Tag: Forex price action

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Forex Daily Topic Forex Price-Action Strategies

Forex Traders: Get Patience, Optimism, and Never Give Up Attitude

In today’s lesson, we are going to demonstrate an example of the daily-H4 combination trading, which makes traders wait for a long time. Usually, if the daily chart produces a daily reversal, it creates an H4 entry within a day or two. In today’s lesson, the H4 chart takes four days after creating a daily reversal to produce the signal candle. Let us find out how it offers us entry.

In today’s lesson, we are going to demonstrate an example of the daily-H4 combination trading, which makes traders wait for a long time. Usually, if the daily chart produces a daily reversal, it creates an H4 entry within a day or two. In today’s lesson, the H4 chart takes four days after creating a daily reversal to produce the signal candle. Let us find out how it offers us entry.

In today’s lesson, we are going to demonstrate an example of the daily-H4 combination trading, which makes traders wait for a long time. Usually, if the daily chart produces a daily reversal, it creates an H4 entry within a day or two. In today’s lesson, the H4 chart takes four days after creating a daily reversal to produce the signal candle. Let us find out how it offers us entry.

This is a daily chart. The chart shows that it produces a bearish inside bar at a strong resistance zone. An inside bar is not a strong reversal candle, but a strong resistance zone may attract the sellers to look for short opportunities. The daily-H4 combination traders are to flip over to the H4 chart for the price to consolidate and produce a bearish reversal candle to offer a short entry. We flip over to the H4 chart later. Let us now have a look at the daily chart with four more daily candles.

The chart produces four more candles that are bearish. However, the daily-H4 combination traders do not get any A+ entry to go short. Should they skip eyeing on this pair? Never, they need to perform the same duty. As long as the last daily candle is bearish, they are to flip over to the H4 chart. The last candle on this chart is bearish. Let us flip over to the H4 chart this time.

You may notice that the H4 chart does not make deep consolidation followed by a bearish engulfing candle to offer them a short entry so far. Traders are to flip over to the H4 chart every day with no luck. Let us proceed to the next H4 chart.

The chart shows that it is having a deep consolidation. The last candle comes out as a bullish engulfing candle. However, the chart is still bearish biased unless it produces a bullish daily reversal candle. The sellers are to wait for an H4 bearish engulfing candle closing below consolidation support to offer them a short entry.

Here it is. The last candle comes out as a bearish engulfing candle closing well below consolidation support. The sellers may trigger a short entry right after the last candle closes with 1R.

The price heads towards the South with extreme bearish pressure. The price hits 1R with ease. Some traders may even make much more than 1R by taking a partial profit. In the end, it ends up being a prolific entry.

It does not come easily, though. The daily-H4 combination traders are to keep eying on the charts for four consecutive days. The H4 chart produces the signal on the fifth day after producing the daily bearish reversal candle. This is why Forex traders need to have patience, optimism, and never give up attitude.

Categories
Forex Price-Action Strategies

A Pair Offering Multiple Entries on Different Charts

In today’s lesson, we are going to demonstrate an example of a chart, which ends up offering two breakout entries for the price action traders. There is a saying, “do not put all your eggs in the same basket.” Forex traders are to maintain this as well. However, sometimes we may have to do things a bit differently. Let us find out why and how.

In today’s lesson, we are going to demonstrate an example of a chart, which ends up offering two breakout entries for the price action traders. There is a saying, “do not put all your eggs in the same basket.” Forex traders are to maintain this as well. However, sometimes we may have to do things a bit differently. Let us find out why and how.

In today’s lesson, we are going to demonstrate an example of a chart, which ends up offering two breakout entries for the price action traders. There is a saying, “do not put all your eggs in the same basket.” Forex traders are to maintain this as well. However, sometimes we may have to do things a bit differently. Let us find out why and how.

This is a daily chart. The chart shows that a bearish engulfing candle followed by a bullish inside bar sets a strong bearish tone in the chart. If a bearish candle closes below consolidation support, the sellers may go short on the pair.

Here it comes. The last candle on this chart closes below consolidation support. This is an explicit breakout. The daily breakout traders may trigger a short entry right after the candle closes by setting their stop loss above the signal candle’s highest high and by setting their take profit with 1 R.

Here is something interesting you may have noticed. Since the daily chart is bearish biased, the H4 chart shall be bearish as well. Let us flip over to the H4 chart.

This is how the H4 chart looks. The price consolidates and produces a bearish reversal candle already, although it is not a deep consolidation. Let us not talk about it. Let us proceed to the next chart.

The last candle comes out as a bullish inside bar. This time there is a deep consolidation as well. If the chart produces a bearish engulfing candle, the sellers may trigger a short entry. Let us not forget that the daily breakout traders have already taken an entry.

The H4 chart produces a beautiful bearish engulfing candle closing below consolidation support. The H4 breakout traders may trigger a short entry right after the last candle closes by setting stop-loss above the signal candle’s highest high and by setting take profit with 1R.  Let us find out how the trade goes.

The price heads towards the South with extreme bearish pressure. Some H4 breakout traders may get 3R from this chart. Now the question may arise here is whether we should take an entry on the H4 chart as well? If we go by saying, “do not put all your eggs in the same basket’, we may not.

We actually should take the entry on the H4 chart as well after taking the first entry on the daily chart. First, we are not taking the second entry based on the daily chart. It is a different setup, although the strategy is the same. If we are confident and experienced in trading different charts, we are all right to take entry in the same pair. This usually brings us a bagful of pips.

Categories
Forex Price-Action Strategies

A Thing You May Notice in the H1 Breakout Strategy

We are going to demonstrate an example of the H1 breakout strategy in today’s lesson. Usually, the H1 breakout strategy does not make traders wait too long to hit the target. However, if the breakout level is a double top or a double bottom level on the H4 chart, the price gets even more momentum to hit the target. Today’s breakout level is a double bottom level on the H4 chart. Let us now find out what happens after the breakout.

We are going to demonstrate an example of the H1 breakout strategy in today’s lesson. Usually, the H1 breakout strategy does not make traders wait too long to hit the target. However, if the breakout level is a double top or a double bottom level on the H4 chart, the price gets even more momentum to hit the target. Today’s breakout level is a double bottom level on the H4 chart. Let us now find out what happens after the breakout.

We are going to demonstrate an example of the H1 breakout strategy in today’s lesson. Usually, the H1 breakout strategy does not make traders wait too long to hit the target. However, if the breakout level is a double top or a double bottom level on the H4 chart, the price gets even more momentum to hit the target. Today’s breakout level is a double bottom level on the H4 chart. Let us now find out what happens after the breakout.

After making a bearish move, the price makes a correction. The last candle on the chart comes out as a bearish engulfing candle. This means the price finds its resistance. If it heads towards the swing low and makes a breakout, price action sellers may jump into this chart to make some green pips by going short in the pair.

The last candle makes a breakout at the level of support. This is an explicit breakout. Please note that the price bounces at the same level earlier. This means this is a double bottom support level on the bigger chart. This is an H1 chart. Thus, this must be a double bottom support level of the H4 chart.

The next candle closes below the breakout candle. It confirms the breakout. The sellers may trigger a short entry right after the last candle closes by setting stop-loss above the level where the trend starts and setting the take profit with 1R.

The price heads towards the South with extreme pressure. The price is about to hit the target on the next candle after triggering the entry. It does not, but the sellers get their message. A strong bearish candle like this suggests that the pair would remain bearish at least for two more candles. That would be enough to hit the target.

The chart produces a bullish inside bar before hitting the target. If we count, it takes only three candles to hit take profit level. As mentioned, the H1 breakout strategy hits take profit level in a hurry. So does this one. If we calculate the next candle after the signal candle, we see that the candle comes out as a very strong bearish candle and generates strong bearish momentum. This is often seen when the H1 chart makes a breakout at a level, which is a double top or double bottom level on the H4 chart too. We do not need to concentrate on this if we aim to trade on the H1 breakout strategy. However, noticing such things help us be better traders to some extent.

 

Categories
Forex Basic Strategies Forex Daily Topic Forex Price Action

Support, Resistance and Trade Management

-Support and Resistance are the two most important concepts in the financial market. Forex traders strongly rely on support and resistance, as well. Price action traders’ main weapon is support and resistance. In today’s article, we are going to demonstrate an example of how the price reacts to a major level of support and resistance. Let us get started.

-Support and Resistance are the two most important concepts in the financial market. Forex traders strongly rely on support and resistance, as well. Price action traders’ main weapon is support and resistance. In today’s article, we are going to demonstrate an example of how the price reacts to a major level of support and resistance. Let us get started.

-Support and Resistance are the two most important concepts in the financial market. Forex traders strongly rely on support and resistance, as well. Price action traders’ main weapon is support and resistance. In today’s article, we are going to demonstrate an example of how the price reacts to a major level of support and resistance. Let us get started.

Look at the chart. The price consolidates around the red-marked level, it finds its resistance there and makes a bearish move. After having a correction, it makes the new lowest low. This is now the sellers’ territory. Let us assume that there is no significant level, which may hold the price as support. Thus, we are not able to mark any level as support. The sellers are to wait for the price to consolidate and produce a bearish reversal candle to offer them short entry in this chart.

The price makes new lowest lows and heads towards the South with good bearish momentum. However, it seems that it may have found its support. It consolidates for a while around the red-marked level and produces a bullish engulfing candle. The buyers on the minor chart may get them engaged to keep an eye on the chart to go long above the highest high of the last candle. Let us find out what happens next.

The price heads towards the North. It consolidates and produces another bullish engulfing candle. It means the chart is now the buyers’ territory. This is where the game of support and resistance begins. You may have noticed that we have red-marked the level. This is the most significant level in this chart for the buyers. The price may consolidate and find its resistance in this chart before it reaches the red-marked level. However, this is where traders may make a decision concerning their long position. They may either close their whole trade or take partial profit.

The price keeps heading towards the North. It buyers are having a party here. They must not forget the red-marked level, though. Let us proceed to the next chart.

Look at the chart carefully. Do you notice that the price consolidates around the red-marked level, which is the swing high in this chart? It produces a bearish engulfing candle followed by another bearish one. The last candle on this chart comes out as a bullish inside bar. If the next candle comes out as a bearish engulfing candle, the sellers may drive the price towards the South. I am sure now you know where the sellers are to be careful with their trade management. Yes, they must take the red-marked support (swing low in this chart) into account to manage their short entries.

Categories
Forex Basic Strategies

Identifying And Trading The Bullish & Bearish ‘Crab’ Pattern

Introduction

Introduction

Introduction

We have learned the importance of harmonic patterns in our recent Forex strategy articles. Also, we have understood how to identify and trade many of the famous harmonic patterns like Butterfly, Bat, Gartley, etc. In this article, let’s explore one last pattern in the harmonic group – the Crab pattern.

H.M Gartley introduced the Crab pattern in 2001, and Scott Carney added the respective Fib ratios to it. Just like the other harmonic patterns, the ‘Crab’ is also a reversal pattern that is used to identify when the trend of an asset is going to end and potentially reverse. There are both bullish and bearish Crab patterns, and they indicate bullish and bearish reversals in the market, respectively.

Each leg of the Crab pattern is denoted by a letter, and in total, there are five swing points – X, A, B, C, and D. Just like other harmonic patterns, there are different rules to trade the Crab pattern. Only trade this pattern and take positions if all of these rules get validated.

Crab Pattern Rules

XA – In its bearish version, the first leg of the pattern forms when the price of an underlying asset decline sharply from point X to point A. It can be any random bearish move. (vice-versa in the case of bullish)

AB – The AB leg is the counter-trend move to the previous leg and must retrace from the 38.2% to 61.8% of the distance covered by the first leg.

BC – Concerning the BC leg, price action changes its direction and goes down to 38.2% or 88.6% Fibs ratio of the AB leg.

CD – The CD move is the last and most important leg of the Crab pattern. So for printing this leg, the price action again changes its direction and goes to counter-trend to XA. The CD leg reverses between the 161.8% of the XA leg.

To identify the Crab pattern, one must follow all the above rules. Take a long or short position at point D as this is where the Crab pattern completes. Below is the pictographic representation of bullish and bearish crab patterns.

Crab Pattern – Trading Strategies 

Trading The Bullish Crab Pattern

The Crab pattern is quite popular in the market, so the respective tool with embedded Fib ratios is widely available in most of the trading platforms. The images we are using in this article are taken from the TradingView tool. If you are also someone who uses TradingView software, you can find this pattern’s charting tool on a toolbar on the left side.

So, first of all, select the Crab pattern charting tool and follow all the above rules to identify the pattern. Keep in mind that the Fibonacci ratios are incredibly crucial to trade the Crab pattern. If you recognize the pattern on a price chart and if you find the Fibs ratios not matching with the pattern rules, it means that the pattern is invalid. So do not trade that pattern.

Identifying The Pattern

The below image is a four-hour chart of the GBP/USD Forex pair. Overall the market was in a downtrend, but when all the rules of the Crab pattern are met, price action changes direction. As you can see below, XA is any random bullish move. The price action then retraces to 61.8% of the AB leg. Furthermore, the price action goes up again and retraces close to the 38.2% Fib level of the AB leg.

At this stage, price action confirms the three moves of the pattern following all the rules. In the end, the last move of the pattern clears that the Crab pattern was genuine. This move of the pattern is the longest one, and it has reached the 161.8% Fib level of the AB leg.

Entry, Stop-Loss & Take-Profit

As the price action confirms the pattern, we have immediately entered for a buy. If you are a conservative trader, make sure to wait for a couple of bullish confirmation candles to enter the trade.

We have four targets (X, B, C, A) to place the take-profit order in the crab pattern. In the beginning, we planned to book full profit at point A, but when the price crosses point B, the market turned sideways. So we have booked half of our profit at point B and then closed our full positions at point A.

We have seen most of the traders placing their stop-loss way below point D. However, that’s a wrong way to do it because they are risking more because of this simple logic – If the price action breaks point D, it automatically invalidates the pattern. Makes sense? In the above image, we can see that we have placed the stop-loss just below the D point, and overall, it was an 8R trade.

Trading The Bearish Crab Pattern

The below Daily chart represents the EUR/USD Forex pair. We have identified the bearish Crab pattern and plotted the Fib ratios on to the chart. As you can see, the market was in an uptrend. The first leg, which is XA, can be considered as a random bearish move. The AB bullish move reached close to the 38.2% of the XA leg. The third leg, BC, goes in the counter direction and retraces to the 88.6% Fib level of the AB move. The last leg is crucial because our decision making depends on this move alone. We can see the last candle reaching close to the 161.8% level of the AB leg, and this confirms the appearance of the bearish Crab pattern.

Entry, Stop-Loss & Take-Profit

We immediately went short in this Forex pair as soon as the final leg of the pattern closed. For some traders, it might be challenging to take a trade on the face of strong buyers. But when the market follows all the rules of the pattern, you can confidently pull the gun. Furthermore, the bearish candles increase the chance of trade working in our favor. Conservative traders can wait for these confirmations and then take the trade. In the end, price rolls over, and prints a brand new lower low.

We have followed the same rules of risk management as we have done with a bullish Crab pattern. However, we were being optimistic and placed the take-profit order at the higher timeframe’s major resistance area. If the market had started moving sideways, we would have booked our profits either at B or C or A. Stop-loss is placed just above point D, as discussed before.

Conclusion

The Crab patterns appear less frequently compared to other harmonic patterns in the market. But when it does, it often provides a high risk to reward ratio trades. If you are new to this pattern, you need a bit of experience and skill set to identify and trade this pattern on the price chart. Once you master this pattern, new trading opportunities will emerge, which can exponentially grow your trading account. In the end, trade the bearish Crab only when it appears in an uptrend, and trade the bullish Crab only when it appears in a downtrend. Only then the odds of your trades performing increase.

We hope you find this educational article informative. If you have any queries, please let us know in the comments below. Cheers.

Categories
Forex Daily Topic Forex Price Action

A Business of Glorious Uncertainty

Trading on the daily-H4 chart combination often brings more reward than our initial expectation. Typically, traders aim to earn 1R. However, it may even bring up to 5R. In today’s lesson, we are going to show an example of this.

Trading on the daily-H4 chart combination often brings more reward than our initial expectation. Typically, traders aim to earn 1R. However, it may even bring up to 5R. In today’s lesson, we are going to show an example of this.

Trading on the daily-H4 chart combination often brings more reward than our initial expectation. Typically, traders aim to earn 1R. However, it may even bring up to 5R. In today’s lesson, we are going to show an example of this.

This is a daily chart. The price heads down with good bearish momentum. The last candle is a spinning top. In a strong bearish daily trend, a spinning top does not suggest that the trend may change. However, the H4-daily traders’ strategy is different. They are to flip over to the H4 chart and wait for consolidation followed by a bullish breakout, to go long on the pair. Let us flip over to the H4 chart.

The H4 chart looks good. The chart produces two bearish candles consecutively. The buyers are to wait for a bullish engulfing candle closing above consolidation resistance to go long. The chart suggests that the buyers shall stick with the chart.

It consolidates more and produces a bullish engulfing candle. However, the candle closes within consolidation resistance. They are to wait for more. Look at the last candle. It seems like it is going to have a deep consolidation again.

This time the chart produces a bullish engulfing candle closing well above consolidation resistance. The buyers could trigger a long entry right after the candle closes and set the stop loss below the signal candle’s lowest low.

The trade does not go as per buyers’ expectations. It takes time to hit the target. However, the candle breaches through the take-profit level, closing as a strong bullish candle. The buyers may consider taking a partial profit and let the rest of the trade run. Let us find out what happens next.

This time the price heads towards the North with extreme bullish pressure. It travels about five times the distance of the buyers’ initial target. Assume, by taking partial profit, how much more a trader can earn. This is the beauty of trading on the daily-H4 combination. Since the daily chart is involved here, the price often heads towards daily support/resistance. This brings traders more profit if they deal with their trade accordingly. Another interesting point here to be noticed, despite producing an excellent bullish engulfing candle, the price does not head towards the North with good bullish momentum. On the other hand, once it hits the target level by producing another bullish Marubozu candle, it keeps going towards the North with extreme bullish momentum. This is why trading may be called a business of glorious uncertainty.

 

Categories
Forex Price-Action Strategies

Do Not Ignore Significant Levels of Support/Resistance

Price action trading is considered one of the most effective and easiest ways of trading. Traders are to follow a few rules and be disciplined to be a successful price action trader. One of the most important factors is marking the support/resistance zone/level. If a trader draws support/resistance zone/level; accordingly, trade management gets easy for him. In today’s lesson, we are going to demonstrate an example of how important it is to mark support/resistance levels on our trading chart and manage trade accordingly.

Price action trading is considered one of the most effective and easiest ways of trading. Traders are to follow a few rules and be disciplined to be a successful price action trader. One of the most important factors is marking the support/resistance zone/level. If a trader draws support/resistance zone/level; accordingly, trade management gets easy for him. In today’s lesson, we are going to demonstrate an example of how important it is to mark support/resistance levels on our trading chart and manage trade accordingly.

Price action trading is considered one of the most effective and easiest ways of trading. Traders are to follow a few rules and be disciplined to be a successful price action trader. One of the most important factors is marking the support/resistance zone/level. If a trader draws support/resistance zone/level; accordingly, trade management gets easy for him. In today’s lesson, we are going to demonstrate an example of how important it is to mark support/resistance levels on our trading chart and manage trade accordingly.

This is a daily chart. The chart shows that the price after being very bullish produces two bullish candles consecutively. The first candle comes out as a bearish engulfing candle as well.  Thus, major intraday charts’ traders may flip over to their charts and look for short opportunities. However, before we proceed, we must mark significant levels that may work as a level of support. Think about the levels that you may mark as the level of potential support. If you are done, proceed to the next chart.

These two levels may work as a level of support. The line below is the most significant level on this chart because this is the lowest low, and this is where the trend starts. The line above is quite significant since it produces a double bottom earlier. There are levels where the price reacted earlier. Thus, they may work as flipped support. However, two marked levels are crucial as far as this chart is concerned.

The chart produces a bullish reversal candle right at the marked level. It has been extremely bearish. The second last candle comes out as a strong bearish candle as well. Price action traders usually keep their eyes on a chart like this to go short upon breakout. That does not happen here. It produces a bullish inside bar. The chart is still the sellers’ paradise. Nevertheless, it is a bullish reversal candle, and it may change the whole equation on this chart. To have a better idea, let us zoom out the same chart.

The chart now tells the whole story. Do you recognize these two marked levels now? The sellers shall plan about trade management before the price hits such levels. It is often seen the price makes a big anti-trend move after reaching such levels. The reason is many traders/ big traders set their take profit at such level. Once they get out of the market with their profit, the price goes another way around, causing an abrupt opposite move. This may make traders lose money and lose profit. Let us make sure we learn how and where to mark the support/resistance zone/level and manage our trade accordingly.

Categories
Forex Price Action

Never Know What is around the Corner

In today’s lesson, we are going to demonstrate an example of trend riding along with the H4 breakout trading strategy. We often see that the market is in a strong direction, but it does not offer many entries. It is frustrating, but we must take it easy. We must not be impatient but keep our eyes on the chart. We never know what is around the corner.

In today’s lesson, we are going to demonstrate an example of trend riding along with the H4 breakout trading strategy. We often see that the market is in a strong direction, but it does not offer many entries. It is frustrating, but we must take it easy. We must not be impatient but keep our eyes on the chart. We never know what is around the corner.

In today’s lesson, we are going to demonstrate an example of trend riding along with the H4 breakout trading strategy. We often see that the market is in a strong direction, but it does not offer many entries. It is frustrating, but we must take it easy. We must not be impatient but keep our eyes on the chart. We never know what is around the corner.

This is an H4 chart. The chart shows that the price has been heading towards the South with strong bearish momentum. However, it has not offered any A+ entry yet. It produces some strong bearish engulfing candle breaching through consolidation support. However, consolidations have been shallow. Thus, the sellers on this chart have not been able to make the most of it. Look at the last candle. It comes out as a strong bearish candle as well. It suggests that the bearish trend is strong enough, and it may drive the price towards the South further. Let us proceed to the next chart.

The chart produces a bullish inside bar. This time it looks better since the inside bar candle is a long one. This means if the chart produces a bearish engulfing candle again, it would be after a deep consolidation. The deeper consolidation, the better it is as far as reward is concerned.

The chart produces two more bullish candles. It looks like it has been searching for its support. Deeper consolidation/correction is good, but if it goes too far by making a bullish breakout, equation changes. Let us proceed to the next chart.

Here it comes. An A+ bearish engulfing signal candle this is. The sellers may trigger a short entry right after the candle closes by setting stop-loss above the candle’s high. Take profit may be set with 1:1 risk-reward.

The chart produces another bullish corrective candle after such a nice-looking bearish reversal candle. However, it heads towards the South and hits the target. We learn two lessons here.

  1. A chart may not offer as many entries as we anticipate, even it is on a strong trend.
  2. We never know what is around the corner in the Forex market.

At one point, it seems that the chart may not offer any short entry for the H4 sellers. The price keeps heading towards the North. Deep consolidation is about to get into too deep. At last, the signal candle comes and offers an excellent short entry. While trading, we are always to be on our toes since we do not know what is around the corner in the Forex market.

 

Categories
Forex Elliott Wave

Introduction to Intermediate Wave Analysis

The wave analysis consists of the market study following the principles described by R.N. Elliott in its Treatise “The Wave Principle.” In this educational article, we’ll introduce the concept of wave patterns.

The wave analysis consists of the market study following the principles described by R.N. Elliott in its Treatise “The Wave Principle.” In this educational article, we’ll introduce the concept of wave patterns.

The wave analysis consists of the market study following the principles described by R.N. Elliott in its Treatise “The Wave Principle.” In this educational article, we’ll introduce the concept of wave patterns.

Introduction

In the preliminary section, we presented the fundamentals of the wave analysis. We learned the wave concept, which will allow us to identify the segments that build a sequence of waves. Additionally, we unveiled the way to recognize the start and the end of each formation. Finally, we presented different rules to describe each kind of sequence according to which the wave analyst will get a panoramic overview of the market.

In the current section, we will present the concepts of wave analysis defined by Glenn Neely, expanding R.N. Elliott’s work.

Grouping Waves

In the preliminary wave analysis section, we presented the concept of “monowave,” or segment, that corresponds to the basic unit of a movement developed by a wave sequence. R.N. Elliott, in his work “The Wave Principle,” defined a set of patterns that follows a specific order according to its internal subdivision.

Elliott grouped these patterns into two main groups, defined as impulses and corrections. In simple words, impulses are directional movements, having five internal segments that create trends. On the other hand, corrections are non-directional movements and, also, moves against the trend; these formations present three sub-divisions.

According to the process of wave grouping, we have five basic kinds of patterns, these are:

  1. 5-5-5-5-5: Impulse.
  2. 5-3-5: Zigzag.
  3. 3-3-5: Flat.
  4. 3-3-3-3-3: Triangle.
  5. 3-3-3-3-3: Terminal.

There are, also, other complex combinations called double and triple three, that will be studied in depth in the advanced analysis wave section.

Analyzing Waves Formations

The process for an Elliott wave pattern analysis begins with the separation of formations that have 3 or 5 internal segments. The knowledge of the basic structures will allow the wave analyst to simplify the study of complex corrective patterns.

As the formations under study are recognized, the analyst should consider that the waves must have a certain level of similarity to each other, in terms of price and time. Two consecutive waves will be similar in both price and time if the smaller of the two is not less than one third (1/3) of the largest. In case the next wave is shorter, then the next wave is said to belong to a sequence of lesser degree. In other words, if W2 does not meet the price and time rule with respect to W1, then W2 must be associated with W3. After this association is made, the new segment should be called W2.

Example

The following chart illustrates Johnson & Johnson (NYSE: JNJ) in its log-scale 2-week timeframe. On the figure, when we compare wave 2 with wave 1 we observe that both comply with the similarity rule in price and time. However, wave 4 does not reach the 1/3 of time rule when compared with wave 3.

Fig 1 – Johnson & Johnson (NYSE: JNJ) 2W Log-scale. (click on it to enlarge)

Conclusions

In this article, we introduced the five basic Elliott wave patterns, which will use in the wave analysis process. Also, we presented the rule of similarity in terms of price and time between waves.

The application of these criteria and integrating the concepts of Directional and Non-Directional moves drove us to conclude that Johnson & Johnson moves in its fourth wave due that does not accomplish the 1/3 rule of minimum time compared with wave 3.

Suggested Readings

  • Neely, G.; Mastering Elliott Wave: Presenting the Neely Method; Windsor Books; 2nd Edition (1990).
Categories
Forex Daily Topic Forex Price-Action Strategies

Never Forget to Calculate Risk-Reward

Risk-Reward is an extremely important factor in Forex trading. The price often makes a reversal at a significant level of swing high/swing low. Thus, price action traders must emphasize those levels before taking any entry. By calculating risk-reward, they should only take entry once a trade setup is found lucrative as far as the risk-reward ratio is concerned. In today’s article, we are going to demonstrate an example of a trade setup, which looks good with candlestick patterns and price action. However, things do not go as it usually goes. We try to find out the reason behind it.

Risk-Reward is an extremely important factor in Forex trading. The price often makes a reversal at a significant level of swing high/swing low. Thus, price action traders must emphasize those levels before taking any entry. By calculating risk-reward, they should only take entry once a trade setup is found lucrative as far as the risk-reward ratio is concerned. In today’s article, we are going to demonstrate an example of a trade setup, which looks good with candlestick patterns and price action. However, things do not go as it usually goes. We try to find out the reason behind it.

Risk-Reward is an extremely important factor in Forex trading. The price often makes a reversal at a significant level of swing high/swing low. Thus, price action traders must emphasize those levels before taking any entry. By calculating risk-reward, they should only take entry once a trade setup is found lucrative as far as the risk-reward ratio is concerned. In today’s article, we are going to demonstrate an example of a trade setup, which looks good with candlestick patterns and price action. However, things do not go as it usually goes. We try to find out the reason behind it.

After being bearish for quite a while, the chart heads towards the North by producing a bullish inside bar. The chart presents a strong bullish candle followed by a corrective candle. This is what price action traders wait for. Ideally, they are to wait for a bullish engulfing candle closing above the consolidation resistance to go long on the pair. Do not miss the drawn level, which is the last significant swing high.

Here it comes. The chart produces a bullish engulfing candle closing well above the consolidation resistance. Some traders may think that they shall trigger a long entry right after the last candle closes. We must not forget that it is not only about candlestick and breakout. There is another factor, which is risk-reward. The reward does not look good comparing to the risk.

The next candle does not disappoint the buyers (if there are some). However, it gives a strong message that the level of resistance has gone stronger. The price may make a reversal. Let us find out what the price does next.

The next candle comes out as a bearish engulfing candle. This is one of the strongest bearish reversal candles. Since a significant level of resistance produces the candle, the sellers are getting ready to go short on the pair upon a bearish breakout. Those who took a long entry earlier, their trade is in great danger.

The next candle comes out as a bearish candle having a strong bounce at the level of last support. It must have swept away buyers’ stop loss. The last candle does not make a bearish breakout and has a long lower shadow, which is not a good sign for the sellers as well.  However, the buyers have not been able to take advantage of such nice bullish price action. The Forex market could take any direction since there are technical as well as fundamental aspects. Nevertheless, if we are to find one valid reason for the bearish reversal, it most probably is risk-reward.

Categories
Forex Daily Topic Forex Price-Action Strategies

When You Confront a Loss

In today’s article, we are going to demonstrate an example of a failed entry on the daily chart. In a bullish market, the chart produces a bearish inside bar followed by a perfect looking bullish engulfing candle closing well above the level of resistance. However, the price heads towards the South and hits the stop loss. We try to find out what goes wrong here.

In today’s article, we are going to demonstrate an example of a failed entry on the daily chart. In a bullish market, the chart produces a bearish inside bar followed by a perfect looking bullish engulfing candle closing well above the level of resistance. However, the price heads towards the South and hits the stop loss. We try to find out what goes wrong here.

In today’s article, we are going to demonstrate an example of a failed entry on the daily chart. In a bullish market, the chart produces a bearish inside bar followed by a perfect looking bullish engulfing candle closing well above the level of resistance. However, the price heads towards the South and hits the stop loss. We try to find out what goes wrong here.

The chart shows that the price heads towards the South with strong bearish momentum. The sellers are having a feast here. Any intraday breakout at the lowest low of the last daily candle may get the traders to go short on the respective chart. Let us proceed with what happens next.

The last daily candle comes out as a bullish inside bar. Intraday buyers may search for a long entry on any breakout at the highest high of the last daily candle. On the other hand, the daily chart traders are to wait for the next day’s candle to close as a bearish engulfing candle.

The price heads towards the North with good bullish momentum. The chart produces two more bullish candles after that inside bar bullish candle. The chart looks good for the buyers on the daily chart as well. If the chart produces a bearish reversal candle followed by a bullish engulfing candle closing above the level of resistance, the buyers may go long on the daily chart.

The chart produces an inside bar. This must excite the buyers. If the next candle comes out as a bullish engulfing candle closing above the resistance of this bullish wave, the buyers may trigger a long entry.

Here it comes. This is what the buyers wait for. They may trigger a long entry right after the candle closes by setting stop loss below the candle’s lowest low. The significant level of resistance is far enough, which offers them a tremendous risk-reward. Moreover, this is the daily chart, which is one of the most consistent charts in the Forex market. In a word, this is a good trade setup for the buyers.

The price hits the stop loss the next day. The daily candle one after it comes out as a bearish candle too. The chart looked extremely good for the buyers two days ago. Now things are very different. If we dig into it, we do not find anything particular that the chart misses to produce such bearish candles all of a sudden. Technically, there is nothing wrong with the entry. We must remember this is how the market goes. It happens a lot. We must learn how to absorb such an unpleasant incident.

 

Categories
Crypto Daily Topic Forex Price Action

Calculate Risk-Reward along with Candle’s Attributes

In today’s lesson, we are going to demonstrate an example of the importance of risk-reward. To be successful in price action trading, traders are to calculate risk-reward before every single entry they execute. Let us find out from the charts below the importance of risk-reward.

In today’s lesson, we are going to demonstrate an example of the importance of risk-reward. To be successful in price action trading, traders are to calculate risk-reward before every single entry they execute. Let us find out from the charts below the importance of risk-reward.

In today’s lesson, we are going to demonstrate an example of the importance of risk-reward. To be successful in price action trading, traders are to calculate risk-reward before every single entry they execute. Let us find out from the charts below the importance of risk-reward.

The price heads towards the South with an average bearish momentum. Ideally, it is the sellers’ territory. However, it has come a long way. The buyers must wait for a strong bullish reversal candle to go long on this chart.

This is an extremely strong bullish reversal candle. The buyers may wait for the price to consolidate and produce a bullish reversal candle. Within a candle, things are very different now.

The chart produces a bearish inside bar. Thus, buyers may get more optimistic. They are to wait for a bullish engulfing candle closing above the last swing high to trigger a long entry. The price may travel towards the drawn level, which is a significant level of resistance on the chart.

The chart produces a bullish engulfing candle closing well above the last resistance. As explained earlier, the buyers are to set their stop loss below the last candle and trigger a short entry right after the candle closes. The question is whether they shall take a long entry here or not. Think about it. The last candle closes within the level of resistance. Technically, there is no space for the price for traveling towards the North unless it makes another breakout here. The reward is zero here.

As anticipated, the price consolidates again and struggles to make another breakout. The last candle comes out as a bearish candle. Thus, things do not look good for the buyers. It may change its direction. If it makes a bullish breakout, that is another ball game, though. Let us proceed to the next chart.

The price does not make a bullish breakout but changes its trend. It is the sellers’ territory again. By looking at the last candle, the sellers may trigger a short entry by setting their take profit at the last swing low.

In this lesson, we have seen that the trend-initiating candle and the signal candle both get 10 on 10. However, the chart does not offer an entry because there is no space for the price for traveling towards the upside. Consequently, the sellers take over and drive the price towards the downside. To sum up, we not only look at the candle’s attributes but also calculate risk-reward.

Categories
Forex Elliott Wave Forex Fibonacci

How to Use Retracements to Analyze Waves – Part 3

In this educational post, we will review the third rule on the use of retracements in the wave analysis devised by Glenn Neely.

In this educational post, we will review the third rule on the use of retracements in the wave analysis devised by Glenn Neely.

In this educational post, we will review the third rule on the use of retracements in the wave analysis devised by Glenn Neely.

Third Rule

The third rule occurs when wave 2 (W2) retraces precisely 61.8% of wave 1 (W1). This scenario tends to be somewhat confusing to analyze because when the price retraces to 61.8%, there is the same likelihood that the structure in progress is an impulsive or corrective formation.

Once the retracement of W2 is compared with the height of W1, the wave analyst should evaluate the length of W0 relative to W1. From the resulting measure, several potential scenarios follow, each meeting one of the six following conditions.

Condition “a”: this condition occurs when W0 is lower than the 38.2% level of W1. In this case, W1 could be the end of a zigzag structure inside a complex corrective sequence. In this case, the end of W1 should be identified as “:5”. Another option is that W1 moves inside a continuous correction, or it is part of the first leg of a flat pattern, in this case, the end of W1 should be identified as “:3.

Condition “b”: this condition occurs if W0 is higher or equal than 38.2%, and lower than 61.8% of W1. Considering the lengths of waves “3” (W3) and “-1” (W-1), W1 could be the end of a zigzag pattern inside of a complex correction; in this case, W1 should be identified as “:5. There is another possible scenario when W1 is part of an ending pattern of an impulsive structure; for this setting, W1 should be tagged as “:3”.

Condition “c”: this condition arises when W0 is higher or equal than 61.8% and lower than 100% of W1. In this scenario, W1 could be part of a corrective structure, like a Flat or Triangle pattern. In consequence, W1 should be identified as “:3”. When the length of wave 3 (W3) is shorter than W1, W1 could be the end of a zigzag pattern, and W1 should be labeled as “:5”.

Condition “d”: this condition appears when W0 is higher or equal than 100% but lower than 161.8% of W1. Depending on the lengths of waves W2, W3, and W-1, W1 could be the first segment of a zigzag pattern. In this case, W1 will be identified as “:5”. In another instance, W1 could correspond to a section of a triangle structure or the central part of a flat pattern. If the wave analyst faces this scenario, it should identify to W1 as “:3”.

Condition “e”: This condition occurs when W0 is between 161.8% and 261.8% of W1. In the same way as with the “d” condition, W1 could correspond to the first segment of a zigzag pattern. Therefore, W1 will be identified as “:5”. The second possibility is that W1 could be the central section of a flat formation that concludes in a complex corrective pattern or a segment of a triangle formation. In this case, W1 will be tagged as “:3”.

Condition “f”: this condition occurs when W0 is higher than 261.8% of W1. In this case, it applies the same identification alternatives for W1 as a “:5” or “:3” described in the previous conditions. In other words, W1 could be part of a zigzag, flat, or triangle pattern.

Conclusions

The third rule studied in this article, reveals that this case corresponds mainly to a corrective formation. On the other hand, during the preliminary wave analysis, it is relevant to study the context in which the price action advances.

In the same way, although there are three kinds of basic corrective structures, as the price advances, the wave analyst must discard the options that couldn’t correspond to the Elliott wave formation. As said by R.N. Elliott in his work ” The Wave Principle,” the knowledge of the corrective structures provides the student an edge to visualize the potential next move of the market.

Suggested Readings

  • Neely, G.; Mastering Elliott Wave: Presenting the Neely Method; Windsor Books; 2nd Edition (1990).
  • Prechter, R.; The Major Works of R. N. Elliott; New Classics Library; 2nd Edition (1990).
Categories
Forex Price-Action Strategies

To Maintain Better Winning Ratio, Go with A+ Entry

In today’s lesson, we are going to demonstrate an example of H1 breakout trading. In this example, the breakout candle, as well as the confirmation candle, is not the best one the price action traders like to have. Nevertheless, the price heads towards the trend’s direction nicely. In most cases, it does not happen though.

In today’s lesson, we are going to demonstrate an example of H1 breakout trading. In this example, the breakout candle, as well as the confirmation candle, is not the best one the price action traders like to have. Nevertheless, the price heads towards the trend’s direction nicely. In most cases, it does not happen though.

In today’s lesson, we are going to demonstrate an example of H1 breakout trading. In this example, the breakout candle, as well as the confirmation candle, is not the best one the price action traders like to have. Nevertheless, the price heads towards the trend’s direction nicely. In most cases, it does not happen though.

The price after being bullish gets choppy. It then makes a bearish move but upon finding its support, it produces a bullish engulfing candle. This is the strongest bullish reversal candle, which shall attract the buyers to keep an eye on this chart. Let us proceed to the next chart.

The price does not get bullish as expected. However, an inside bar means that the buyers still hold the key. The chart may produce bullish candle and end up making a breakout at the swing high. The H1-breakout traders must be waiting for a breakout here.

The next candle comes out as a bullish engulfing candle closing above the level of resistance. It is a breakout but the breakout is not explicit. If the candle closes well above the level of resistance, it would attract more buyers. Let us now wait for the confirmation candle. If the next candle comes out as a bullish candle closing well above the breakout candle, it may attract more buyers in the end.

The confirmation candle does not look very promising either. As far as H1 breakout price action trading is concerned, the buyers may trigger a long entry. Considering candles’ attributes, it is not an A+ entry though. Let us proceed to the next chart and find out what the price does.

The price heads towards the North with good bullish momentum. It takes only two candles to hit the target. As mentioned, it is not an A+ entry but the trade gets the buyers some profit. In some cases, we see that even an A+ entry gets us a loss instead.

This is how the market works. We must not lose our patience but stick with our plan. If we take such entry, we may have to encounter less momentum after triggering entry, and more losing trades. We have to have the mental strength to face such losses then. Otherwise, we may skip taking such entry. Such an entry does not always get us profit. We have demonstrated this in today’s lesson.

Another equation we should remember, if we want to take A+ entry, we get less number of entries but more consistency. On the other hand, if we take a signal as long as it meets our trading strategy requirement, we get more entries but less consistency.

Categories
Forex Daily Topic Forex Price-Action Strategies

A Weak Breakout Candle Makes Things Different

In H1 breakout trading, the signal candle’s attributes are as important as the breakout candle. We know that a breakout candle means a lot. So is the breakout confirmation or signal candle. In today’s article, we are going to demonstrate an example of this. Let us get started.

In H1 breakout trading, the signal candle’s attributes are as important as the breakout candle. We know that a breakout candle means a lot. So is the breakout confirmation or signal candle. In today’s article, we are going to demonstrate an example of this. Let us get started.

In H1 breakout trading, the signal candle’s attributes are as important as the breakout candle. We know that a breakout candle means a lot. So is the breakout confirmation or signal candle. In today’s article, we are going to demonstrate an example of this. Let us get started.

The price after being bearish gets caught within a horizontal channel. However, the last candle comes out as a bearish engulfing candle. It seems that the sellers may take control soon. It all depends on the breakout at the level of support followed by breakout confirmation.

The next candle comes out as a bearish candle as well closing within the level of support. The sellers are to wait longer. On the other hand, the buyers would love to get a bullish reversal right here. The battle is on.

The bear wins. The last candle comes out as a bearish engulfing candle closing well below the level of support. This is what H1 breakout traders want. If the next candle closes well below the breakout candle, the sellers may trigger a short entry.

The next candle comes out as a bearish doji candle. It closes below the breakout candle. The sellers may trigger a short entry. However, this is not an ideal candle showing strong bearish momentum. If a candle like this confirms a breakout, the price may not go towards the take profit level that we would love to see.

After triggering the entry, the chart produces two bullish candles. It looks extremely ominous. Most probably, the entry is going to get us a loss. Taking a loss is a usual thing in the Forex trading. However, the last two candles may be produced because of the fragile confirmation candle. This is where H1 breakout traders shall be a bit careful. If the confirmation candle does not come out as a strong candle, the price may go another way round. Let us find out from the next chart what the price does here.

Oh! It is about to hit the stop loss. It produces a bearish engulfing candle again. The price may head towards the downside and hit take profit level. It is still 50-50 since the price is trading within the level of last swing low. Let us find out how it ends.

Yes, it hits the target at last. However, this is what the price does not usually do when the H1 chart makes a breakout and confirms it. As mentioned, it often happens when the breakout and confirmation candle come out as weak candles. Thus, we may consider this when trading H1 breakout strategy next time.

Categories
Forex Daily Topic Forex Price-Action Strategies

‘Set and Forget’ Tailor Made for H1 Breakout Trading

In today’s article, we are going to demonstrate an example of H1 breakout strategy. It is a typical example of the rule ‘Set and Forget’. To trade on the H1 chart, we must be patient and let the price do its job once we have taken entry. Let us proceed. The chart shows that the […]

In today’s article, we are going to demonstrate an example of H1 breakout strategy. It is a typical example of the rule ‘Set and Forget’. To trade on the H1 chart, we must be patient and let the price do its job once we have taken entry. Let us proceed. The chart shows that the […]

In today’s article, we are going to demonstrate an example of H1 breakout strategy. It is a typical example of the rule ‘Set and Forget’. To trade on the H1 chart, we must be patient and let the price do its job once we have taken entry. Let us proceed.

The chart shows that the last candle breaches closing below the level of support. As far as the H1 breakout strategy is concerned, traders must wait for the next candle to be bearish closing well below the breakout candle.

The last candle comes out as a bearish candle closing well below the breakout candle. The sellers wait for such candle to confirm a breakout. The sellers may trigger a short entry right after the last candle closes. Stop loss is to be set above where the trend starts and Take Profit is to be set with a 1:1 risk-reward.

The next candle comes out as a bearish candle as well. The sellers must let the price to hit the target. To be precise, they shall not even look at the chart. Stop Loss and Take Profit are set. All they can do is let the price do its job.

Where does that one come from? The chart produces a bullish engulfing candle. It is a strong bullish reversal candle, which may change the trend. To be honest, a candle like this may intimidate any price action trader. Do not forget this is an H1 chart and the entry is taken on H1 breakout strategy. Set and Forget rule comes very handy in this trade setup. Let us assume, we do not even know that the chart produces such a candle. We let the market do its own job.

The next candle comes out as a bearish inside bar. It looks more ominous. If the next candle comes as a bullish engulfing candle, the sellers will be in serious trouble. Let us proceed to the next chart.

The next candle comes out as a doji candle followed by another doji candle. However, the price heads towards Take Profit level and hits the target at last. If we keep looking at such chart, would we be able to hold ourselves back from closing the entry manually? It may get very tough for the traders to hold their nerves with such price action when a trade is running. If a trader trades on the daily or the H4 chart, he may consider closing the entry manually. With the H1 chart trading, traders may not do this. In other words, set and forget when you are trading on the H1 chart.

Categories
Forex Price-Action Strategies

A Different Kind of Breakout Does Its Job Well

In today’s lesson, we are going to demonstrate an H1 breakout trade setup. Usually, the breakout candle makes a breakout by breaching through a level of support/resistance. Today, we are going to study about a breakout that takes place right at the level of resistance, which becomes support after the breakout. We need to be […]

In today’s lesson, we are going to demonstrate an H1 breakout trade setup. Usually, the breakout candle makes a breakout by breaching through a level of support/resistance. Today, we are going to study about a breakout that takes place right at the level of resistance, which becomes support after the breakout. We need to be […]

In today’s lesson, we are going to demonstrate an H1 breakout trade setup. Usually, the breakout candle makes a breakout by breaching through a level of support/resistance. Today, we are going to study about a breakout that takes place right at the level of resistance, which becomes support after the breakout. We need to be familiar with such a breakout since it happens quite a lot.

The price produces a bullish engulfing candle. The buyers wait for such a good-looking bullish reversal candle. They shall wait for the price to go towards the level of resistance and makes a breakout later. Let us proceed to the next chart.

The price heads towards the North but not right after the reversal candle. However, the bullish momentum looks good. Look at the last candle. It closes right at the level of resistance. It seems the price may make a breakout here soon.

The next candle closes well above the level of resistance. However, the candle is formed right at the level of resistance. Typically, a bullish breakout candle’s 25% of its lower body shall remain below the level of resistance. In this case, candle’s 100% (almost, ignore that very tiny lower body) body is above the level of flipped support. Such a breakout takes place in the Forex market very frequently.

The next candle closes well above the breakout candle. This means the breakout is confirmed. The buyers may trigger a long entry right after the last candle closes.

After triggering the entry, the price heads towards the upside with good bullish momentum. The chart produces two consecutive bullish candles after breakout confirmation. The buyers shall wait for the price to hit the target. For that, the price still has some space to travel towards the North.

The price hits the target and comes back down a little. It goes towards the level again. In this trade setup, the breakout candle’s breakout is not a good one that price action traders look for. In many cases, we may see that the chart does not confirm a breakout but goes another way around. It happens because such a breakout consumes some extra space. Thus, the majority of such breakouts are not confirmed and may not end up offering entry. However, once the breakout is confirmed, and there is enough space for the price to travel, most likely trade setup would work in traders’ favor. In the beginning, we may get puzzled with such a breakout. The fact is if the next candle after a breakout closes above (bullish market) the breakout candle, it is a valid breakout and works as well as the typical breakout candle does.

Categories
Forex Price-Action Strategies

Patience Required Even with H1 Breakout Trade Setup

In today’s lesson, we are going to demonstrate an example of an H1 breakout strategy. Usually, the price heads towards the trend’s direction with good momentum on the H1 breakout trade setup. In today’s example, the price does not behave as it usually does. Let us get started.

In today’s lesson, we are going to demonstrate an example of an H1 breakout strategy. Usually, the price heads towards the trend’s direction with good momentum on the H1 breakout trade setup. In today’s example, the price does not behave as it usually does. Let us get started.

In today’s lesson, we are going to demonstrate an example of an H1 breakout strategy. Usually, the price heads towards the trend’s direction with good momentum on the H1 breakout trade setup. In today’s example, the price does not behave as it usually does. Let us get started.

The price after being bullish, it has been on consolidation. Look at the last two candles. The price heads towards the consolidation resistance. The buyers eagerly wait for a bullish breakout at the level of resistance on such price action. Let us proceed to the next chart.

Here comes the breakout candle. The buyers love to get a breakout with such a candle. Now, they must wait for the next candle to close above the breakout candle. If that happens, traders may trigger a long entry.

The next candle comes out as a bullish candle closing well above the breakout candle. The buyers may trigger a long entry right after the last candle closes. The stop loss is to be set below the trend-initiating candle, and the take profit is to be placed with 1:1 risk-reward. Six out of ten times, the price goes towards the take-profit level with ease in a hurry. Let us proceed to the next chart and see how this one goes.

The price does not head towards the North with good bullish momentum. The way it has been going for the last five candles, it looks ominous. A question may be raised here, “shall we close the entry?” The price still has a lot of space to hit take profit level. The market is not about to close down for the weekend or holiday. Thus, we must be patient and hold the entry. In other words, we shall apply the rule “set and forget.” The set and forget rule is tailor-made for intraday trading, such as the H1 chart to the 5M chart. Let us wait and find out what happens.

After a long while, the price makes a move towards the North again. It seems the trade is going to get the buyers some green pips. They must wait and let the price to hit the target.

It loses its momentum again a bit, but it hits the target. We often head that patience is required more when traders trade on major charts such as the H4, the daily or the weekly. The reality is patience is required for traders of all kinds. Today’s example has proved this again.

Categories
Forex Price-Action Strategies

The ABC Pattern’s C Point May Confuse You Time to Time

In today’s lesson, we are going to demonstrate an example of the ABC pattern trading. In this example, the price does not make a full-wave correction to produce C point. However, the signal candle comes out as a strong reversal candle, which drives the price towards the trend’s direction. Let us get started. The price […]

In today’s lesson, we are going to demonstrate an example of the ABC pattern trading. In this example, the price does not make a full-wave correction to produce C point. However, the signal candle comes out as a strong reversal candle, which drives the price towards the trend’s direction. Let us get started. The price […]

In today’s lesson, we are going to demonstrate an example of the ABC pattern trading. In this example, the price does not make a full-wave correction to produce C point. However, the signal candle comes out as a strong reversal candle, which drives the price towards the trend’s direction. Let us get started.

The price makes a long bearish move and produces a bullish reversal candle. The price heads towards the last swing high. The buyers are to wait for a breakout at the level of resistance (swing high) first. A correction followed by a bullish engulfing candle at the breakout level would be the signal to go long here.

The chart makes a breakout keeps producing bullish candles. The buyers are to wait for the chart to produce a bearish reversal candle to make a downside correction. Since the chart produces one more bullish candle, it may make a correction soon.

After producing a bearish reversal candle, the price keeps making a correction. Ideally, the buyers would love to see the price come back to the breakout level. However, it is the Forex market. Things do not always go by the book here.

As mentioned, things do not always go by the book. The price does not make a full-wave correction. Nevertheless, look at the bullish reversal candle. The candle closes way above the last swing high. The buyers may trigger a long entry right after the last candle closes. We must remember that this is not an A+ entry as far as the ABC pattern trading is concerned. Let us proceed to the next chart to find out how the trade goes.

The price heads towards the North with good bullish momentum. Typical 1 R is achieved as well. In a word, the long entry gets the profit for the buyers. As mentioned earlier, this is not an A+ entry. The question is, shall we go for such entry?

In most cases, such price action may get us profit. However, if we do not like to take losses, we may skip taking such entry. Especially, in the beginning, traders find it hard to digest losses. Thus, for beginners, it would be best if they skip taking such entry and only go for A+ entry. Traders learn the art of digesting losses with time. Yes, you have read it right. Digesting losses in Forex trading is an art. If you have already learned the art, then you may as well go with an entry like this. In the end, you will be able to come out with a profit.

Categories
Forex Daily Topic Forex Price-Action Strategies

Look for Such Price Action to Trade on the ABC Pattern

In today’s lesson, we are going to demonstrate an example of the ABC pattern trading. The trend-initiating candle comes out as a bullish engulfing candle followed by a bullish breakout. The price then makes a bearish correction and makes a bullish move upon producing a bullish reversal candle at a flipped support. Let us demonstrate with the charts how it happens.

In today’s lesson, we are going to demonstrate an example of the ABC pattern trading. The trend-initiating candle comes out as a bullish engulfing candle followed by a bullish breakout. The price then makes a bearish correction and makes a bullish move upon producing a bullish reversal candle at a flipped support. Let us demonstrate with the charts how it happens.

In today’s lesson, we are going to demonstrate an example of the ABC pattern trading. The trend-initiating candle comes out as a bullish engulfing candle followed by a bullish breakout. The price then makes a bearish correction and makes a bullish move upon producing a bullish reversal candle at a flipped support. Let us demonstrate with the charts how it happens.

The price has been bearish, but it has produced a bullish engulfing candle at the support zone. The buyers are to wait for the price to head towards the North and make a bullish breakout at the last swing high. Let us proceed to the next chart.

The price makes a breakout at the nearest swing high. The buyers are to wait for consolidation or correction and a bullish breakout. The last candle comes out as a strong bullish candle as well. It may keep going towards the North. Let us wait and find out what it does next.

It starts having a correction. Then, it produces a bearish inside bar followed by two more bearish candles. The price is at the flipped support. The buyers are to keep their eyes on this chart very closely.

Here it comes. The chart produces a bullish reversal candle. Do not miss the point that the level is the breakout level when the price heads towards the North. Such level is very significant as far as the ABC pattern trading is concerned.

The price makes a bullish breakout again and produces a new higher high. Traders may trigger a long entry right after the last candle closes by setting stop loss below the level of flipped support. It usually provides at least 1:1 risk-reward, which is the safest option. Let us proceed to the next chart to find out how it goes.

The price heads towards the North as expected. It hits the target (1R) with ease. The chart suggests that it may go towards the North further. Anyway, the ABC pattern traders shall enjoy their profit and hunt for the next one somewhere else.

In this example, we have seen that four aspects of the ABC pattern trading such trend initiating candle, breakout, reversal candle at the breakout level, and the signal candle get 10 on 10. Consequently, the price heads towards the desired direction with good momentum. If any of them fails to get 10 on 10, the trade may not go, exactly we would love to see it go. To keep excellent trading consistency, try your best to trade the ABC pattern on such price action that we have demonstrated today.

Categories
Forex Price-Action Strategies

Trading on the Daily Chart: The Inside Bar May Disappoint You More Often

In today’s article, we are going to demonstrate an example of price action trading on the daily chart. In price action trading, a reversal candle or reversal pattern means a lot. Usually, the engulfing candle, track rail, morning start, or evening star are considered strong reversal candles or patterns in price action trading. On the […]

In today’s article, we are going to demonstrate an example of price action trading on the daily chart. In price action trading, a reversal candle or reversal pattern means a lot. Usually, the engulfing candle, track rail, morning start, or evening star are considered strong reversal candles or patterns in price action trading. On the […]

In today’s article, we are going to demonstrate an example of price action trading on the daily chart. In price action trading, a reversal candle or reversal pattern means a lot. Usually, the engulfing candle, track rail, morning start, or evening star are considered strong reversal candles or patterns in price action trading. On the other hand, the inside bar is not considered a strong bearish reversal candle. In the daily-H4 chart combination trading, an inside bar still may offer a good entry since traders take their final decision depending on the H4 chart. To trade on the daily chart, it may be a different case in most cases. Let us have a demonstration of this.

After being bullish for several daily candles, the chart produces an inside bar at a resistance zone. To trade on the daily chart, traders wait for the price to produce a corrective candle followed by another candle towards the trend’s direction. Over here, traders are to wait for a bullish corrective candle followed by a bearish reversal candle closing below the level of support to offer a short entry.

The chart produces a bullish inside bar. Things are going according to the sellers’ expectations. If the chart produces a bearish engulfing candle closing below the last candle’s lowest low, the sellers may trigger a short entry. Let us proceed to the next chart.

The last candle comes out as a bearish engulfing candle closing well below the level of support. The nearest swing low is far enough, which offers an excellent risk-reward. The sellers may trigger a short entry right after the last candle closes.

Things are not going according to the sellers’ expectations. Anyway, the sellers must be patient with the position. Let us proceed to the next chart and find out what the price does next.

The price consolidates for several candles. The last two candles look good for the sellers. However, the level of consolidation support is still held. Do not forget the point that the sellers have been holding the position for the last five trading days.

It makes the sellers wait longer and heads towards the North to hit the stop loss. Taking a loss or getting the stop loss hit is a usual incident in the Forex trading. However, if we dig into this case study, we find that apart from the trend-initiating candle, everything gets A+. In trading on the daily chart, an inside bar may get us a profit on many occasions. However, if we compare it with other strong reversal pattern or candle, the winning percentage may not impress us.

 

Categories
Forex Daily Topic Forex Price-Action Strategies

Trading on the Daily Chart More Rewarding Than It Looks

Trading on the daily chart is very rewarding as well as hassle-free comparing to intraday trading. Trade management is different since it allows enough time for the traders to make a decision about their positions. This often allows the traders to earn more pips. In today’s article, we are going to demonstrate an example of price action trading on the daily chart, which allows the traders to hunt some extra pips. We find out how traders do it.

Trading on the daily chart is very rewarding as well as hassle-free comparing to intraday trading. Trade management is different since it allows enough time for the traders to make a decision about their positions. This often allows the traders to earn more pips. In today’s article, we are going to demonstrate an example of price action trading on the daily chart, which allows the traders to hunt some extra pips. We find out how traders do it.

Trading on the daily chart is very rewarding as well as hassle-free comparing to intraday trading. Trade management is different since it allows enough time for the traders to make a decision about their positions. This often allows the traders to earn more pips. In today’s article, we are going to demonstrate an example of price action trading on the daily chart, which allows the traders to hunt some extra pips. We find out how traders do it.

This is a daily chart. It shows that after being bullish for seven trading days, it produces a bearish engulfing candle. The Bearish engulfing pattern is one of the strongest bearish reversal patterns. The sellers are to wait for the price to consolidate and give them a level of resistance where they set Stop Loss above to ensure better risk-reward.

This is what the sellers want to see. The chart produces a bullish inside bar, which states that the sellers may take over the control upon getting another bearish engulfing candle closing below the level of support.

Look at the last candle. It comes out as a bearish engulfing candle closing below the level of consolidation support. The sellers may trigger a short entry right after the candle closes by setting the stop loss above the highest high of the signal candle. To set take profit, some traders may close the trade manually upon getting a bullish reversal candle; some may set at 1:1 risk-reward; some may set at the last significant lowest low. It depends on traders’ psychology and with the strategy (in terms of taking profit) they feel comfortable with.

The price consolidates with one more candle after triggering the entry. However, the price hits the target, which is set at the level of the significant lowest low. As mentioned, some traders may keep holding the position since the price is still with the bear. Let us proceed to the next chart and find out what the price does in the next candle.

It makes a breakout as well. The sellers holding the position may dream big. It seems the price may keep heading towards the South further. This is the good thing about trading on the daily chart. Traders get enough time to decide about their positions. They get 1:1 risk-reward in almost every trade. If they understand daily price action well and get well acquainted with daily trading, it usually gets them very lucrative risk-reward. Imagine, if traders want to manage trade like this on the H4 or the H1 chart, how painful it could be. Moreover, the H4 or the H1 chart is not as consistent as the daily chart. In our fore coming articles, we will demonstrate more examples of how we can maximize our profit by trading on the daily chart. Stay tuned.

Categories
Forex Price-Action Strategies

The Right Strategy with the Wrong Chart Creates a Losing Trade

In today’s lesson, we are going to demonstrate an example of the daily-H4 chart combination trading, which has everything to offer a good entry. However, the outcome is not what we would love to get. Let us dig into it and find out what may go wrong with the setup sometimes and where we have to be careful.

This is a daily chart. Look at the last candle. This is an A+ bearish engulfing candle, which the price action traders crave for. The sellers are to flip over to the H4 chart for the price to consolidate and make a bearish breakout to offer them a short entry. Let us flip over to the H4 chart.

The price consolidates for six H4 candles (remember the number six). However, it has not made any breakout. Let us assume that we keep an eye on the pair. Let us proceed to the next chart.

The chart produces a breakout candle. If we are to give it a grade, it would get A+ as well. It means everything looks good. We may trigger a short entry right after the breakout candle closes.

The price does not head towards the South according to the sellers’ expectations. It goes another way and hits the stop loss. The daily reversal candle and the H4 breakout candle both have all the attributes to attract the sellers to go short on the pair. Is there anything wrong with the entry?

First, it may happen. It does not matter how good a trade setup looks. It may get us loss. It is a game of probability after all.

Now concentrate here. This entry looks good in naked eyes but it is not. Do you remember how many candles it consolidated with? It consolidated with six H4 candles and makes the breakout by the 7th candle. It means the H4 support becomes daily support. Thus, an H4 breakout is not enough to attract the sellers to go short on the pair. To have a clearer view, have a look at the daily chart again.

The last candle comes out as a bullish inside bar. It means the pair is still bearish biased but it is for the daily traders. If the daily chart produces a bearish engulfing candle closing below the level of support, the daily sellers may go short. Meanwhile, it produces a false signal on the H4 chart and makes some sellers lose money.

Trading at the right chart with the right strategy is an important aspect to be successful in trading. It does not matter how good an angler you are. If you do not choose the right place and the right hook, you are going to come back home empty-handed.

Categories
Forex Daily Topic Forex Price-Action Strategies

Taking Partial Profits: an Alternative if You are Too Defensive

In today’s article, we are going to demonstrate an example of the daily-H4 chart-combination price-action trading. The signal candle comes out as a strong bearish candle, which attributes have a lot to offer to the sellers. Let us find out how it ends.

In today’s article, we are going to demonstrate an example of the daily-H4 chart-combination price-action trading. The signal candle comes out as a strong bearish candle, which attributes have a lot to offer to the sellers. Let us find out how it ends.

In today’s article, we are going to demonstrate an example of the daily-H4 chart-combination price-action trading. The signal candle comes out as a strong bearish candle, which attributes have a lot to offer to the sellers. Let us find out how it ends.

This is a daily chart. The last candle comes out as a bearish engulfing candle. The daily-H4 combination traders are to flip over to the H4 chart for the price to consolidate and produce a bearish reversal candle to offer them a short entry below the consolidation level of support.

This is the H4 chart. The price consolidated earlier before producing that daily bearish reversal candle. Traders must wait for consolidation and a bearish candle from now. It produces two bearish candles consecutively. It may consolidate soon.

It produces one more bearish candle and starts having a correction instead of consolidation. It is less likely that the chart presents a bearish engulfing candle breaching the level of support. We shall never be certain, though, since it is the Forex market. Let us see what happens next.

Would you believe it? What a good-looking bearish engulfing candle that is! The sellers may trigger a short entry right after the candle closes by setting stop-loss above the level where it has a rejection. Such price action offers 1:1 risk-reward easily. Considering the signal candle, the price may go towards the South further and get more reward to the sellers.

The chart produces a bullish inside bar and heads towards the South again. The last candle comes out as a bearish Marubozu candle. The sellers must hold the trade to make a handful of pips.

The price heads towards the South for one more candle. However, it produces three consecutive bullish reversal candles. The last one comes out as a bullish pin bar. The price is still to cover a lot of space to get us 1:1 risk-reward. By looking at the price action for the last three candles, it seems that the price may have an upside correction before making the next bearish move. It may even change its trend as well. It is best to have a belief in our positions and hold it as long as we can. In other words, we shall remember the rule ‘set and forget.’ However, if the price produces too many reversal candles and strong reversal candle such as pinbar, truck rail, or engulfing candle, we may consider taking a partial profit.

In such cases, taking a partial profit comes handy. We may take out at least 50% profit and let the rest of it run. Even if the trend changes, we do not lose money. On the other hand, if it goes towards our desired direction, it gets us more profit.

Categories
Forex Daily Topic Forex Price-Action Strategies

Remember the Rule ‘Set and Forget’

In today’s lesson, we are going to demonstrate an example of H1 breakout trading. Usually, in this strategy, the price goes towards the direction with good momentum if things go accordingly. In this example, the breakout candle, breakout confirmation candle are immaculate, but it takes a long pause before it hits the target. It has a lesson to give us. Let us dig into this.

In today’s lesson, we are going to demonstrate an example of H1 breakout trading. Usually, in this strategy, the price goes towards the direction with good momentum if things go accordingly. In this example, the breakout candle, breakout confirmation candle are immaculate, but it takes a long pause before it hits the target. It has a lesson to give us. Let us dig into this.

In today’s lesson, we are going to demonstrate an example of H1 breakout trading. Usually, in this strategy, the price goes towards the direction with good momentum if things go accordingly. In this example, the breakout candle, breakout confirmation candle are immaculate, but it takes a long pause before it hits the target. It has a lesson to give us. Let us dig into this.

The price after being bearish finds its support. It consolidates for a while and produces a bearish pin bar followed by a bearish engulfing candle. Traders are to wait for a breakout at the level of support to get them prepared to go short on the pair.

The last candle breaches the level of support and closes well below the level. The candle is having a tiny lower spike. Ideally, H1 breakout strategy traders wait for such a breakout candle.  They are to wait for the next H1 candle to close below the breakout candle. If that happens, the game is on. Let us proceed to the following chart.

As expected, the next candle closes below the breakout candle. The candle looks very bearish, being an ideal candle to confirm the breakout. The sellers may trigger a short entry right after the last candle closes. Let us have a look at the same chart with some calculations in it.

The sellers may set the level of stop-loss above the level where the trend is initiated. They may set the take-profit level with 1:1 risk-reward. It means

Entry- Stop Loss= Take Profit-Entry.

The price consolidates after the signal candle. It bounces at the level, where it bounced some hours earlier. This is the first sign of a double bottom. It looks the buyers may take over the control, which may make the price hit the stop loss. You may remember, in one of our lessons, it has been recommended that a trader may have to close his entry manually. It was an example of the Friday market. Today’s market is not the Friday market. Thus, we must not close it manually, as it may get us a loss, but we must let it run. Let us wait and see how it ends.

It looks much better now. The price heads towards the South with good bearish momentum. It may not take much time to hit the target.

It does not go according to your calculation. It takes much longer than our expectations. However, it hits the target at last. The lesson that we have learned here is we must let a trade run to do its bit. Once we take entry after measuring the risk-reward, we must be patient. In a word, we must remember the rule ‘set and forget.’

Categories
Forex Price-Action Strategies

When Things Go Like This

In today’s lesson, we are going to demonstrate an example of H1 breakout trading. We have come to know that it is an excellent trading strategy. It offers 1:1 risk-reward but maintains a tremendous winning consistency. However, the H1 chart is to maintain some attributes to offer us entry with the strategy. Today’s example is […]

In today’s lesson, we are going to demonstrate an example of H1 breakout trading. We have come to know that it is an excellent trading strategy. It offers 1:1 risk-reward but maintains a tremendous winning consistency. However, the H1 chart is to maintain some attributes to offer us entry with the strategy. Today’s example is […]

In today’s lesson, we are going to demonstrate an example of H1 breakout trading. We have come to know that it is an excellent trading strategy. It offers 1:1 risk-reward but maintains a tremendous winning consistency. However, the H1 chart is to maintain some attributes to offer us entry with the strategy. Today’s example is one of the ideal charts with those attributes. Let us have a look.

The chart shows that the price gets caught within two horizontal lines. The last candle comes out as a bearish Marubozu candle. Thus, It may be the beginning of a new bearish trend. Traders must wait for the price to continue its bearish move and make a breakout at the level of support.

The price continues its bearish move. The last candle comes out as a strong bearish candle closing below the level of support. It is an explicit breakout. Here comes the trickiest part of this strategy. Traders must wait for the next candle to close below the breakout candle. Let us find out what the price does in the next chart.

Look at the confirmation candle. This is one good-looking bearish candle. Traders shall look for such candle for the breakout and breakout confirmation to trade with H1 breakout trading. A short entry may be triggered right after the last candle closes. Let us find out the level of Stop Loss and Take Profit.

Measure the difference between Stop Loss to Entry and set the Take Profit at the level with the same distance. In a word, it gives us 1:1 risk-reward. It often travels more, but usually, the price consolidates after hitting the target with 1:1 risk-reward. Let us proceed and find out how the trade goes.

The price heads towards the Take Profit level with extreme bearish momentum. The level where we set Take Profit, the price seems to be making another breakout. It looks the sellers still have the controls. However, as far as H1 breakout trading is concerned, the sellers are out with the profit.

You might have noticed that after the breakout confirmation, how the price heads towards the South. It does not take any pauses. We must not be certain about the reasons since it is the Forex market. However, if we consider

  1. The trend initiating candle
  2. The breakout candle
  3. The breakout confirmation candle

We see that three of these candles have all the attributes that the sellers look for in an ideal bearish market. In a bullish market, it is vice versa. If things go like this, H1 breakout trading is one of the most consistent winning strategies. In most cases, the price hits the target as we have demonstrated the example in today’s lesson.

Categories
Forex Daily Topic Forex Price-Action Strategies

Friday Trading May Need More Attention

The Forex market is open from Monday to Friday. Since Friday is the last day of the week, traders may need to look after their trade more. To be precise, they may need to close their intraday trades manually. In today’s lesson, we are going to demonstrate an example of this.

The Forex market is open from Monday to Friday. Since Friday is the last day of the week, traders may need to look after their trade more. To be precise, they may need to close their intraday trades manually. In today’s lesson, we are going to demonstrate an example of this.

The Forex market is open from Monday to Friday. Since Friday is the last day of the week, traders may need to look after their trade more. To be precise, they may need to close their intraday trades manually. In today’s lesson, we are going to demonstrate an example of this.

This is an H1 chart. The price after being bearish has been trapped within a rectangle. It could make a breakout either side. However, the last candle suggests that the price is bearish biased. It closes within the level of previous swing low. If the price makes a bearish breakout, the sellers may trigger a short entry upon the breakout confirmation. Let us proceed to the next chart.

The price action produces an inside bar. As we know, an inside bar is a relatively weak reversal candle. It may push the price towards the North; however, if a bearish candle breaches the level of support, the sellers may get ready to go short on the pair.

The last candle breaches the level of support. It is not an explicit breakout. Nevertheless, the candle closes below the level. If the next candle closes well below the breakout candle, the sellers may trigger a short entry by setting the Stop Loss above the trend-initiating candle.

Yes, the next candle closes well below the breakout candle. The sellers may trigger a short entry right after the last candle closes. Usually, the take profit level is to be set with a 1:1 risk-reward ratio on the H1 breakout strategy. Do not forget that it is Friday. It is an essential factor to remember while trading in the H1 breakout trading strategy.

The last candle gets us some green pips. It looks good now. Most probably, it is going to get us the reward, which it usually does. We must wait and hold the position.

We have been waiting for long. The price has been on strong consolidation. It is still to travel more to hit the Take Profit. As mentioned, it is Friday. The market is about to close (within 2 hours). Usually, most of the pairs get sluggish before the market closes on Friday. On Monday, many pairs start trading with a gap. There is no point holding H1 breakout positions during the weekend. Thus, we may close the trade manually and be happy with half the profit of our expectations.

Categories
Forex Price-Action Strategies

Does the ABC Pattern Give Any Clue about the C Point?

We have learned about the ABC pattern in some of our previous lessons. The C point is the most crucial factor to trade on the ABC pattern. Traders use Fibonacci retracement, flipped support/resistance to spot out the C point. Fibonacci retracement works like magic, which we will learn soon. In today’s article, we will demonstrate […]

We have learned about the ABC pattern in some of our previous lessons. The C point is the most crucial factor to trade on the ABC pattern. Traders use Fibonacci retracement, flipped support/resistance to spot out the C point. Fibonacci retracement works like magic, which we will learn soon. In today’s article, we will demonstrate […]

We have learned about the ABC pattern in some of our previous lessons. The C point is the most crucial factor to trade on the ABC pattern. Traders use Fibonacci retracement, flipped support/resistance to spot out the C point. Fibonacci retracement works like magic, which we will learn soon. In today’s article, we will demonstrate an example of an ABC pattern and try to find out whether it gives us any clue about the level before it produces the C point.

This is a daily chart. The price after being very bearish makes a bullish move. The price produces a bearish reversal candle. It is an inside bar not being a strong bearish reversal candle. However, we must notice where it is produced. Let us have a look at the same chart with some horizontal lines.

Look at the chart now. The price reacted at the level earlier. The level worked as a strong level of resistance and drove the price towards the downside. This time, the level produces a bearish reversal candle. The ABC pattern traders usually wait for such price action around such levels. To take an entry, the daily-H4 chart combination traders are to flip over to the H4 chart.

The price produces a reversal candle. It may consolidate now. The sellers are to get a bearish reversal candle and to find out a level of resistance to set their Stop Loss above it. A breakout at the level of support is the signal to trigger a short entry.

The price consolidates. Upon getting its resistance, it makes a breakout. A short entry may be triggered right after the last candle closes. The price may find its next support at the red-marked level (point B). Let us find out how the trade goes.

The trade goes well. The price heads towards the Take Profit with extreme bearish pressure. Since this is an ABC pattern’s daily-H4 chart combination, the price may travel towards the South further. The sellers may consider taking partial profit here. Taking Partial Profit usually increases our chance of getting more pips. When we can find out an ABC pattern, and we are trading on the C point, it often gets us more profit in the end. To be able to spot out the C point, we must practice a lot with Fibonacci retracement, eyeing on flipped levels, and previous levels of support/resistance.

Categories
Forex Price-Action Strategies

The Daily-H4 Chart Combination May Have More to Offer

We have been learning the daily-H4 chart combination trading, where we flip over to the H4 chart once we get a daily reversal candle. In today’s lesson, we are going to demonstrate the strategy, which offers entry in a different way. This strategy is quite handy. We find out the reason in a minute. This […]

We have been learning the daily-H4 chart combination trading, where we flip over to the H4 chart once we get a daily reversal candle. In today’s lesson, we are going to demonstrate the strategy, which offers entry in a different way. This strategy is quite handy. We find out the reason in a minute. This […]

We have been learning the daily-H4 chart combination trading, where we flip over to the H4 chart once we get a daily reversal candle. In today’s lesson, we are going to demonstrate the strategy, which offers entry in a different way. This strategy is quite handy. We find out the reason in a minute.

This is a daily chart. The chart produces a bullish engulfing candle, with its the swing high far enough. This allows that daily-H4 chart combination traders enough space to hunt for pips. This is time for the traders to flip over to the H4 chart.

The H4 chart shows that the price heads towards the North with good bullish momentum. The last candle comes out as a bullish candle. However, it closes within the last H4 candle’s resistance. Traders are to wait for consolidation and bullish H4 reversal candle to go long on the pair.

The price consolidates and produces a bullish reversal candle. However, the price does not breach the consolidation resistance yet. Moreover, you may have noticed that there have been six H4 candles. It means the whole trading is passed, but the price does not make any breakout. Please note that if the H4 chart does not produce a reversal candle followed by a breakout at the highest high or lowest low within the next day, the daily-H4 chart trade setup is not valid anymore. This means we have wasted our time. It is a part of trading. We must take it professionally. However, we may have good news here. Let us flip over to the daily chart again.

The last daily candle comes out as an Inside bar. As far as the candlestick pattern is concerned, the price is bullish biased. If we get a bullish engulfing candle closing above the last two candles, the price may head towards the red marked level.

Here it comes. A bullish engulfing candle with a long lower shadow closes above the last two candles. This is a buy signal to go long for the daily traders (it is a daily chart). Daily traders may trigger a long entry right after the candle closes. Take Profit level is to be set at the red marked level, and Stop Loss is to be placed below the signal candle’s lower low. Make sure that it offers a 1:1 risk-reward ratio, at least. Let us find out how the trade goes.

It goes well. It may go towards the North further. Nevertheless, traders may either close the whole trade or take partial profit, at least. The bottom line is we may be eying on a pair to take an entry on a daily-H4 chart combination. The H4 timeframe may not offer an entry. However, the daily chart may do. This is how our effort, time never go in vain, but we make most of our invested time and effort.

Categories
Forex Daily Topic Forex Price-Action Strategies

The Trend on the Daily Chart Means a Lot

Most of the Forex trading platforms have charts from 1M to Month. It is a debatable issue to determine the best chart among them. All these charts have merits as well as demerits. However, the Daily Chart plays an important role as far as determining the trend is concerned in the Forex market. In today’s lesson, we are going to demonstrate an example of how long term trend on the daily chart may help us guess the price’s next direction.

Most of the Forex trading platforms have charts from 1M to Month. It is a debatable issue to determine the best chart among them. All these charts have merits as well as demerits. However, the Daily Chart plays an important role as far as determining the trend is concerned in the Forex market. In today’s lesson, we are going to demonstrate an example of how long term trend on the daily chart may help us guess the price’s next direction.

Most of the Forex trading platforms have charts from 1M to Month. It is a debatable issue to determine the best chart among them. All these charts have merits as well as demerits. However, the Daily Chart plays an important role as far as determining the trend is concerned in the Forex market. In today’s lesson, we are going to demonstrate an example of how long term trend on the daily chart may help us guess the price’s next direction.

This is a daily chart. The price after being very bearish gets choppy. A bullish breakout may make the price go towards the North. On the other hand, a bearish breakout keeps the price being bearish. It could go either way. However, the long-term trend on this chart is bearish biased. Moreover, the last candle comes out as a bearish engulfing candle. Thus, the pair may get bearish again. Let us flip over to the H4 chart and find out how it looks.

The chart shows that the price has been bearish on the H4 chart. However, the price finds its support at the same level, where it had a bounce earlier. If we consider only the H4 chart, the price may get bullish. Do not forget that the daily chart’s long-term trend is bearish. Let us proceed to the next H4 chart.

The last candle comes out as a bearish engulfing candle closing below the level of support. It may get tough to guess what happens here. Have a look at the same chart with two horizontal lines to make things simpler.

The price produces that bearish engulfing candle after a bullish corrective candle. The Stop Loss level is explicit, so it is entry-level. The sellers may trigger a short entry right after the last candle closes. Since there is no support nearby, the sellers may hold their entry until it produces a bullish reversal candle.

The short entry goes well — the price heads towards the South with good bearish momentum. The last candle comes out as a bullish engulfing candle. It is a strong bullish reversal candle. It is time for the sellers to close the entry.

As mentioned, the price in such a case can make a bullish breakout too. Traders must look for long entries then. However, in such price action on the daily chart, we may concentrate more on the chart when it produces a reversal candle in favor of the long-term trend. This is how we give ourselves more chances of getting an entry.

 

Categories
Forex Price-Action Strategies

The Better the Risk-Reward, the More the Opportunities

Risk-Reward is an extremely important factor in price action trading. The price action of a chart is related to risk-reward to some extent. In today’s lesson, we are going to reveal an example of that. Despite the daily chart producing a bearish reversal candle, the H4 traders do not get the opportunity to take an […]

Risk-Reward is an extremely important factor in price action trading. The price action of a chart is related to risk-reward to some extent. In today’s lesson, we are going to reveal an example of that. Despite the daily chart producing a bearish reversal candle, the H4 traders do not get the opportunity to take an […]

Risk-Reward is an extremely important factor in price action trading. The price action of a chart is related to risk-reward to some extent. In today’s lesson, we are going to reveal an example of that. Despite the daily chart producing a bearish reversal candle, the H4 traders do not get the opportunity to take an entry. However, something interesting happens afterwards. We find that out in a minute.

This is the daily chart. The chart shows that it produces a bearish inside bar, which is a not a strong bearish reversal candle. Nevertheless, a good consolidation and a bearish engulfing candle on the H4 chart may attract the sellers to go short on the pair. The nearest support is not too far. However, if we flip over to the H4 chart, we will be able to find out whether it offers a 1:1 risk-reward or not.

This is the H4 chart. The chart shows that if it starts consolidating now, it may offer 1:1 risk-reward (depending on the breakout candle). Thus, sellers may wait for a consolidation and an H4 bearish engulfing candle to make some green pips.

It does not consolidate but keeps going towards the South. The sellers on the minor charts may have found some short entries earlier. Since we are dealing with the daily-H4 combination, we may not shift our concentration on the minor charts of this pair. Do you notice one thing? Concentrate and try to find an interesting thing about the chart. The interesting fact about the chart is it has made a breakout on the H4 support. It consolidates and seems to have obeyed the breakout level. A bearish engulfing candle may attract the price action sellers to go short. Have a look at the chart below.

Here it is. A bearish engulfing candle breaches the consolidation support. Look at the red marked take profit level. In naked eyes, it offers an excellent risk-reward. As far as the daily-H4 chart combination trading is concerned, the pair may head towards the take profit level with good bearish momentum. Let us find out how the trade goes.

As expected, the price heads towards the downside and hits the take profit with ease.

On the first occasion, the price neither consolidates nor offers an entry. On the second occasion, it consolidates nicely and produces an ideal bearish engulfing candle to offer a short entry with an excellent risk-reward. I am not saying that it never offers an entry on such occasions (first occasion). Risk-reward attracts more traders. Thus, if there is a better risk-reward, most likely, there is more opportunity for traders.

Categories
Forex Price-Action Strategies

The Lesson We Learn from Such Price Action

In today’s article, we are going to demonstrate an example of a trade, which does not go according to the price action traders’ expectations. We try to dig out what goes wrong with the trade. Let us get started.

In today’s article, we are going to demonstrate an example of a trade, which does not go according to the price action traders’ expectations. We try to dig out what goes wrong with the trade. Let us get started.

In today’s article, we are going to demonstrate an example of a trade, which does not go according to the price action traders’ expectations. We try to dig out what goes wrong with the trade. Let us get started.

This is a daily chart. The chart produces an inside bar right at the level where the price had a rejection earlier. The buyers, according to price action trading, usually wait for the price to produce a bullish reversal candle around such levels. However, the buyers may remember an important point here that the bullish reversal candle is an inside bar. An inside bar is not known as a strong reversal candle. Nevertheless, it is a daily bullish reversal candle producing right at the level of support, so they daily-H4 buyers are to flip over to the H4 chart.

The H4 chart’s price action is bullish. The last candle comes out as a bearish pinbar. The price may consolidate soon. If that happens, followed by an H4 bullish breakout, buyers may go long on the pair. The next significant swing high is far, offering a tremendous risk-reward.

The price consolidates and produces a bullish engulfing candle breaching the level of resistance. The consolidation does not look an ideal one. Ideally, the buyers may trigger a long entry here. This is what we have been learning on daily-H4 chart trading lessons. Let us assume that we take a long entry here. Let us find out how the trade goes.

The next candle comes out as a bearish candle. It does not hit the stop loss, but it looks ominous. Since taking a loss is an unavoidable thing in trading, so we may let it go. This is what we have been learning, as well. Let us find out what happens next.

It hits the stop loss. As far as trading psychology is concerned, we must not let it take over us. However, with this trade, two things may hold many price action buyers back taking the entry.

  • An inside bar bullish daily reversal candle
  • Ugly looking consolidation

We have demonstrated on many occasions, an inside bar daily reversal candle with good-looking consolidation ends up offering a winning entry. On some lessons, an unusual consolidation but with a daily bullish reversal candle does the same. Over here, a combination of both ends up offering a losing entry. On some occasions, such price action (inside bar daily reversal candle and unusual consolidation) may end up offering a winning entry. However, to have better winning consistency, we may skip taking entry on such price action.

 

Categories
Forex Price-Action Strategies

An H1 Trading Strategy, A New Arrow in the Quiver

The H1 chart is one of the most traded charts in the Forex market. This is a very consistent chart considering other intraday charts. In today’s article, we are going to learn a strategy to trade on the H1 chart in the Forex market. This is an H1 chart. The price after making a bearish […]

The H1 chart is one of the most traded charts in the Forex market. This is a very consistent chart considering other intraday charts. In today’s article, we are going to learn a strategy to trade on the H1 chart in the Forex market. This is an H1 chart. The price after making a bearish […]

The H1 chart is one of the most traded charts in the Forex market. This is a very consistent chart considering other intraday charts. In today’s article, we are going to learn a strategy to trade on the H1 chart in the Forex market.

This is an H1 chart. The price after making a bearish move seems to have found its support. It produces two consecutive bullish candles. The buyers are to wait for the price to consolidate and create a bullish breakout to go long. On the other hand, the sellers are to wait for a bearish reversal candle and make a bearish breakout to go short on the pair. Let us find out what the price does next.

The chart produces a bearish engulfing candle, which is the strongest bearish reversal candle. The sellers have the upper hand here. A breakout at the level of support is the next thing to take a short entry here.

The price consolidates around the level of support. The level of support becomes double bottom support. A strong battle is going on between the buyers and the sellers. Traders must wait to find the next direction.

It makes an explicit bearish breakout. Admittedly, the sellers have outplayed the buyers. Traders shall get themselves ready to go short on the pair. The question is why they have to get themselves ready. Should not they trigger any entry right after the last candle closes? The answer is no. They must wait for the next candle to close below the breakout candle. This is the trickiest part of this strategy. Traders must wait for one more candle to make a new lower low (in a bearish market).

Here it comes. The next candle comes out as a bearish candle closing well below the breakout candle. An entry may be triggered right after the last candle closes. The stop loss level is easy to be found out. It is above the level where the trend initiates. We see that a red marked take profit level as well. However, the chart does not show that it is a significant level. How do we find this out then? We may set our take profit exactly with a 1:1 risk-reward ratio. It means the length of entry to stop loss equals to the length of entry to take profit in this strategy. Let us find out how the trade goes.

The trade goes well. We will demonstrate more examples of this strategy soon. Meanwhile, let us concentrate on the things to remember.

  1. The trend initiation candle is to be a strong reversal candle.
  2. The breakout is to be very explicit.
  3. The very next candle is to close below (in a bearish market) or close above (in a bullish market).
  4. Take Profit is to be set with no more than 1:1 risk-reward.
Categories
Forex Price-Action Strategies

Breakout Confirmation Means a Lot

Breakout Confirmation Means a Lot

Breakout Confirmation Means a Lot

Breakout Confirmation Means a Lot

 

Price action traders count the breakout as one of their most essential trading components. There is another factor, which is directly related to a breakout: It is called Breakout Confirmation. A breakout is not considered as a perfect breakout on a particular chart if the breakout level does not hold the next candle. In today’s lesson, we are going to demonstrate an example of that.

Thie chart above is a daily chart. The chart shows that the price breaches the level of resistance. The candle closes above the level as well. Many traders consider it as a breakout. It is not a breakout yet on the daily chart. The price may have made a breakout on other minor charts such as the H4, H1, 15M, etc. However, to consider it as a daily breakout, traders must wait for the next daily candle to close above or within the breakout level. Let us have a look at the following daily chart.

The next daily candle comes out as a bullish pin bar and closes within the breakout level. It means that the breakout level holds the price and confirms the breakout. The price may head towards the North because of the breakout and breakout confirmation. The daily-H4 chart traders may flip over to the H4 chart for the price to consolidate and upside breakout.

The H4 chart shows that the price produces a bullish engulfing candle having a long upper shadow. However, the candle closes within the last swing high. The buyers shall wait for the price to consolidate and upside breakout.

The price keeps heading towards the North with an average bullish momentum. The last candle comes out like a spinning top, which is a sign of price consolidation. Let us proceed to the next chart to find out whether it consolidates more or makes an upside breakout.

It produces a bullish engulfing candle closing above the last swing high. The buyers may trigger a long entry right after the candle closes by setting stop loss below the consolidation support. Let us find out how the entry goes.

It goes well. It goes towards the North further even after producing a little bearish candle. Ideally, some buyers may come out with their whole trade there, and some traders may take partial profit. This is another issue. We shall concentrate on the breakout and the breakout confirmation. Since the daily pin bar candle’s body closes within the breakout level, it suggests that the trend is still with the bull. If it closes below the breakout level, things would have been different. Such things matter a lot in the Forex market and traders must consider those.

Categories
Forex Daily Topic Forex Price-Action Strategies

Don’t Only Rely on Your Initial Assumption, Dig into It

In today’s article, we are going to demonstrate an example of an entry, which is derived from the daily-H4 chart combination. It is a typical entry once we flip over to the H4 chart. Before flipping over to the H4 chart, there is a good lesson, which may help us in the future. Let us get started.

In today’s article, we are going to demonstrate an example of an entry, which is derived from the daily-H4 chart combination. It is a typical entry once we flip over to the H4 chart. Before flipping over to the H4 chart, there is a good lesson, which may help us in the future. Let us get started.

In today’s article, we are going to demonstrate an example of an entry, which is derived from the daily-H4 chart combination. It is a typical entry once we flip over to the H4 chart. Before flipping over to the H4 chart, there is a good lesson, which may help us in the future. Let us get started.

This is a daily chart. It shows that the price, after having a bounce, heads towards the upside. It finds its resistance and produces a bearish marubozu candle. The combination of the last two candles is also known as track rail. It is a strong bearish signal. Usually, the daily-H4 combination traders may want to flip over to the H4 chart to hunt an entry. However, the level of support seems too adjacent to offer a short entry. In naked eyes, the daily chart shows that there is very little space for the price to travel towards the South. Is it? Let us flip over to the H4 chart and reveal the truth.

This is the H4 chart. It shows that the price is on consolidation, searching for its resistance already. The level of support is far enough to offer some handful of pips to the sellers.

The chart produces a bearish engulfing candle closing below the last swing low. The sellers may trigger a short entry right after the candle closes. Let us not just guess it. Let us measure it by drawing two horizontal lines.

These two lines determine the stop loss and entry-level. The drawn support is far enough to offer excellent risk-reward. If you are not sure, measure it with the tool on the trading platform. The risk-reward is 1:1.5 here. Let us now find out the result.

The price heads towards the level of support and produces a bullish reversal candle as well. The sellers have grabbed some green pips. The consolidation, the signal candle, and the risk-reward are perfect here. Do you remember how it begins, though? The daily chart does not look that appealing at the very outset despite producing an excellent daily bearish reversal candle. In naked eyes, it looks bad. However, once we have flipped over to the H4 chart, it is a different story. It looks very appealing, and in the end, it offers an excellent entry. In the beginning, do not just skip a chart by its outlook. Dig into it. The habit of digging may get you more entries.

Categories
Forex Daily Topic Forex Price-Action Strategies

Significant Levels Must be Counted

Price action traders are to take entry and exit by determining support and resistance on the naked chart. Significant highs and lows are considered to draw support and resistance, which help traders find out stop loss, take profit as well as risk-reward. In today’s article, we are going to demonstrate an example of a level holding the price as support, where the price had a rejection earlier. Let us find out how we are to deal with such levels.

Price action traders are to take entry and exit by determining support and resistance on the naked chart. Significant highs and lows are considered to draw support and resistance, which help traders find out stop loss, take profit as well as risk-reward. In today’s article, we are going to demonstrate an example of a level holding the price as support, where the price had a rejection earlier. Let us find out how we are to deal with such levels.

Price action traders are to take entry and exit by determining support and resistance on the naked chart. Significant highs and lows are considered to draw support and resistance, which help traders find out stop loss, take profit as well as risk-reward. In today’s article, we are going to demonstrate an example of a level holding the price as support, where the price had a rejection earlier. Let us find out how we are to deal with such levels.

This is the daily chart. The price heads towards the North with good bullish momentum. Look at the last candle. It is a strong bearish candle with a long solid bearish body. The daily-H4 chart combination traders may want to flip over to the H4 chart to find short entries.

This is how the H4 chart looks. The price has been bearish. The last candle comes out as an inside bar. If the price consolidates and produces a bearish candle breaching the lowest low, the sellers may go short on the pair. The question is, where do they set their take profit level? Look at the red line, which is drawn right at the point where the price had a rejection earlier. The level of support is further down, but the red-lined level is a significant level, which the sellers must consider before making any selling decision on this chart.

The price produces a bearish engulfing candle breaching the lowest low. It means that the price has found its resistance. The sellers may draw two lines here to identify their stop loss and entry point.

This is how it looks with two drawn lines. The live above is the stop loss level. The price breaches the line and closes below it. Thus, the sellers may trigger a short entry right after the candle closes. Let us proceed to the next chart to find out how the trade goes.

The price heads towards the South with good bearish momentum. Look at the last candle, which comes out as an inside bar. It produces right at the flipped support. This is where the price had a strong rejection earlier. The sellers shall set the take profit right here. Some traders may take out partial profit and use trailing stop loss by making sure that they do not lose even a single penny. Both have pros and cons. However, the matter of fact is they must count such level before making any trading decision. It helps them determine the take profit level, risk-reward, and trade with more winning chances.

Categories
Forex Daily Topic Forex Price-Action Strategies

An Entry Derived From an Unusual Consolidation

Price action traders love to see the price consolidates and makes a breakout towards the trend direction. Consolidation offers better risk-reward as well as a better chance of winning a trade. In today’s lesson, we are going to demonstrate an example of a consolidation, which is rather unusual. Let us proceed.

Price action traders love to see the price consolidates and makes a breakout towards the trend direction. Consolidation offers better risk-reward as well as a better chance of winning a trade. In today’s lesson, we are going to demonstrate an example of a consolidation, which is rather unusual. Let us proceed.

Price action traders love to see the price consolidates and makes a breakout towards the trend direction. Consolidation offers better risk-reward as well as a better chance of winning a trade. In today’s lesson, we are going to demonstrate an example of a consolidation, which is rather unusual. Let us proceed.

This is a daily chart. The chart shows that the price produces a bullish engulfing candle at a flipped level of support. The daily-H4 chart combination traders may flip over to the H4 chart for the price to consolidate and a bullish breakout to go long on the pair. Let us flip over to the H4 chart.

The H4 chart shows that the price heads towards the North by producing bullish candles consecutively. The buyers shall wait for the price to find its support, consolidates, and makes a bullish breakout. Let us proceed to the next chart.

The chart produces another candle, which has a bullish body. In naked eyes, it is a bullish candle, but it is not. It is an Inside bar, which closes within the level of resistance. Let us have a look at the next chart.

The next candle has a little bullish body as well. Many traders may think that the price is still with the bull. Do not get trapped here. The candle closes within the level of resistance again. The price has not found its support yet. However, it has been on a tricky consolidation.

Look at the last candle, which closes above the level of resistance. The price bounces at the level where the first candle (Inside Bar) bounced. Since a bullish engulfing candle breaks the level of resistance, technically traders may trigger a long entry right after the candle closes. Let us proceed to the next chart to find out how the trade goes.

The price keeps heading towards the North for two more candles. As it seems, it may go towards the North further. An unusual consolidation and an explicit breakout seem to work wonderfully well for the buyers here. We usually see that price consolidates by producing bearish candles on a bullish market and vice versa. In this example, we have seen that the price may consolidate by producing inside bars as well. An Inside bar/s may confuse us. It may make us think the price is not on consolidation. Now we know consolidation sometimes may look different. However, it works as well as usual consolidation.

Categories
Forex Daily Topic Forex Price-Action Strategies

Do not Mix up, Stick with the Rules

In today’s lesson, we are going to demonstrate an example of an H4 chart offering an entry. The daily-H4 chart combination traders are to keep an eye on the daily chart first. Once the daily chart produces a daily reversal candle from the support/resistance zone, they are to flip over to the H4 chart to take an entry. Today, we are going to do it in another way for a reason. We are going to start monitoring from the H4 chart. Let us start. Soon you will know why I am doing it so.

In today’s lesson, we are going to demonstrate an example of an H4 chart offering an entry. The daily-H4 chart combination traders are to keep an eye on the daily chart first. Once the daily chart produces a daily reversal candle from the support/resistance zone, they are to flip over to the H4 chart to take an entry. Today, we are going to do it in another way for a reason. We are going to start monitoring from the H4 chart. Let us start. Soon you will know why I am doing it so.

In today’s lesson, we are going to demonstrate an example of an H4 chart offering an entry. The daily-H4 chart combination traders are to keep an eye on the daily chart first. Once the daily chart produces a daily reversal candle from the support/resistance zone, they are to flip over to the H4 chart to take an entry. Today, we are going to do it in another way for a reason. We are going to start monitoring from the H4 chart. Let us start. Soon you will know why I am doing it so.

This is the H4 chart, and the red-marked level is daily support. It shows that the price is at the level of support. The last candle comes out as a bearish candle with a long lower shadow. It suggests that the level may produce a bullish reversal soon.

As expected, the chart produces a bullish engulfing candle right at the level of support. A bullish engulfing candle at a support zone has a strong message to send to the buyers that it is their territory.

The price goes towards the North for one more candle. It then has a correction and produces another bullish engulfing candle closing above the resistance. This is an ideal sequence for the price action traders to take a long entry. Let us assume that we do not trigger an entry here and have a look at the next chart.

The price keeps heading towards the North. It means that we have missed an opportunity to make some green pips here. Everything seems perfect, but why we skip taking the entry. Is it a mistake? Is not it? No, it is not a mistake. We shall not take the entry as far as the daily-H4 chart combination chart is concerned. We have started monitoring the chart from the H4 chart today. The daily-H4 chart combination traders are to monitor from the daily chart. Let us have a look at the Daily chart how it looks before flipping over to the first H4 chart here.

You see that the last daily candle comes out as a bearish one. It closes within a level, which has the potential to hold the price as a level of support. However, it has not produced a bullish reversal candle yet. Thus, they shall not flip over to the H4 chart. This is the reason that the daily-H4 chart combination traders may not take the above entry. The H4-H1 chart combination traders may not get an entry here as well since the level of support is not H4 support. The price does not react to the level on the H4 chart in recent times.  It moves towards the North by obeying other trading methods but not according to the price action chart combination trading.

We must be disciplined and must not mix up one strategy with others but stick with the rules. Sticking with the rules is one of the most important factors to be consistent in trading.

Categories
Forex Daily Topic Forex Price-Action Strategies

Consolidation and Breakout: The Two Key Movements in Price Action Trading

Price action trading mainly relies on consolidation, trend, and breakout. Reversal candle is another feature that traders keep an eye at. Typically, double top/bottom, morning star/evening star, and engulfing candle are considered the strongest reversal signal. However, even an inside bar may create an excellent bullish/bearish momentum if the price consolidates and makes a perfect breakout. In today’s lesson, we are going to demonstrate an example of this.

Price action trading mainly relies on consolidation, trend, and breakout. Reversal candle is another feature that traders keep an eye at. Typically, double top/bottom, morning star/evening star, and engulfing candle are considered the strongest reversal signal. However, even an inside bar may create an excellent bullish/bearish momentum if the price consolidates and makes a perfect breakout. In today’s lesson, we are going to demonstrate an example of this.

Price action trading mainly relies on consolidation, trend, and breakout. Reversal candle is another feature that traders keep an eye at. Typically, double top/bottom, morning star/evening star, and engulfing candle are considered the strongest reversal signal. However, even an inside bar may create an excellent bullish/bearish momentum if the price consolidates and makes a perfect breakout. In today’s lesson, we are going to demonstrate an example of this.

We are looking at an H4 chart. It shows that the price heads towards the North with extreme bullish momentum. A bearish inside bar followed by another bearish candle makes a reversal. The price after being bearish may have found its support. The buyers are to wait for the price to make a bullish breakout at the level of resistance. The sellers are to wait for consolidation and a bearish breakout at the level of support.

The price starts having a correction. If it keeps going towards the North further, it may get choppy. If it finds its resistance nearby, the sellers may find an opportunity to go short on the pair.

The chart produces a bearish engulfing candle. It means the price finds its resistance. If it makes an H1 breakout at the level of support, the sellers may want to trigger a short entry. Let us now have a look at the same chart with those two levels.

The equation gets much simpler with those two levels. Since this is an H4 chart, the sellers are to flip over to the H1 chart to get a breakout and trigger a short entry. The reversal candle looks strong enough to make the sellers keep an eye on the pair to take a short entry upon a breakout.

This is how the H1 chart looks. The price seems to have found two levels of support here. However, the H4 chart looks very bearish, which may keep driving the price to make a breakout at the level of red marked support.

Here comes the breakout. The candle closes well below the level of support. It has a long lower shadow, but it has a thick bearish body as well. The sellers may trigger a short entry right after the candle closes by setting stop loss above the resistance. Take profit may be set at the last swing low on the H4 chart. Let us proceed to the next chart to find out how the entry goes.

The price heads towards the South with good bearish momentum. It makes another bearish breakout at the last swing low as well. Concisely, the sellers grab some green pips from the entry.

If we concentrate on the first candle of the trend, we see that the candle is a bearish inside bar. An inside bar is considered the weakest reversal signal. However, it produces an excellent short signal here because of perfect consolidation and the breakout. The above example signifies the importance of consolidation and breakout in price action trading.

Categories
Forex Price-Action Strategies

Choppy Daily Chart, H4 Chart Still Offering an Entry

In today’s price-action lesson, I am going to divulge an example of the daily-H4 chart combination offering an entry. Usually, it is best to trade on the daily-H4 chart combination when the price is having a solid trend on the daily chart. However, not all the time the price is going to have a strong trend on the daily chart. The price action may be trapped within zones and still offer an entry.

In today’s price-action lesson, I am going to divulge an example of the daily-H4 chart combination offering an entry. Usually, it is best to trade on the daily-H4 chart combination when the price is having a solid trend on the daily chart. However, not all the time the price is going to have a strong trend on the daily chart. The price action may be trapped within zones and still offer an entry.

In today’s price-action lesson, I am going to divulge an example of the daily-H4 chart combination offering an entry. Usually, it is best to trade on the daily-H4 chart combination when the price is having a solid trend on the daily chart. However, not all the time the price is going to have a strong trend on the daily chart. The price action may be trapped within zones and still offer an entry.

The daily chart shows that the price has been roaming around within two levels. The last candle comes out as a bearish engulfing candle. The candle forms at the resistance zone. The level of support is not too far away. Let us have a look at the same chart with those two levels.

The chart shows that the price may find its next support at the red marked line. The price had a bounce at the level earlier. As far as the daily chart is concerned, the price does not have enough space to travel towards the South. However, the daily-H4 chart combination traders may have another equation to play with. Let us flip over to the H4 chart and find that out.

The H4 chart shows that the price heads towards the South with extreme bearish pressure. Traders are to wait for consolidation and bearish breakout to go short on the pair. The selling pressure is too high to consolidate though. Then again, the sellers must not give up. Let us find out what happens next.

The price starts having the correction. It may find its resistance nearby and offer a short entry upon a bearish breakout. On the other hand, if the price goes too far towards the North, the risk-reward factor may hold the sellers back to go short.

The price goes towards the North for one more candle and produces an H4 bearish engulfing candle closing below the level of consolidation support. The last candle looks to be a fantastic signal candle and the price still has some room to travel towards the South. Let us have a look at the same chart with consolidation support and resistance.

The equation gets much simpler with those two lines. A short entry may be triggered right after the last candle closes by setting Stop Loss above consolidation resistance. Take Profit may be set at the last swing low or wait until a bullish reversal candle on the H4 chart. Let us find out what the price does after triggering the entry.

The price heads towards the downside with good bearish pressure. The last H4 candle comes out as a bullish Inside Bar. The sellers may want to close the entry here.

We have seen that as long as the daily chart’s support/resistance offers a lucrative risk-reward for the H4 traders, they may be able to find entry occasionally even though the price is not having a strong trend on the daily chart.

Categories
Forex Price-Action Strategies

The H4-H1 Chart Combination Keeps You Busy Even in a sluggish Market

Usually, the Forex market gets sluggish in December. It gets tough for traders to find out a good entry on major charts as far as price action is concerned. However, the H4-H1 chart combination still offers a few entries. In today’s lesson, we are going to demonstrate an example of an entry based on the H4-H1 chart, which was offered in mid-December 2019.

Usually, the Forex market gets sluggish in December. It gets tough for traders to find out a good entry on major charts as far as price action is concerned. However, the H4-H1 chart combination still offers a few entries. In today’s lesson, we are going to demonstrate an example of an entry based on the H4-H1 chart, which was offered in mid-December 2019.

Usually, the Forex market gets sluggish in December. It gets tough for traders to find out a good entry on major charts as far as price action is concerned. However, the H4-H1 chart combination still offers a few entries. In today’s lesson, we are going to demonstrate an example of an entry based on the H4-H1 chart, which was offered in mid-December 2019.

Let us proceed.

We’re looking at the H4 chart. The last candle makes a strong breakout at the last swing low. Traders are to wait for consolidation and H1 breakout to go short on the pair. Let us find out whether it starts consolidating from right there or comes further down.

It comes down further for one more candle. It means traders are to wait longer. However, the nearest support is far enough. Thus, the price has a lot of space to travel towards the South.

The price starts consolidating and produces two bullish candles consecutively. The pair is to make a big decision from here. Does it continue its journey towards the North, or does it find its resistance nearby? Let us find out from the next chart.

The price finds its resistance and produces a bearish engulfing candle. The sellers have been waiting for this. It is time for the traders to flip over to the H1 chart and wait for an H1 bearish breakout to take a short entry. Let us find out how the H1 chart looks.

The H1 chart shows that the price produces an engulfing bearish candle and heads towards the South. The price on this chart makes a breakout at the red marked support level. It may make the traders wait for, or it may make a breakout straightway. Let us what the price does here.

The price makes an explicit bearish breakout. The breakout candle looks very strong, barely having a lower shadow. A short entry may be triggered right after the candle closes by setting Stop Loss above the level where the H4 chart produces the bearish reversal candle. Let us now find out how it ends.

The price heads towards the South with good bearish momentum. It produces a bullish engulfing candle having a long upper shadow. It may be time for the sellers to close the whole entry since it is the month of December.

As mentioned, in December, traders do not get as many entries as they usually get. However, the H4-H1 chart combination may offer a few entries occasionally even when the market gets sluggish.

Categories
Forex Daily Topic Forex Price-Action Strategies

Daily-H4 Combination – Rather Mechanical than Emotional

 

 

 

In today’s article, we are going to demonstrate an example of a daily chart, which after having a bounce at Double Bottom support heads towards the North. However, the question is whether the daily-H4 chart combination traders find an entry or not. Let us find this out.

The chart shows that the price has had several bounces at the level of support. Without any doubt, it is a strong level of support, in which buyers would love to keep an eye on the price action around this level. A bullish reversal candle around this level, like the last one, would make them flip over to the H4 chart to go long upon breakout. We are not flipping over to the H4 chart right now. You find out the reason in a minute.

The price on the H4 chart may have consolidated but never made any breakout on the following day. The candle is called Bearish Harami. Usually, it attracts buyers. However, the daily resistance is not too far, so the buyers may not be interested in buying the pair on the daily chart.

As expected, intraday sellers pushed the price down. Then, a bullish engulfing candle forms right at the level of support. The daily-H4 combination traders are to flip over to the H4 chart. Let us flip over to the H4 chart and find out how it looks.

The chart looks bullish, but the momentum is not there. The level of resistance is far enough, which suggests that there are still some pips for the buyers to grab. The buyers are to wait for consolidation and an upside breakout to go long on the pair.

The next candle comes out as a bullish candle too. The price has covered some distance. This means the price is offering less number of pips. However, if it consolidates from right there, the buyers would still be offered a good risk-reward. Let us proceed to the next chart.

The price keeps heading towards the North. It does not offer an entry. Moreover, it even makes a breakout at the level of resistance. This means the level of support has been working with command. Matter of regret, the daily-H4 chart combination traders have not been able to take an entry in such a strong bullish market.

When things go like this, it annoys us. This is obvious. After all, we are the human being, not a machine. The thing is we often have to deal with things like a machine in the Forex market. It is hard and needs someone to be mentally strong. Whatever it is, we must work towards it.

 

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Forex Price-Action Strategies

Daily-H4 Timeframe Combination – The Market Sometimes Makes You Wait More Than You Think

In today’s lesson, we are going to demonstrate an example of an entry derived from the daily-H4 combination. Usually, the daily-H4 combination does not take that long to offer an entry once the price makes a breakout on the daily chart. In today’s example, things are a bit different. Let us find out how it starts and ends.

In today’s lesson, we are going to demonstrate an example of an entry derived from the daily-H4 combination. Usually, the daily-H4 combination does not take that long to offer an entry once the price makes a breakout on the daily chart. In today’s example, things are a bit different. Let us find out how it starts and ends.

In today’s lesson, we are going to demonstrate an example of an entry derived from the daily-H4 combination. Usually, the daily-H4 combination does not take that long to offer an entry once the price makes a breakout on the daily chart. In today’s example, things are a bit different. Let us find out how it starts and ends.

The figure above shoes the daily chart. After a strong bullish impulse, the price action gets choppy for several days. Do you notice anything here?

The price gets caught within a rectangle. Since it has been choppy for quite a while, it makes some traders think not to keep the pair on their watch list.

There is a saying in price action trading “the more it ranges, the harder it breaks’. Thus, the next breakout may be a very strong one.

The breakout candle looks good. However, it is not that strong a breakout as we have expected. Nevertheless, it is a valid daily breakout, so traders are to flip over to the H4 chart to take a long entry.

The figure above shows the H4 chart. The price has been heading towards the North with an average bullish momentum. Traders are to wait for the price to find its support and make an upside breakout to offer them a long entry.

The price keeps being choppy on the H4 chart as well. It neither has consolidated nor produced a bullish reversal candle on which buyers could take a long entry. It has instead been within another bullish rectangle. This time it is, of course, an H4 bullish rectangle. Let us proceed to find out which way it makes its next breakout.

The price makes an upside breakout again. A bullish engulfing candle with long lower shadow makes the breakout. The buyers have been waiting for it, so a long entry may be triggered right after the candle closes. The Stop Loss shall be set below the rectangle support. There is no visible swing high. This suggests that the profit taking should be managed manually.

The plan has worked wonderfully well. The price goes straightway towards the North with extreme bullish momentum. The buyers may trail their Stop Loss in the middle of the big candle or at least above the breakeven point. As it has been going, it may keep pushing towards the North further. Let us find out what happens next.

The chart produces a bearish reversal candle. It is an Inside Bar, but it is time for the buyers to close the entry.

The price takes so long to make a breakout on the daily chart. It also takes a long time to offer entry on the H4 chart as well. This situation does not happen frequently, but sometimes it may occur. Thus, traders are to be mentally prepared for it.

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Forex Price-Action Strategies

H4-H1 Combination – An Opportunity Missed Just for an Inch

The H4-H1 is an action-packed combination. By drawing support/resistance on the and upon getting a reversal candle on the H4 chart, an entry is triggered considering H1 price action. However, things do not always go according to our expectations. In today’s lesson, we are going to demonstrate an example of an H4-H1 combination and find out whether it offers us entry or not. Let us get started.

The H4-H1 is an action-packed combination. By drawing support/resistance on the and upon getting a reversal candle on the H4 chart, an entry is triggered considering H1 price action. However, things do not always go according to our expectations. In today’s lesson, we are going to demonstrate an example of an H4-H1 combination and find out whether it offers us entry or not. Let us get started.

The H4-H1 is an action-packed combination. By drawing support/resistance on the and upon getting a reversal candle on the H4 chart, an entry is triggered considering H1 price action. However, things do not always go according to our expectations. In today’s lesson, we are going to demonstrate an example of an H4-H1 combination and find out whether it offers us entry or not. Let us get started.

This is the H4 chart. The chart shows that the price after having a rejection at a strong resistance zone heads towards the downside with extreme bearish pressure. The support zone is strong too. The last three candles are bearish, but they suggest that selling pressure may have decreased off a little. The last candle is a Spinning Top.

The combination of the last three candles ends up producing a Morning Star. This is one of the strongest bullish reversal candle combinations. The buyers are to flip over to the H1 chart for consolidation and H1 breakout candle to go long on the pair. Let us flip over to the H1 chart.

This is how the H1 chart looks. The chart produces several bullish candles consecutively, which suggests that it is the buyers’ territory. The resistance level is far enough to offer a lucrative risk-reward to the buyers as well.

Here it comes. The first candle for consolidation comes out as a bearish engulfing candle. Let us find out whether the price finds its support nearby or it heads towards the downside further.

It seems that the price may have found its support. It produces a Spinning Top again. If a bullish engulfing candle breaches the level of resistance, it will be an A+ buying signal. If another bullish candle breaches the level from where the last candle closes, it will be a good buying signal as well but may have relatively less buying pressure than the engulfing one. In both cases, the buyers are to calculate that the signal candle does not go too far up. Let us find out what happens next.

A very good-looking bullish Marubozu candle breaches the resistance. The buyers may want to trigger a long entry right after the candle closes. Would you trigger a long entry here? I let you think for a minute.

If yes, then you might have missed the line “In both cases, the buyers are to calculate that the signal candle does not go too far up.” It does, and it leaves only a little space for the price to travel towards the resistance. The risk-reward is not lucrative here at all.

An entry where almost everything looks perfect, we may still skip taking that for not fulfilling just one condition. It may frustrate us to some extent, but we have to deal with it professionally.

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Forex Price-Action Strategies

Be Patient and Observant, You Will be Paid Back

Price action traders are to be extremely observant to find out entries. Charts sometimes may seem not to offer an entry soon. However, if traders are sharp, they will be able to find out entries from the charts that may look choppy or dead for the price action traders. In today’s lesson, we are going to demonstrate an example of that.

Price action traders are to be extremely observant to find out entries. Charts sometimes may seem not to offer an entry soon. However, if traders are sharp, they will be able to find out entries from the charts that may look choppy or dead for the price action traders. In today’s lesson, we are going to demonstrate an example of that.

Price action traders are to be extremely observant to find out entries. Charts sometimes may seem not to offer an entry soon. However, if traders are sharp, they will be able to find out entries from the charts that may look choppy or dead for the price action traders. In today’s lesson, we are going to demonstrate an example of that.

After being very bearish, the price gets caught within a rectangle. The price action has been choppy, and it does not seem like that the chart is going to offer an entry. Many traders may want to skip eying on the chart to find out an entry. Can you sniff something out of it? Have a look at the chart below.

With a bit of adjustment, we can draw horizontal support as well as resistance. Look at the last bullish engulfing candle. It forms right at the support level, where the price had bounced twice earlier. That was on the daily chart. The daily-H4 combination traders may want to look for long opportunities here. Since the resistance is not far away, let’s wait for a daily breakout.

Here it comes. The next candle breaches the level of resistance and closes well above the resistance level, so it is an explicit breakout. The buyers, then, must wait for consolidation to get a level of support and to set their stop loss below that level.

The next candle comes out as an Inside Bar closing within the breakout level. This fact must excite the buyers and make them wait to get a bullish engulfing candle to trigger a long entry.

This has been a copybook price action, which price action traders dream of. The last candle engulfs the previous candle. The buyers may want to trigger a long entry right after the candle closes. Stop loss may be set below the flipped support.

This is how the chart looks after triggering the entry. The way the price has been heading, it may keep going towards the last swing high. However, by locking some profit, the buyers are to keep an eye on the chart.

The chart produces an Inside Bar. It still favors buyers. However, traders are to make a decision here. They either close the whole entry or take out at least 50% profit and let the rest of it run. This is part of trade management. However, the lesson we have learned from here is we are to be patient and extremely observant to be able to find out entries. If we are observant, we will be able to find out entries even from the charts that do not look that good.

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Forex Price-Action Strategies

It’s Not Only the Levels, but It’s also about Zones

We keep talking about support, resistance, and their levels. Sometimes we forget that it is not only about the levels. A lot depends on their zones. No doubt, in the end, we are to calculate their levels at the time of taking an entry. However, we are to keep an eye at the zones where the price may create a new trend. In this article, we are going to demonstrate an example of that.

We keep talking about support, resistance, and their levels. Sometimes we forget that it is not only about the levels. A lot depends on their zones. No doubt, in the end, we are to calculate their levels at the time of taking an entry. However, we are to keep an eye at the zones where the price may create a new trend. In this article, we are going to demonstrate an example of that.

We keep talking about support, resistance, and their levels. Sometimes we forget that it is not only about the levels. A lot depends on their zones. No doubt, in the end, we are to calculate their levels at the time of taking an entry. However, we are to keep an eye at the zones where the price may create a new trend. In this article, we are going to demonstrate an example of that.

This is a daily chart. The chart shows that the price upon finding very strong support heads towards the upside. It may have found its resistance as well, which pushes the price towards the downside. Take note that the level of support is extremely strong, which creates a secure buying zone.

The price tried to find its support at the last swing high. However, it breaches the level and comes further down. It produces an Inside Bar. It looks good for the sellers so far. Let us proceed to the next chart to find out what the price does.

The price consolidates with several candles. Look at the last candle. This is an engulfing candle which states that buyers on the minor time frames are confident enough to push the price towards the North. The resistance is far enough. Thus the daily-H4 chart traders are to flip over to the H4 chart to find out a long opportunity.

This is the H4 chart. The chart produces a Spinning Top. A bullish reversal candle, along with a breakout at the resistance, will be the signal to go long. Let us find out from the next chart whether it consolidates more or produces the bullish reversal candle.

It produces an H4 bullish engulfing candle as the reversal candle. It has an upper wick, but the body looks good enough to attract the buyers. A long entry may be triggered right here. Let us find out how the price heads with the bull. Do not forget it may go another way around, as well.

It goes towards the buyers’ desired direction. The buying pressure has been good as well. However, the last candle comes out as a bearish engulfing candle. It may be time for the buyers to close their entry.

The Bottom Line

We have demonstrated an example that the price creates a new trend, not right from the last level of support. It instead creates it from a support zone. Traders are to keep an eye on the price action around the support/resistance zone to be able to find out more entries.

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Forex Price-Action Strategies

Risk-Reward and Its Impact on the Price Behavior

Risk-reward is an essential factor in price action trading. When the price makes a breakout and produces a signal, the first thing traders are to calculate is risk-reward. It does not matter how the price heads towards a direction, significant higher high and lower low are to be calculated. These are what determine risk-reward. In today’s lesson, we are going to demonstrate an example of how risk-reward may have an impact on the market.

Risk-reward is an essential factor in price action trading. When the price makes a breakout and produces a signal, the first thing traders are to calculate is risk-reward. It does not matter how the price heads towards a direction, significant higher high and lower low are to be calculated. These are what determine risk-reward. In today’s lesson, we are going to demonstrate an example of how risk-reward may have an impact on the market.

Risk-reward is an essential factor in price action trading. When the price makes a breakout and produces a signal, the first thing traders are to calculate is risk-reward. It does not matter how the price heads towards a direction, significant higher high and lower low are to be calculated. These are what determine risk-reward. In today’s lesson, we are going to demonstrate an example of how risk-reward may have an impact on the market.

The above chart is a daily chart, in which the price action produces a Double Top along with an Inside Bar, and its neckline is not too far. The sellers are to wait for a breakout at the neckline and go short on the pair. Let us flip over to the H4 chart.

The H4 chart produces an Inside Bar as well as the reversal candle. However, the price heads towards the neckline with good bearish momentum. If the price makes an H4 breakout, the sellers may go short up to the last swing low on the H4 chart. The daily support, however, lies a bit further down.

The price is right at the neckline level. It is at a critical level since the last candle closes right at the neckline level. It could go either way from here. Let us see which way it heads.

A massive breakout takes place here. However, look at the last swing low. The price is adjacent to it. This means risk-reward is not lucrative at all. Traders must not sell from here on this chart.

It makes a breakout, which is fantastic. However, the black marked level is daily support. The sellers may take a short entry from here, but that is on the H4-H1 chart combination.

As expected, the price heads towards the daily support, and it produces a bullish reversal candle. It made such a strong bearish move, but the daily-H4 chart combination traders have not found any entry because of the risk-reward issue. If the daily-H4 combination chart traders found an entry, the bearish move would have been more consistent. Let us find out what happened next.

The price heads towards the level sellers were waiting for the price to make a breakout at first. This one is another inconsistent move on this chart. That means an inconsistent move may bring another inconsistent one. To sum up, we could conclude by saying that the risk-reward factor may make the price inconsistent to some extent.

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Forex Price-Action Strategies

Never give Up: Chase it All the Way

Trading is a game of probability, which requires patience and amazing mental strength. A trader has to have ‘never give up’ mindset. In today’s trading lesson, we are going to demonstrate an example of the importance of having ‘never give up’ attitude.

Trading is a game of probability, which requires patience and amazing mental strength. A trader has to have ‘never give up’ mindset. In today’s trading lesson, we are going to demonstrate an example of the importance of having ‘never give up’ attitude.

Trading is a game of probability, which requires patience and amazing mental strength. A trader has to have ‘never give up’ mindset. In today’s trading lesson, we are going to demonstrate an example of the importance of having ‘never give up’ attitude.

The price heads towards the North by making new higher highs. The last candle comes out as a bearish candle. However, the overall trend is still biased with the bull. Thus, traders shall look for long opportunities here until it makes a breakout at the last swing low.

The last candle makes a breakout at the last swing low. The bear seems to have taken control. Traders are to go short on this chart upon upside correction. The last candle closes within the level, where the price reacted heavily earlier. Thus, the price may consolidate hard here.

It does not. It rather makes a breakout straightway. Moreover, it produces another bearish candle and approaches towards a significant level of support. Usually, after making such big movements without having consolidation, the price gets tired and choppy.

It is not tired on this occasion though. It consolidates and produces a bearish engulfing candle closing below the last support. A short entry may be triggered right after the candle closes by setting Stop Loss above the consolidation resistance.

Off she goes. The price heads towards the downside with extreme bearish pressure. Two consecutive bearish candles and there is still no sign of a reversal. The sellers may keep holding their position to make more pips. The movement justifies the statement that the market can be very tricky from time to time. It can do things (market move) that we may not even imagine on that particular occasion.

After making the first breakout, the price makes an abrupt move. Usually, in most cases, the price does not continue its journey towards the trend. Either it consolidates for a long time or it makes a reversal. Many price action traders may not want to keep their eyes on the chart. They may think it is a waste of time. However, the above example shows us that it is not waste. Experienced price action traders must have made full use of that bearish move. If a trader wants to survive in this market, he is to be patient, perseverant, and hard working. With these three qualities, he must have ‘never give up’ mind setup.

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Forex Daily Topic Forex Price-Action Strategies

An Old Theory about Support/Resistance

Support and Resistance are the two extremely important components in financial trading. Price action traders rely on them as a critical component of their trading strategies.

Support and Resistance are the two extremely important components in financial trading. Price action traders rely on them as a critical component of their trading strategies.

Support and Resistance are the two extremely important components in financial trading. Price action traders rely on them as a critical component of their trading strategies.

Ideally, 90% of the indicators are able to reveal support and resistance levels. An ancient theory of support and resistance says that support becomes resistance and vice versa and interesting point is the theory still works nowadays as well as it did in the past. In today’s lesson, we are going to demonstrate an example of this long-used theory.

In the above figure, the price heads towards the North with good bullish momentum. It pauses at a level of resistance, where the price had a rejection earlier. The equation is simple here. If the price produces a bearish momentum and makes a breakout at the last swing low, the sellers are going to look for short opportunities. In case of an upside breakout, it remains buyers’ territory.

A bullish engulfing candle breaches the resistance. If the price confirms the breakout, the buyers keep dominating here. It seems that the sellers do not have any reasons to be optimistic soon.

The breakout level holds the next candle, as well. This move is a confirmed breakout. However, the buyers are to wait for price consolidation, which gives them a level of support to set stop loss and an upside breakout to trigger an entry.

Oh! No, a bearish Marubozu candle comes back in. All of a sudden, things look a bit different here. The buyers and the sellers both have chances. Let us find out what the price does next.

The price confirms the bearish breakout with an Inside Bar. Look at the last candle on the chart – a bearish engulfing candle forms at the resistance zone. The sellers may flip over to the H1 chart to take a short entry since it is an H4 chart.

The price takes some time to get bearish. It may have been consolidating on the H1 chart for several hours. However, it does get bearish in the end — the price heads towards the South with extreme bearish momentum. The last candle comes out as a Doji candle, which may make some sellers think about taking an exit. However, the way it has been heading towards the downside, most likely it may go towards the last swing low.

The Bottom Line

There are so many strategies, indicators, EAs in the market. It would be tough to suggest if you ask me which one works best. Then again, if I am asked to choose just one strategy, my choice would be “Sell at flipped over resistance; buy at flipped support.”

Categories
Forex Basics Forex Price-Action Strategies

A Story of a False Bullish Breakout

In today’s lesson, we are going to demonstrate an example of a short entry that is derived from a false breakout. It contains two lessons. Let us get started.

In today’s lesson, we are going to demonstrate an example of a short entry that is derived from a false breakout. It contains two lessons. Let us get started.

In today’s lesson, we are going to demonstrate an example of a short entry that is derived from a false breakout. It contains two lessons. Let us get started.

The price heads towards the North and makes an upside breakout. The buyers are to keep their eyes on the pair to go long upon consolidation and bullish reversal candle at the breakout level. Let us find out what happens next.

Wow! This is a copybook corrective candle, which closes right at the breakout level. A bullish reversal candle followed by a breakout at the highest high would get the buyers engaged in buying the pair.

The buyers might not have even thought about it. They are to let the sellers dominate in the pair, while sellers should wait for the breakout confirmation and a bearish reversal candle to go short on the pair. However, they have to calculate that the last swing low is not too far.

The price keeps going towards the South without having apposite consolidation. It consolidates just before the support. The price has been bearish but has not offered any short entry on this chart. Meanwhile, it has made another bearish breakout. The sellers shall be hopeful again. Look at the chart below.

This is an explicit breakout, and the next candle confirms it. The consolidation and the price breakout at the lowest low would be a signal to go short. Let see what the price does this time.

Price action traders have been waiting for this. The price consolidates and makes another breakout. By setting Stop Loss above the resistance, an entry may be triggered right after the last candle closes.

This is how it goes. The price produces consecutive four bearish candles. The very last candle comes out as an Inside Bar. Most traders may come out with their profit; some may still hold their trade by locking some profit.

 Lessons

We learned two lessons from here

  1. False breakout usually drives the price towards the opposite direction.
  2. Risk-reward is always a factor. It does not offer an entry within the first support since risk-reward is not lucrative. It offers an entry on the second breakout, where there is not support nearby.

The Bottom Line

In the beginning, it may sound too many things to remember in price action trading. It is right to some extent. However, if we practice hard, study with the recent price behavior on the chart with as many pairs as we can, surely it will get easy for us.