In today’s lesson, we are going to demonstrate an example of a chart, which may entice traders to take entry more than once. Some traders may get themselves engaged in taking entry. We find out why we price action traders skip taking those entries. Let us get started.
This is an H4 chart. The price makes a strong bearish move by producing three consecutive Marubozu bearish candles. The last candle comes out as a doji candle. The price may consolidate now. The sellers are to wait for a strong bearish reversal candle upon consolidation to go short in the pair. Let us proceed to the next chart.
The chart produces a bearish Marubozu candle again. As a reversal candle, it is a strong one. However, the price has not consolidated well. It has produced the bearish reversal candle upon having a shallow consolidation. Moreover, the last candle does not close below the level of support. Thus, the sellers may skip taking the entry but wait for the right time to come. The chart still looks good for the sellers.
The chart produces a bullish engulfing candle. The price may make a deeper consolidation this time. The sellers may keep their eyes on the chart again to go short in the pair. Let us proceed to the next chart to find out what happens next.
The price makes a deeper consolidation. Upon finding its resistance, it makes a bearish move. It seems that the price may make a breakout here. A question may be raised here whether the sellers on the H4 chart shall take the entry or not? We find out the answer in a minute. Meanwhile, let us proceed to the next chart.
The next H4 candle closes well below the level of support. The pair trades below the breakout level for one more candle as well. However, the sellers on the H4 chart may skip taking the entry. The reason behind that is the chart takes more than six candles (a day) to make the breakout. This level of support is a daily level of support now. Thus, the sellers may take the trading decision as far as the daily chart is concerned. If they take their trading decision by observing the H4 chart, it may not be that fruitful. The risk-reward may not be a good one. It may not end up being a daily breakout, but the price may come back in. Or, the daily chart may produce a bullish corrective candle next day, which makes the price hit the H4 sellers stop loss. Thus, in such cases, they might have to take losses only because the pair belongs to the daily chart. Thus, for better trading, traders shall take a closer look before taking entry on a chart to determine whether it favors their trading chart.