand the language of it, which reflects the psychology of

Price Action traders are to look at a chart and make a trading decision according to that. They have to understand the language of it, which reflects the psychology of the market. In today’s lesson, we are going to demonstrate the importance of trading according to the chart’s price movement.

On 17.10.2019, the AUD did well against its counterparts in almost all the pairs. However, in AUDNZD, the AUD did not do well. It rather had a bad day against the NZD. On the day, the AUD was strong against other currencies, but why did it underperform against the NZD?

To start with, let us have a look at the H1-AUDUSD chart.

After finding the support at the red-marked line, the price heads towards the upside. It consolidates and continues the move towards the trend. The daily candle closes with a strong bullish tone, barely having an upper shadow. Let us have a closer look at the consolidation.

The first reversal candle is bearish. However, it closes within the wick of the last candle, which is a Spinning Top. The price finds support, and after producing an engulfing bullish candle breaching the resistance, it continues its bullish journey.

As mentioned earlier, the AUD was weak against the NZD. Let us now have a look at the H1-AUDNZD chart.

Look at the chart, the price heads towards the North (up arrowed) and comes down. You can assume how the daily candle would look like for that day. In the end, it makes a breakout at the support level and makes a new lower low. Things are completely different here with the AUD. Do you spot out the difference? Let us investigate on the chart.

The price heads towards the North as it does in other pairs. However, look at the first reversal candle (arrowed). This is a bearish engulfing candle. When the consolidation starts with such a candle, the minor time frames’ sellers shall keep their eyes to go short. This often makes a chart look choppy. Even after producing a good bullish reversal candle, the price does not make a breakout at the resistance. It rather comes down and gets choppy. After some hours, this is what happens.

A Double Top and breakout at the neckline drive the price towards the South. The consolidation followed by the breakout at the support makes the price bearish on the following day. We now understand the reason, despite having a good day, the AUD did not do well against the NZD.

To sum up, traders must understand the chart, price action, candlestick formation, and trade according to those to be consistent in making a profit.

Categories
Forex Price Action

Equidistant Channel Trading: What Else to Consider?

Equidistant Channel is a very reliable trading tool for the price action traders. In an ascending Equidistant Channel, the buyers wait for the price to come at the support level

Equidistant Channel is a very reliable trading tool for the price action traders. In an ascending Equidistant Channel, the buyers wait for the price to come at the support level

Equidistant Channel is a very reliable trading tool for the price action traders. In an ascending Equidistant Channel, the buyers wait for the price to come at the support level and to get a bullish reversal candle to go long. It is vice versa, in the case of a descending channel. However, some other equations are to be taken care of by the traders when trading with an Equidistant Channel. In today’s lesson, this is what we are going to demonstrate. Let us get started.

The chart above shows that the price is caught within an ascending Equidistant Channel. Look at the last bearish wave. After a rejection, the price heads towards the support. As a trader, we shall wait for a bullish reversal candle to go long here. Let us proceed to find out what happens next.

Wow! The price action traders always dream of this. This is one good bullish reversal candle. A bullish engulfing candle right at the channel’s support, the buyers, shall jump into the pair to start buying. However, we must set stop loss, take profit. Stop Loss level looks very evident here, which will be below the signal candle (Bullish Engulfing Candle here). What is about the Take Profit level? Where shall we set it? Typically, we set it at the upper band of the channel since the price usually goes towards the resistance of the channel after having a bounce at the support level.

Look at the chart. At the last wave, the price produced a bearish engulfing candle right at a strong horizontal resistance (arrowed). It had a rejection at this level earlier, as well. Thus, this is a level, which must be counted at the time of setting Take Profit level.

Despite having an engulfing daily candle, the price does not head towards the North with a good buying pressure. Anyway, it heads towards the upside. Look at the rejection. This means setting our take profit at the horizontal resistance would give us 1:1 risk and reward ratio here. This is not bad. However, if we make a target to go all the way towards the upper band, it may get us a loss instead.

Let us see how the price action acts afterward.

We would not make a loss here, but see how the price action has been. It gets choppy. It may still offer more long entries since the support is held by the price. However, we know what else is to look for, a breakout at a significant level of horizontal resistance.

Key Points to Remember in Equidistant Channel trading:

  1. A significant level of horizontal support/resistance is to be broken.
  2. If there is no horizontal support/resistance, an anti-trend line is to be broken.
  3. The signal candle is to be a strong trend reversal candle.
  4. In the case of having horizontal support/resistance in the middle of a channel, at least the Risk-Reward ratio is to be 1:1.
Categories
Forex Price Action

Retracement, Consolidation, Breakout, and Price-Action Trading

In the financial market, there is a saying, “Trend is your friend.” When the price makes a strong move towards a direction breaching a significant level of support/resistance, traders start

In the financial market, there is a saying, “Trend is your friend.” When the price makes a strong move towards a direction breaching a significant level of support/resistance, traders start

In the financial market, there is a saying, “Trend is your friend.” When the price makes a strong move towards a direction breaching a significant level of support/resistance, traders start looking for opportunities to take entries. The word ‘opportunity’ signifies a lot. After making a strong move, the price usually makes a correction/consolidation. At the correction/consolidation, the price finds a level of support/resistance. This is what gives a good risk-reward ratio to traders. In the end, it brings more winning trades, as well. In this lesson, we are going to demonstrate how a retracement gives us an entry.

The price produces a Double Bottom and breaches the neckline level. The buyers are to look for opportunities to go long on the chart. Look at the last two bearish candles. The price seems to have started having a correction. The last candle closes within the support. We might as well get a buying opportunity here. A bullish reversal candle at this level shall attract the buyers to go long. Let us see what happens next.

A bullish engulfing candle is produced here, which is considered the most powerful reversal candle. We have been eyeing to buy. Make a decision. What shall you do? Are you going to click the “Buy” button? Hang on. You must consider an equation before going long here. Look at the chart below.

The bullish reversal candle is produced at a level of support where the price had its last bounce. This is consolidation where the price is caught in a range. Thus, until the price makes a breakout at the resistance, we must not buy. Let us look at the chart below to find out what happens next.

The price comes out from the consolidation zone by making a downside breakout. It seems that the price is going to have a long retracement. Honestly, it appears that the buyers may not get the opportunities to go long. The price has been heading towards the South by making an ABC pattern, and the bullish trend is about to collapse. A down-trending Trend Line works as a resistance as well. Then, this is what happens.

We have a massive bullish engulfing candle at the level where the price has had several bounces. This is the candle, you may click the “Buy” button, right after it closes. A question shall be raised here that we do not take the long entry at the first bullish engulfing candle, but we do it now. What is the reason behind that? Before answering the question, look at the chart below.

The signal candle this time makes a breakout at the down-trending Trend line. This means along with a strong bullish reversal candle, we get a breakout as well. This is what makes the price action traders click the “Buy’ button this time. Let us have a look at the chart how it looks after clicking the “Buy” button.

It looks good. The price heads towards the North with good buying pressure. This is what we love to see. However, this does not come as easy as it sounds. The first bullish engulfing candle does not offer us entry, but this one does. The reason is it makes a breakout. We need to have a lot of practice, study, and research to be well acquainted with consolidation, correction, reversal, and breakout. Stay tuned to get more lessons on these topics.

 

Categories
Forex Price Action

A Breakout-caused by a Gap – Anything to Offer to the Price Action Trader?

In today’s lesson, we are going to demonstrate an example of a breakout created by a gap or price adjustment. Usually, we get a gap at the start of a

In today’s lesson, we are going to demonstrate an example of a breakout created by a gap or price adjustment. Usually, we get a gap at the start of a

In today’s lesson, we are going to demonstrate an example of a breakout created by a gap or price adjustment. Usually, we get a gap at the start of a new week. Extremely high impact news events make charts have a gap too. Price action traders do not like the gap. Gap usually provides fewer clues which lead the market to be in a range. However, it sometimes may create opportunities by making a breakout. Today we are going to see how a gap makes a breakout at the support of an up-trending trend line and offers us an entry. Let us have a look at the chart below.

A strong uptrend is pushing the price towards the North. In this chart, traders shall look for opportunities to go long. Along with horizontal support, we shall draw an up-trending trend line here.

The buyers shall be more confident now. On the other hand, the sellers are to wait to get a downside breakout. In this case, the trendline has been a vital element. Thus, a trendline breakout may attract sellers to look for short opportunities. Have a look at how the breakout takes place here.

The breakout should have been done with a good-looking bearish candle. We do not see any here, but the price stays below the trendline. There has been an adjustment or price gap which has made the breakout. The question is do we consider it as a breakout?

The first sign of a downside breakout is the price goes past a support level. We have that here. Do you see that the price starts having an upward correction after the breakout? It closes within the flipped support of the trendline. This is the confirmation of a breakout. This means we have a confirmed breakout here which is done by a gap meaning the gap creates an opportunity here.  Everything looks good so far. The price action traders are to wait for the final signal to go short. Can you guess how it may look like? Close your eyes for twenty seconds and think about the signal candle that you may want to have here. Open your eyes and have a look at the chart below.

See how strong the last candle looks. This is the signal candle that the price action traders always dream of. A short entry may be triggered right after the last candle closes.

Let’s now have a look at how the chart looks like after triggering the entry.

Looks good right. It does, but there has been an instantaneous upward correction. That may have created some butterflies in the sellers’ stomach. The price is held way above the signal candle’s resistance and in the end, the price heads towards the South with good selling pressure. The bottom line of the story “A breakout which is created by a gap helps the price action traders grab some green pips”.

 

 

Categories
Forex Price Action

An Entry Derived from a Double Bottom

The Double Bottom is one of the strongest bullish reversal patterns that price action traders wait for once they see the price may have found a support zone. On a

The Double Bottom is one of the strongest bullish reversal patterns that price action traders wait for once they see the price may have found a support zone. On a

The Double Bottom is one of the strongest bullish reversal patterns that price action traders wait for once they see the price may have found a support zone. On a strong downtrend, the first bounce does not attract the buyers to go long. On the second bounce, however, it attracts the buyers to start looking for long opportunities. In today’s lesson, we are going to demonstrate an example of how a Double Bottom offered us an entry.

What do you think about the price action here? A choppy price action where the price gets caught within a horizontal range. It is best to avoid taking entries when the price action is like this. You may have noticed that the price has several bounces on the support and rejections on the resistance. To get a clearer picture, look at the chart below.

The price has a rejection of the resistance and a bounce on the support. The price goes up again; it had a rejection and a bounce on the same level. This means we may get a Double Top or a Double Bottom here. The chances are the same. Thus, we must wait for the price to make the decision.

 

Here it goes. An upside breakout takes place here. A Double Bottom and  Breached Neckline, a perfect buying meadow. Do we start buying from here? No, we must wait for a confirmation. A pullback and another bullish move are needed to go long. See what happens next.

It seems like we may not get an opportunity to trigger an entry here. The price continues to go towards the North. Do not get into a trap. Never jump into a running train. Keep patience. See what happens next.

Here it goes. Finally, the price starts having a correction. Look at the last H4 bearish candle closing obeying the level where the price on minor time frames has bounces. It is time to wait for a bullish reversal candle. Is it going to be the very next candle or do we have to wait longer?

It is the very next candle that signals us that it is the time to trigger a long entry. The candle closes above the consolidation resistance having a tiny upper shadow. A perfect signal candle that the buyers have been waiting for.

The price heads towards the North with good buying pressure. 1:1 Risk and reward is easily achieved here. Such a nice price action this is! I have a question to you though. Do you see any other potential buying opportunity here? If you do, write on the comment box what the price action would be like if it is to offer another long entry. I am looking forward to getting your comments.

Categories
Forex Price Action

How a Broken Resistance Offers Us an Entry

In today’s lesson, we are going to demonstrate an example of how the price heads towards the direction of the trend upon a breakout. We know that it is not

In today’s lesson, we are going to demonstrate an example of how the price heads towards the direction of the trend upon a breakout. We know that it is not

In today’s lesson, we are going to demonstrate an example of how the price heads towards the direction of the trend upon a breakout. We know that it is not only the breakout that traders shall be looking at. There are other factors, such as consolidation or correction, breakout confirmation, and the signal candle. Let us have a look at what the price does before offering us an entry.

 

The price heads towards the North and has a rejection. Look at the candle at the top (arrowed candle). This is where the price has its first rejection and lands at the support zone. The price has another rejection at the level below (arrowed candle). However, it continues the consolidation. As a trader, you have to wait for a price to make a move either to make a breakout at the support of the consolidation or the resistance level.  Let’s see what happens next.

 

Oh! Upside breakout! This is how a breakout candle should look like. It closes just below the second resistance. The first resistance is now a support. The price is to make a pullback to confirm the breakout. Let us see what happens next.

 

It rather continues its bullish journey and makes a breakout at the second level of resistance as well. Guess what shall we do here? Shall we wait for the price to come back to the first breakout level or the second breakout level? Have a look at the chart below.

 

The breakout level seems to be held and produces a bullish candle already. Shall we consider taking an entry here? The answer is no. The price does not come up to the breakout level. Let us see what happens next.

 

Look at the last candle. A bullish engulfing candle closes above the last highest high and confirms the breakout level by having a bounce on it. This is the signal candle price-action traders crave for. A buy entry may be triggered right after the candle closes by setting Stop Loss below the candle’s lowest low. In this case, the candle’s lowest low and breakout level are the same. If the signal candle had a bigger lower shadow below the breakout level, the Stop Loss should have been set below the candle’s lowest low.

About setting Take Profit level, there are several ways to determine it. To be very safe, you may have 1:1 risk and reward. This means the number of pips that we have set as our Stop Loss from the entry point; we shall set our Take Profit at a distance with the same amount of pips.

The price travels almost twice the distance than we have anticipated. Never regret, but keep studying to learn how to maximize your risk and reward ratio. We will write some articles on this. Stay tuned.

Categories
Forex Basic Strategies

Moving Average Strategies: Three Simple Moving Averages Part 2

In the article “Moving Average Strategies: Three Simple Moving Averages Part 1”, we have come to know how three simple moving averages on a chart help us detect a trend.

In the article “Moving Average Strategies: Three Simple Moving Averages Part 1”, we have come to know how three simple moving averages on a chart help us detect a trend.

In the article “Moving Average Strategies: Three Simple Moving Averages Part 1”, we have come to know how three simple moving averages on a chart help us detect a trend. In this article, we will demonstrate how and where to take entries with the help of ‘Three SMAs”.

A Moving Average is an indicator that shows trends as well as it acts as support/resistance. In a buying market, it acts as support whereas it serves as a resistance in a selling market. Let us have a look at how it works as resistance and offers us entries in a selling market.

We have inserted “Three SMAs” with the value of 200, 100 and 50 on this chart. The chart shows that the price has been down-trending nicely as far as “Three SMAs” rules are concerned. Please notice that every time the price goes back to the 50- Period Simple Moving Average, it comes down. However, in some cases, the price makes a bit bigger move than the others. We need to understand which one is to make a bigger move and offers us an entry. Can you spot out the differences?

Have a look at the same chart below.

Look at the arrowed candle. The price comes down with a better pace and travels more after those marked candles. There are several reasons for this.

  1. The price goes back to the 50- Period Simple Moving Average; touches (or very adjacent to it).
  2. The bearish reversal candles are engulfing candle.

In some cases, the price starts down-trending without touching the 50-Period Simple Moving Average, it does not travel a good distance towards the downside. It rather goes back again; touches it and then makes a bigger move.

At the very left, the first arrowed candle, the bearish engulfing candle does not touch the Moving Average, but one of the bullish candles has had rejection at the 50-Period Simple Moving Average, thus this is an entry. However, see the very next candle comes out as a corrective candle. This means the sellers are not that sanguine since the bearish reversal candle is not produced right at the 50-Period Simple Moving Average.

With the second and third arrowed candles, they are produced right at the 50-Period Simple Moving Average and both of them are bearish engulfing candles. Those two are perfect entries as far as ‘Three SMAs’ is concerned.

At the very right, the last arrowed candle is very adjacent to the 50-Period Simple Moving Average and produces a bearish engulfing candle.  Most likely, the price would head towards the South again. However, “Three SMAs” does not recommend that we shall take an entry here.

We will learn more strategies with Moving Average in our fore coming articles. Keep in touch.

 

Categories
Forex Basic Strategies

Moving Average Strategies: Three Simple Moving Averages Part 1

Moving Average (MA) is the most widely used indicator which has long been used by the traders in the financial markets. It is a trend detecting indicator. Since detecting trends

Moving Average (MA) is the most widely used indicator which has long been used by the traders in the financial markets. It is a trend detecting indicator. Since detecting trends

Moving Average (MA) is the most widely used indicator which has long been used by the traders in the financial markets. It is a trend detecting indicator. Since detecting trends is one of the most important key components of trading, visual representation of a trend by Moving Average makes it be a favorite indicator among the financial traders.

There are multiple Moving Average strategies used by traders. In this lesson, we are going to learn a strategy called “Three SMAs”. It is a strategy with three Simple Moving Averages; these are Simple Moving Average 200, Simple Moving Average 100 and Simple Moving Average 50.

Let us now have a look at how a chart looks like with “Three SMAs”.

This is how the charts look like most of the time. The red one is 200-period Simple Moving Average, the yellow one is the 100-period SMA and the blue one is  50-period SMA. It is better to use different colors so that we can identify them easily.

In the chart above, we see that the price gets caught in between those Moving Averages to start with. The price comes further down, but the 50-SMA stays between the100-SMA and the 200-SMA. What does “Three SMAs” suggest to us here? It suggests that the price does not have a solid trend.

In the naked eyes, the price action suggests that the asset is down-trending. However, by having “Three SMAs”, we can identify solid down-trend has not been established yet. This is why many price action traders use “Three SMA’s” to be sanguine about the trend. Ideally, this is not a chart that we should look for entries.

The question is how a trading chart should look like with “Three SMAs” to look for entries. Let us have a look at the chart below.

The difference is very evident here. See how they have been lined up. Moving Average 200 stays on the top; Moving Average 100 stays in between; Moving Average 50 stays at the bottom. This is an ideal chart with “Three SAM’s” to look for short entries.

In the case of price is up-trending, this is how it looks like.

In a buying market, they are to be lined up just another way round than the selling market. Look at the chart above. The Moving Average 200 stays at the bottom, Moving Average 100 stays in between and Moving Average 50 stays at the top. In this chart, we shall look for long entries.

“Three SMAs” indicators work wonderfully well with intraday trading. In this lesson, we have used a 15-minute chart and three SMAs with periods of 50,100 and 200. If we want to use other charts such as H1 or H4, we have to change the values. However, the best combination for “Three SMAs” is Moving Averages of 50,100 and 200 on the 15M chart.

We now understand how “Three SMA’s” may help us understand the trend.  Thus, “Three SMA’s” may be integrated with any other strategies for taking entries. Moreover, only “Three SMAs” itself offers us entries as well. In our next article, we will demonstrate how entries are to be taken based on “Three SMAs”.  Stay tuned.

Categories
Forex Candlesticks

Ideas that can be Blended with Candlestick to Trigger Entries-Part4

In this article, we are going to demonstrate how a Morning Star offered us an entry. We know Morning Star is a strong bullish reversal candle, which is a combination

In this article, we are going to demonstrate how a Morning Star offered us an entry. We know Morning Star is a strong bullish reversal candle, which is a combination

In this article, we are going to demonstrate how a Morning Star offered us an entry. We know Morning Star is a strong bullish reversal candle, which is a combination of three candlesticks. There are two types of Morning Star.

  1. Morning Star
  2. Morning Doji Star

Here is how Morning Star looks like

And this is how Morning Doji Star looks like

The example we are going to demonstrate is a Morning Doji Star. Let us get started.

The price was down-trending and produced a Doji Candle on a support level where the last bearish candle closed within. Look at the very last candle. It came out as a Bullish Marubozu Candle closing above the 2nd last candle’s open. This is a typical example of Moring Star upon which buyers shall start integrating other equations to go long.

Let us have a look at those equations.

At first, we have to draw a level of resistance here. Let us draw it.

We draw the resistance line right where the candle closes. Since we do not have any down-trending Trend Line or a Double Bottom’s neckline here, thus we must wait for a trigger candle to close above the bullish candle on the trading chart.  We now have to flip over to the trigger chart. This is an H4 chart, so let’s flip over to the H1 chart to get correction/consolidation and breakout.

This is how the H1 chart looks. The first H1 candle came out as a bearish corrective candle, and the very next one closed above the bullish H4 candle’s close. A perfect trigger candle, we shall wait for. We sometimes may not get the corrective candle here. The very next H1 candle may breach the resistance line and offer us the entry.

In our previous article, we demonstrated an example of how a Bearish Engulfing Candle offered us an entry. Have you spotted out the difference between a single candlestick pattern and a combination of candlesticks pattern’s entry?

On a single candlestick entry, we had to wait for a neckline breakout (it may be trend line breakout), consolidation (on the trading chart), bearish reversal candle (on the trading chart), then the breakout (trigger chart). With Morning Star, we did not have to wait for consolidation on the trading chart. Once the combination pattern (Morning Star) was evident, we flipped over to the trigger chart; waited for a candle to make a new higher high to take an entry.

It may sound so many things to be remembered and integrated with candlesticks trading. However, once we practice and try to understand the market psychology that goes with those patterns, things will get as easy as you may like.

 

Categories
Forex Chart Basics

Ideas that can be Blended with Candlestick to Trigger Entries-Part 3

In Part 2, we learned how important a breakout is for taking an entry. Even the strongest reversal candle itself is not enough to create a new trend. In this

In Part 2, we learned how important a breakout is for taking an entry. Even the strongest reversal candle itself is not enough to create a new trend. In this

In Part 2, we learned how important a breakout is for taking an entry. Even the strongest reversal candle itself is not enough to create a new trend. In this article, we are going to learn other steps that we need to maintain for taking an entry in case of engulfing candlestick.

Let us have a look at the chart below.

After producing the engulfing candle,

  1. The price breached through a support level.
  2. The breakout candle looks very strong.

First two equations have been met. Shall we take the entry right now? The answer is “NO”. We must wait for an upward correction/consolidation. A correction/consolidation gives us another level of support/resistance (in this case resistance). It offers a better risk and reward ratio as well as a better winning percentage. Thus, correction/consolidation is considered one of the most vital components of trading.

Let us have a look at how consolidation took place here.

Pay attention to those candles after the breakout. The pair produced one more bearish candle. Many traders may think an opportunity missed here. Look at the very next candle. That came as a Doji Candle followed by a bullish one. Be very careful. The market often keeps having a correction and changes the trend even by making new higher highs. Thus, a bearish reversal candle we must wait for.

We got one and luckily, it was a bearish engulfing candle. Candle Stick Pattern is being used here again to show us selling sign. What do we have to do now?

We have to wait for another breakout. This time we have to flip over to our Trigger Chart. This is an H4 chart. Thus, our trigger chart is H1 Chart. Let us flip over to the H1 Chart.

The price came out with the last candle from the consolidation zone. A Marubozu Bearish Candle made the breakout. A less low spike indicates that the sellers are very confident. Look, Candle Stick Pattern is being used here again. Here we go. This is the point where we trigger out short (sell) entry.

Let us have a look at the chart below how our trade would play.

Wow, it played well. Though it had consolidation on the minor time frames later, however, this should not be our concern. We followed our trading chart’s trend, breakout, consolidation (H4) and the H1 breakout. By setting our Stop Loss and Take Profit, we shall forget the entry. This is another thing of trading called “Set and Forget” that need to be integrated.

In this article, we learned these are the things to be integrated as well.

  1. Consolidation/ Correction on the trading chart.
  2. Reversal candle to be formed on the trading chart.
  3. Flipping over to the trigger chart and waiting for a breakout.

In the next article, we are going to demonstrate an example of how a Morning Star offered us entry with the integration of consolidation, breakout, and breakout candle with a Morning Star. Stay tuned.

Categories
Forex Candlesticks

Ideas that can be Blended with Candlestick to Trigger Entries – Part 2

Candlestick Patterns are widely used by traders to take entries and making money out of trading. We have come to know from Part 1 that relying on a candlestick formation

Candlestick Patterns are widely used by traders to take entries and making money out of trading. We have come to know from Part 1 that relying on a candlestick formation

Candlestick Patterns are widely used by traders to take entries and making money out of trading. We have come to know from Part 1 that relying on a candlestick formation only is not enough for a reliable entry signal. Other things need to be integrated with candlestick formation so that traders can trade accordingly. In this article, we are going to demonstrate an example of how an entry should be taken depending mainly on an engulfing candle as well as other equations that need to be maintained by traders.

Let us have a look at the chart below.

The chart above shows that the market is up-trending. At first glance, we shall look for buying opportunities here. However, look at the last candle. This is an engulfing candle which indicates that the sellers may take over. An engulfing candle is a strong sign of a trend reversal. However, we must not get carried away, but wait for other indications. In this case, we may wait for a breakout at the last swing low. Have a look at the chart.

Pay attention to the red line. This is the last swing low where the price had a bounce and moved towards the North. Then, after finding a resistance, it produced a bearish engulfing candle; kept going down on the next candle and made a breakout with a huge bearish candle. This is now an ideal chart for the sellers to look for selling opportunities. The trend starts with an engulfing bearish candle. Candlestick pattern suggests that the sellers may take over. It has. It is pretty simple, right? Not really. Just go three candles back. Look at the same chart below.

Pay attention to the arrowed candle. This is a bearish engulfing candle as well. That could have changed the trend and the price could have headed towards the South. However, that did not happen. The price kept going towards the North for three more candles then came down. Do you spot out the difference? The price did not make any downside breakout. In this case, if it had made a breakout at the nearest swing low, it might have come down from right there. Look at the chart below to get a better idea of which level I am talking about.

The drawn red level was the last swing low. If the price continued to go down and made a breakout at that level, it would have been a different ball game.

In this lesson, we have learned that Candlestick Pattern is a sign. In fact, is the first sign of a trend reversal. However, we need at least two more things to integrate with Candle Stick Pattern for taking an entry. These are:

  1. A Breakout at a significant level of support or resistance.
  2. The breakout is to have good momentum meaning the breakout candle is to be a good-looking bullish or bearish candle.

 

Stay tuned to get to know more about candlestick and integration in Part-3.

Categories
Forex Candlesticks

Ideas that can be Blended with Candlestick to Trigger Entries-Part 1

Candlesticks are considered one of the strongest components to take an entry. However, this is not the only thing that a trader shall consider before taking an entry. An Engulfing

Candlesticks are considered one of the strongest components to take an entry. However, this is not the only thing that a trader shall consider before taking an entry. An Engulfing

Candlesticks are considered one of the strongest components to take an entry. However, this is not the only thing that a trader shall consider before taking an entry. An Engulfing Candle or a Pin Bar is a strong reversal candle. If the price is down-trending and we get a bullish engulfing candle, we may want to go long on the pair. No doubt, a bullish engulfing candle is a strong reversal candle, but there are other factors we must consider before taking an entry.

Let us find more about it from the charts below.

I have chosen a chart which was down-trending and produced a Bullish Pin Bar. The price then changed its direction and headed toward the North. Let us have a look at the chart.

The arrowed candle is one good-looking bullish Pin Bar. A Pin Bar like this attracts the buyers to go long. We see the consequence; the price headed towards the North with good buying pressure. Does this mean whenever we see a Bullish Pin Bar, we go long or vice versa? The answer is no. We must consider other factors such as Support/Resistance zone, Double Top/Bottom, Neckline Breakout, Trend Line breakout, Breakout Candle.

Let us have a look at the chart again.

See where the Pin Bar was formed. It was formed right at a zone where the price had several bounces. Ideally, this is a level where the sellers want to come out with their profit. Thus, a strong bullish reversal candle such as a Bullish Pin Bar shall attract the buyers to concentrate on the chart to go long. Now that we have found a strong support level what else to look for?

The price was down-trending by following a Trend Line. Can you spot that?

Have a look at this.

A down-trending Trend Line can be drawn. Buyers must wait for a breakout there. See the breakout candle. That was a strong bullish candle which was followed by another one. Moreover, the price came back and touched the Trend line after the breakout. Many buyers may have taken their entry there. This is not a bad idea. You may want to go long right after the second candle closes.

However, some buyers may want to go long at the neckline breakout. Have a look at the chart below.

To be very safe, some traders love to set a pending buy order and go long above the neckline level. It is a safer option for sure, but it has some disadvantages as well. We will talk about this later. Meanwhile, concentrate on what we have learned from this article.

  1. Candlestick or Candlestick pattern is to be formed at a value area.
  2. The existent trend is to be collapsed.
  3. Double Bottom or Double Top is to be evident.
  4. Breakout Candle is to be a strong commanding candle.

 

 

Categories
Forex Candlesticks

Morning Star: A Strong Bullish Reversal Candlestick Pattern

The Morning Star is a bullish reversal pattern that occurs at the bottom of a downtrend. A Morning Star is a combination of three candlesticks: The first candle shows the

The Morning Star is a bullish reversal pattern that occurs at the bottom of a downtrend. A Morning Star is a combination of three candlesticks: The first candle shows the

The Morning Star is a bullish reversal pattern that occurs at the bottom of a downtrend. A Morning Star is a combination of three candlesticks: The first candle shows the continuation of the downtrend. The second candle shows the weakness, and the third candle shows the strength of the bull.

There are two types of Morning Star:

  1. Morning Star
  2. Morning Doji Star

 

Morning Star

The Morning Star starts with a strong bearish candle followed by a gap down. The star candle may have a little bullish or bearish body. However, the third candle is to be a strong bullish candle closes at the above of the first candle’s open.

Have a look at this.

See the first candle, which is a strong bearish candle. The next candle starts with a gap closing as a little bearish candle. This one may have a small bullish body in some cases. The third candle starts with another upside gap. It is to be a strong bullish candle closing at the above of the first candles’ open. This states that the bull has taken control of the bear.

 

Morning Doji Star

 

Let us have a look at the Morning Doji Star

In this case, the star candle comes out as a Doji candlestick. The first candle comes as usual as a strong bearish candle. The third candle opens right at the support level and finishes above the first candle’s open. It states that buyers have started dominating the market.

 

In both cases, the first and third candles’ attributes are the same. The second candle varies. However, both types explain the psychology of the market, showing that the existent downtrend has come to an end, and an uptrend has been formed.

The Morning star is a visual pattern that is spotted out by the traders easily. It is the preferred pattern among all kinds of traders from price action traders to traders based on indicators.

How Traders Based on Indicators/Price Action Use the Morning Star

Traders based on indicators may use the Morning Star when it is produced at the Supply/Support zone. Moving Average, RSI, Bollinger Band, Parabolic SAR indicate Supply/ Support zone. If a Morning Star is produced at the zone that is a supply/support zone of those indicators, an entry may be triggered at the close of the third candle.

The price action traders may use horizontal, Trend Line, Fibonacci Support/Supply zone to take en entry on the Morning Star. If a Morning Star is produced at the supply/support zone of a horizontal/Trend Line/ Fibonacci levels, an entry may be triggered right after the close of the third candle.

 

 

 

 

Categories
Forex Candlesticks

Types of Bullish Candlesticks

In this article, we are going to get acquainted with some of the Bullish Candlesticks that the financial markets produce. Let’s get started.

 
Bullish Trackrail
Bullish Trackrail candlestick indicates

In this article, we are going to get acquainted with some of the Bullish Candlesticks that the financial markets produce. Let’s get started.

 
Bullish Trackrail
Bullish Trackrail candlestick indicates

In this article, we are going to get acquainted with some of the Bullish Candlesticks that the financial markets produce. Let’s get started.

 

Bullish Trackrail

Bullish Trackrail candlestick indicates that the market has been dominated strongly by the buyers. It is a combination of two candlesticks. The second candle is to be bullish and the length is very similar to the first candle. Both candles are with a long and solid body having tiny spikes or no spike at all.

Image: Bullish Trackrail

Bullish Engulfing

Bullish Engulfing Candle is formed with a combination of two candles. The second candle is to engulf and close above the first candle to be considered as a Bullish Engulfing candle. Some analysts/traders do not want to take first candle’s wick into account. However, if the second candle closes above the first candle’s wick, that is one good Bullish Engulfing Candle. A Bullish Engulfing Candle is considered as the strongest bullish reversal candle.

 

Image: Bullish Engulfing

Bullish Hammer

Bullish Hammer Candle is created when a candle closes with a small body with a long lower shadow. The body has to be tiny and it can be bullish or bearish. However, a little bullish body instead of a bearish body is more preferable among the buyers.

Image: Bullish Hammer

Spinning Top      

Spinning Top has a short body found in the middle with upper and lower wicks. The body can be bullish or bearish.

Image: Spinning Top

Bullish Pin Bar

Bullish Pin Bar is similar to Bullish Hammer. The only difference is a Bullish Pin Bar does not have any real body whereas a Bullish Hammer has a tiny body. Since a Pin Bar does not have a body, it has more rejection from the downside. Thus, Bullish Pin Bar is considered one of the most powerful bullish reversal candlesticks in the financial market.

Image: Bullish Pin Bar

Bullish Inside Bar

Bullish Inside Bar is produced with a combination of two candles. The second candle is to be bullish but shorter than the first candle. It is just the opposite of Bullish Engulfing Candlestick. A Bullish Inside Bar is considered the weakest bullish reversal candlestick.

Image: Bullish Inside Bar

Doji

A Doji Candle is formed where the price finishes very close to the same level. Thus, the candle has no body or a very tiny body. A Doji Candle itself is not a strong bullish reversal candle. However, if it is produced at a strong level of support, the market often reverses and goes towards the North.

 

 

Image: Doji

Bullish Spinning Top and Doji look very similar to the Bearish Spinning Top and Doji. The only difference between a Bullish Doji and Bearish Doji is a Bullish Doji is produced at a Support Level whereas a Bearish Doji is produced at a resistance level. The same goes for Spinning Top as well. All other bullish reversal candles’ are to be formed at a significant level of support as well. Their appearance is very different than the bearish reversal candles. Stay tuned with us to learn more about Candlestick.

 

 

Categories
Forex Chart Basics

Candlestick Charts and Its Advantages in Financial Trading

With the advancement of technology, retail trading in the financial markets has become popular among investors. Since unnumbered traders from all over the world invest in the financial markets, they

With the advancement of technology, retail trading in the financial markets has become popular among investors. Since unnumbered traders from all over the world invest in the financial markets, they

With the advancement of technology, retail trading in the financial markets has become popular among investors. Since unnumbered traders from all over the world invest in the financial markets, they use so many of strategies, indicators, and EAs to make money out of trading. Also, many things with the financial markets have been changing as well. However, certain basic things have no, and they may never change. One of the things is the usage of Candlestick charts.

Before getting into this, lets us summarize the different types of charts available for traders. Typically, there are three types of charts that are mostly used in trading.

  • Line Chart
  • Bar Chart
  • Candle Stick Chart

Line Chart

Let us have a look at a line chart.

The line chart is generated by using the closing price of the bars. It does not represent the highest high, lowest low or the opening price. Thus, it gets tough for traders to find out the sentiment of other traders. The price may go towards the upside and has a strong rejection from a level of resistance. But the line chart does not show that rejection. Thus, a trader may think the market is bullish whereas the price has had a strong rejection and it may be time for the sellers to take over.

Let us flip over the same chart to a Bar Chart.

The Bar Chart is more informative than the Line Chart. It shows the opening price, closing price, highest high and lowest low of the period it has tracked. It certainly gives us a clearer picture than the Line chart. An experienced trader may not have any problem to find out the trend, rejections, market psychology by using the Bar Chart. However, we may have a better option. Do you know what that is? It is the Candle Stick Chart.

Here it comes.

A picture is worth a thousand words. Does not give us the clearest picture of market psychology? It does because it represents the market with color including closing price, opening price, the highest high and lowest low. Moreover, it shows us rejection or bounce (upper shadow/lower shadow) as well. Candlestick charting is one of the most important tools in modern days trading.

There are other things to be integrated with Candlestick Chart such as Support, Resistance, Fibonacci Levels, Pivot Points, Trend Line, and Channels, etc to be able to trade effectively. To be a long racehorse in trading, a trader must have a good understanding with all those. We will get more acquainted with Candlesticks, Candlestick Patterns and their usage, integration with other trading factors in our fore coming articles. Be with us. See you in our next article.

Categories
Forex Chart Basics

Dissection of a Candlestick

A candlestick is a type of price that financial markets’ charts use to display the high, low, opening, and closing prices for a particular period. It is the most commonly

A candlestick is a type of price that financial markets’ charts use to display the high, low, opening, and closing prices for a particular period. It is the most commonly

A candlestick is a type of price that financial markets’ charts use to display the high, low, opening, and closing prices for a particular period. It is the most commonly used price chart among financial traders nowadays. It does not only show the high, low, opening, and closing prices but also represents the true psychology of the traders. This is the main reason for the candlestick/candlestick chart being the most popular chart in the financial markets.

Let us demonstrate two typical types of candlesticks to find out how they look and how they are formed.

Let us start with a Bullish Candlestick.

In a Bullish Candlestick, the price opens at the downside; goes down and goes up again. This is what creates the lower shadow. The price continues to go upwards and goes all the way up to where the upper shadow ends. It comes down and closes at the Closing Price. This is what creates the Upper Shadow. Eventually, Opening Price and Closing Price creates Bullish Body. A Bullish Candlestick is usually represented by Green or White color.

Let’s have a look at a typical bullish market in Candlestick Chart.

The chart shows that the market is bullish. Most of the candles are bullish candlesticks. Thus the price heads towards the North. However, not all of them have Upper Shadow, Lower Shadow, or a thick Body that we have demonstrated in this lesson earlier. The market produces several types of Candlesticks, and they convey different messages to the traders.

A Bearish Candlestick is just the opposite. Let us have a look at that.

As we see here, that the price opens at the upside. Goes up and comes down to create the Upper Shadow. Comes all the way down and closes the price a bit further up. This is what creates the Lower Shadow. Difference between the Opening and Closing Price creates the Bearish Body.

Let us have a look at a bearish market in Candlestick Chart.

Same goes here. Not all the candlesticks are as typical as we have demonstrated in our lesson. However, the message is clear here. The price is bearish because of the dominance of Bearish Candles.

Not all the candles with a bearish body (or bullish body) declare the supremacy of the bearish market (or bullish market). By being able to read them well, traders can predict the market’s trend, trend continuation, and trend reversal.

In our fore coming articles, we will learn different types of candlesticks that the market produces; how they look like; what message they convey to the traders; how to read and make a profit out of them.