Tag: Price Action

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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.

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Forex Course

59. Trading The Candlestick Charts Using Support and Resistance Levels

Introduction

Introduction

Introduction

In the previous few lessons, we have discussed many candlestick patterns and how to trade them. Those basics are very important for us to master Technical Analysis. Before leaving the Candlestick topics, let’s discuss THE most important concept in technical trading i.e., Support & Resistance. We shall first understand what Support and Resistance are, and will learn how to trade them on the Candlestick charts.

What Is Support?

Support is the level at which the price finds it difficult to fall below. Eventually, the price will bounce back up at this particular level. The support level acts as a floor that restricts price action to go down further. Some technical traders describe ‘Support’ as an area where demand overcomes supply. Because at this level, the demand for any currency will be more, hence the selling stops, and buying continues. The price reaction of any given asset would look something like the image below at the Support level. We can clearly see the price bouncing back up once it reaches the support level. (Blue Line = Support Level)

What Is Resistance?

Resistance is just the opposite of the support level. It is the level where price finds it difficult to break through to rise above until it is pushed back down. It acts as a ceiling restricting the price action to go up further. Basically, it is an area where supply overcomes demand. The price reaction of any underlying currency at a resistance looks something like the image below. We can see the price reaching the resistance line many times but unable to break through it. We must remember that at any point, Support can turn into Resistance and Resistance can turn into support. Hene, it is called S&R.

Pairing candlesticks with S&R

The fundamental method of technical trading is to buy at Support and Sell at Resistance. But this does not always work as there is no sure shot assurance that the Support and Resistance levels will hold for long. Hence traders need to look at other important factors while trading at Support and Resistance.

When buying near Support, we must wait for the consolidation at that area and only buy when the price breaks above that small consolidation. In that way, we can be sure that the price is respecting that level and is starting to move higher. The same concept applies when selling at resistance. Wait for consolidation and then enter a short trade when the price drops below the low of the small consolidation.

Below is an example of a short trade.

After entering the trade, make sure to place the stop-loss just below the low and above the high of Support & Resistance, respectively.

According to technical analysis principles, if a Support level or Resistance level is broken, their role is reversed, i.e., Support becomes Resistance and Resistance becomes Support. The psychology behind this phenomenon is that, when price breaches a key area, some will get out, and some hold on to their trades to see what happens. When price retraces back to the key area, people who have held it, go out and making the price bounce at the previous Support and Resistance.

Conclusion 

Traders always suspect a reversal at the key Support and Resistance as there is a high probability that price will reverse at these key levels. Some traders who had open positions exit at these price levels and others initiate new positions at these levels, depending on which side the price are they. Support and resistance levels are psychological levels at which many traders place orders to buy (support) or sell (resistance) making them supply or demand levels. That is why it is crucial to learn about Support and Resistance.  Also, support and resistance levels can be identified more easily using candlesticks, as a candle is very graphical, displaying wicks when the price bounces back from bottoms or tops. Identifying these significant levels forms the basis for Technical Analysis. Cheers!

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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.

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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.

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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.

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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.

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Candlestick patterns Forex Candlesticks

Candlestick Reversal Patterns V – The Morning Star and the Evening Star

The Morning Star and the Evening Star

The Morning Star and the Evening Star

The Morning Star and the Evening Star

The morning Star and the Evening Star formations are patterns made of three candlesticks. The original candlestick patterns were made on the Japanese rice futures trading and were created for daily timeframes. Thus, they could depict gaps from the previous close to the next open. The Star was a small real body – white or black – that was gaping away from a previous large body. The only place where that could occur in the Forex markets is during weekends. Thus, what is required to form a star in Forex is a small body, the smaller, the better, at the end of a large body, preferably with large shadows.

The Morning Star

The Morning Star is a three-candle formation at the bottom of a descending trend. In astronomy, Mercury is the morning star that foretells the sunrise and the arrival of the day. That was the name the Japanese gave to the formation, as they consider it to be the precursor of a new uptrend.

As said, it is formed by three candlesticks. The first one is a large and black candlestick. The session day the price starts with a gap down (or just at the close in Forex) continues moving down for a while, then it recovers and closes near the open, creating a tiny body. The third day is a white candlestick that closes near the open of the first black candlestick. The important factor in the signal is the confirmation of buyers after the star candle is formed. The close of the third day should, at least, cross the halfway up to the black candle body, as in the case of a piercing pattern. 

Chart 1 – Morning Star on the DAX-30 Index (click on it to enlarge)

Criteria for a Morning Star 
  1. The downtrend was evident
  2. The body of the first candle continues with the trend (black)
  3. The second candle is a short body figure showing indecision
  4. The third day the candle closes at least above 50 percent the body of the black candle.
  5. The larger the black and white candles, the better.
  6. A gap is desirable but doesn’t count on it on 24H markets
  7. A high volume in the first and third candles would be good signs of a selloff and consequent reversal.
Market Psychology

As in most bullish reversals, the first day, the hopeless bulls capitulate with a significant drop and substantial volume. The next day the power of the sellers stops in a short-bodied candle. The third day began bullish, touching the stops of the late short-sellers, and also caused by the close of positions of profit-takers. That fuels the price to the upside, making more short sellers close their positions -buying- and pushing up further the price. At the end of the day, buyers take control of the market action closing with a significant white candle on strong volume.

The Evening Star

The Evening star is the reciprocal of the Morning star, and even more so, when trading pairs in the Forex market, or any pair, for that matter. In this case, the Japanese linked this formation with the Venus planet, as the precursor or the night. It is created when a long white candle is followed by a small body and a large black candle.

As the case of the Morning Star, a gap up on the second small-bodied candle followed by a gap down on the third black candle is further confirmation of a reversal, but that seldom happens in the Forex Market.  Also, the third candlestick is asked to close below 50 percent of the body of the first white candle.

 

Chart 2 – Evening Star on the EURUSD Pair (click on it to enlarge)

Criteria for an Evening Star
  1.  The upward trend has been showing for some time
  2. The body of the first candle is white and large.
  3. The second candlestick shows indecision in the market
  4. On the third day, it is evident that the sellers have stepped in and closes below 50 percent of the initial white candle.
  5. The longer the white and black candles, the better
  6. A gap before and after the second candle is desirable, although not attainable in Forex.
  7. A good volume in the first and third candles is also desirable.
Market Psychology

The uptrend has attracted the buyers, and the last white candle has seen an increasing volume. In the next session, the market gapped of continue moving up for a while, catching the last stops by short-sellers, but suddenly retraces and creates a small body, with the close next to the open. The next day there is a gap down makes the stops of the long positions to be hit, adding more selling pressure to the profit takers and short-sellers. The day ends with a close that wipes most of the gains of the first white candle, that shows that the control is in the hand of sellers.

 

 

Reference: Profitable Candlestick Patterns, Stephen Bigalow

 

 

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.

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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
Candlestick patterns Forex Candlesticks

Candlestick Reversal Patterns IV – The Hammer and The Hanging Man

 

 

 

The Hammer

The Hammer is a one-candle pattern. The Hammer is identified as a small body with a large lower shadow at the bottom of a downtrend. The result of having a small body is that the open and the close are near each other. The large lower shadow means during the session sellers could move down the price but, then, buyers stepped in and pushed the price back to the levels of the open, or, even, a bit further up. That means sellers lost the battle, and the buying activity started dominating the price action. A positive candle is needed to confirm the price action. This usually converts this candle into a Morning Star formation.

Chart 1 – Hammer in the USDCHF Pair

Criteria for Hammers

  1. The lower shadow must be at least twice the length of the body
  2. The real body is at the upper side of the range. The color does not matter much, although a white body would increase the likelihood of the reversal.
  3. There should be no upper shadow or a very tiny one.
  4. The longer the lower shadow, the better
  5. A large volume on the Hammer is a good signal, as a blob woff day might have happened.

Market Psychology

After a relatively large downtrend, the sentiment of the traders is rather bearish. The price starts moving down at the open and makes a new low. Then, buy orders to move the price up. Profit-taking activity also contributes to the upward move. Then intraday stop-loss orders come in fueling the action further up. A positive follow-up candle would confirm the control of the action by the buyers.

The Hanging Man

The Hanging Man is also a figure similar to a Hammer, with its small body and large lower shadow, but it shows up after a bullish trend. The Japanese named this figure that way because it looks like a head with the body and feet hanging.

Chart 2 – Three Hanging Man in the DOW-30 Index

Criteria for the Hanging Man

  1. The lower shadow must be at least twice the length of the body
  2. The real body is at the upper side of the range. The color does not matter much, although a white body would increase the likelihood of the reversal.
  3. There should be no upper shadow or a very tiny one.
  4. The longer the lower shadow, the better
  5. A large volume on the Hammer is a good signal, as a blowoff day might have happened.

Market Psychology

After a strong trend, the sentiment is quite positive and cheerful. On the day of the Hammer, the price moves higher just a bit, then it drops. After reaching the low of the session, the buyers step in again and push the price back up, close to the open level, at which level the session ends. This would indicate the price action is still in control of the buyers, but the considerable drop experienced in the first part of the session would mean the sellers are eager to sell at these levels, and a resistance zone was created. A lower open or a black candlestick the next day would move the control to the sell-side.

Reference.
Profitable Candlestick Patterns, Stephen Bigalow

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Forex Videos

Naked Trading Forex – Don’t Get Caught With Your Pants Down!

https://youtu.be/gJ4Z2JJqnvQ

https://youtu.be/gJ4Z2JJqnvQ

Naked Trading – Is this all you really need for trading?

So what is naked trading? Well, it is certainly not sitting at your screen trading in your underwear! It has only really been since the advent of the internet that trading by technical analysis has really taken off. Before that, traders managed perfectly well without technical analysis, so how did they cope? Really good traders, including pit traders in the Futures markets,, knew where prices of certain assets should be in their head. They waited for levels where a Futures contract was oversold or overbought, and because they had a clear picture in their mind, from past experience, they knew when to buy or sell.

This was fairly similar in the early days of the forex market; currency exchange rates moved much more slowly than they do nowadays. Institutional forex brokers would squawk prices to the banks and institutional clients who, again, pretty much knew the levels in their heads. Some traders would simply write the exchange rate price changes on a piece of A5 paper, or a notebook, and they could then see by the changes if prices we’re moving up or down, and at what levels they had stalled, and would then trade accordingly.

Nowadays, price action in a volatile market can be so fast-moving it is almost difficult to keep up with it on a PC screen when using technical analysis. However, many profitable traders do not use lots of indicators on their charts. Some trade naked, relying only on the price action. Just like the days before the internet really took off, they take advantage of price movement on their screens only to tell them when a currency pair is overbought or oversold. Because essentially, this is what trading is all about, markets are pushed as high as they can possibly go in one direction, and when they run out of steam, because of a lack of buyers or sellers, they turn around and move in the opposite direction.

These moves can sometimes be limited to just a few pips, and sometimes the moves are much larger. This depends on the time of day and is also dependent on the number of market players; because the more traders are in the market simultaneously, the greater the liquidity in the market. And this also depends on things like fundamental reasons leading up to economic data releases, or market sentiment, and also forthcoming speeches by financial policymakers.

Example A

Let’s look at example A, and try and gauge how naked traders operate. This is a one-hour chart of the USDJPY pair, using only price action, in the form of Japanese candlesticks, to try and determine future price action. On its own, we can see that price is generally bid from the beginning of the chart, which we always read from left to right because it tells us a story.

Example B


Now let’s look at example B, where we have just added a couple of horizontal lines which help to give us a clearer picture of what is going on. Simply by adding two horizontal lines, we can now see the price action of this particular pair is centered around two levels: 109.00 and one 110.00.
Firstly at position A, we can see a bullish candle that takes the price to just above the 109.00 level, only for price action to come down and be supported at position B by the 109.00 level. And when Traders could not push the pair any lower, price action begins to move up to the next key level at position C, which is the 110.00 level. Something we see quite often in the market is price action floating around key levels, or round numbers, and that’s exactly what happened here. Price moves down to position D, but fades out because of a lack of sellers, and then moves up to position E, before pushing above the 110.00 key level to around 1:1030. Here the market runs out of buyers and price action would appear to be gravitating back down to the 110.00 level again.

Sometimes new traders rely on too many technical indicators, which means they spend too much time looking at them all and cannot see the wood for the trees. Price action is king when trading Forex. So let it be your number one priority during technical analysis.

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
Candlestick patterns Forex Candlesticks

Candlestick Reversal Patterns III: Understanding the Harami

So far, the reversal formations we saw – the Piercing Pattern, the Dark Cloud Cover, and the Engulfing patterns, were strong reversal signals, showing that the bulls or bears had the control. The Harami is usually a less powerful signal.

So far, the reversal formations we saw – the Piercing Pattern, the Dark Cloud Cover, and the Engulfing patterns, were strong reversal signals, showing that the bulls or bears had the control. The Harami is usually a less powerful signal.

So far, the reversal formations we saw – the Piercing Pattern, the Dark Cloud Cover, and the Engulfing patterns, were strong reversal signals, showing that the bulls or bears had the control. The Harami is usually a less powerful signal.

The Harami is created when a short candle’s body is entirely contained inside the body of the preceding candle. The color of the second body of this pattern is unimportant, although the color of the first one follows the trend (black in downtrends and white in uptrends). The name “Harami” comes from the old Japanese word meaning “pregnant.” Japanese traders call the first candle, “the mother,” and the second one, “the baby.
The appearance of a Harami is indicative that the current trend has ended. According to Steve Nison, the Japanese say the presence of a Harami shows the market is losing its breath. They contend that, after a large healthy candle, the small inside candle shows uncertainty.
We have to say that if we look at the charts, harami-like formations appear often, but most of it was just pauses or pullbacks of the primary trend. Thus, although not good enough to call for a reversal of the trend, they could be potential signals to exit a trade or take partial profits.
Also, we have to remember that, since trading the Forex markets, and, also, intraday, there are no gaps available. This fact makes a harami quite similar to a Piercing pattern or a Dark cloud Cover if the body of the second candle surpasses half of the previous body.

Chart 1 – Several Haramis in the Cable.

As we see in chart 1, haramis and engulfing patterns are alike, with the exception of the second one.  What we can see is that be it harami or engulfing, the pattern is worth to pay attention to since most of the time signals the end of the previous leg.

Criteria for a Bullish Harami

  1. The body if the first candle is black (red) and the body of the second candle is white (green)
  2. There is evidence of a downtrend.
  3. The second candle opens higher or at the close of the first candle.
  4. Just the body needs to be inside the body of the first candle. That is unlike the inside day.
  5. A confirmation is needed for a reversal signal.
  6. The longer the black and white candles, the more powerful the signal
  7. The higher the white candle closes, the better.

Market Psychology of a Bullish Harami

After a selloff day, the next day, sellers don’t have the strength to push the prices further down. Concerned short-sellers start to take profits of just close the trade fuelling the purchases. The price finishes higher, and traders mark the double bottom as support. A strong day following the harami formation would convince the market participants that the trend has reversed.

Criteria for a Bearish Harami

  1. The body if the first candle is white (green) and the body of the second candle is black (red)
  2. There is evidence of an uptrend.
  3. The second candle opens lower or at the close of the first white candle.
  4. Just the body needs to be inside the body of the first candle. That is unlike the inside day.
  5. A confirmation is needed for a reversal signal.
  6. The longer the white and black candles, the more powerful the signal
  7. The lower the black candle closes, the better.

Chart 2- Several Haramis in the GBPAUD pair. Not all are successfully signaling a reversion of a trend

Market Psychology of a Bearish Harami

After a strong bullish trend, a long white candle emerges. In the next session, the longs cannot force more upsides. The asset began to drop, as concerned bulls are closing their positions to pocket their profits, and the day finished lower. Also, short-term traders mark the top of the white candle as a resistance level. A third day showing weakness is what is needed to convince everybody that the uptrend is over and a new leg down is starting.

References:

Profitable candlestick Patterns, Stephen Bigalow

The Candlestick Course: Steve Nison

 

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 Course

50 – Basic Anatomy Of A Candlestick Chart

Introduction

Introduction

Introduction

In the previous article, we have discussed the history, introduction, advantages, and disadvantages of using candlestick charts. Now, in this lesson, we will discuss how to read a typical candlestick chart.

Every candlestick has a central portion which is referred to as the body of the candlestick. It shows the distance between the opening price and the closing price of the security that is being traded. The faint line between the top of the body and the high of the trading period is the upper shadow. Likewise, the thin line between the low of the body and the low of the trading period is known as the lower shadow.

The chart below is made up of lines going from top to bottom. These lines are known as candles. This vertical axis of this chart shows the price, whereas the horizontal axis shows the time.

(Chart Taken From Trading View)

Each of the candles in the above chart gives us four pieces of information.

Candlesticks always refer to the information for a specific unit of time. For example, in a daily chart, each candle represents one single trading day. Every single candle is comprised of the open, close, high, and low for that given trading period. The horizontal axis of the above chart can be used to know which day corresponds to which candlestick. Almost every candle has a wick (also known as shadow) that goes outside the body of the candle. They represent the highest and lowest price of a security during that period.

               

The color of the candle is the essential aspect of any candle. It determines if the opening price of a security was higher or lower than the closing price of a security. If the candle is Red, it is known as a bearish candle. Always remember that the opening price is higher than the closing price in a bearish candle. Contrarily, if the candle is Green in color, it is known as a bullish candle, and that means that the opening price is lower than the closing price.

Market Emotions & Candlesticks

The names given to candlestick patterns are a colorful way to describe the emotional sentiment of the market. When we hear words like ‘dark-cloud cover’ or ‘hanging-man,’ they easily indicate the unhealthy state of the market. We are not saying they provide proper trading signals, but they clearly indicate the negative market state.

Without even knowing the technicalities of these patterns, we get an idea of where the market is heading to just by hearing their names. For instance, consider the names like ‘morning star’ & ‘evening star’ candlestick patterns. The morning star essentially implies the bullish state of the market as the appearance of the morning star is just before the sunrise. Likewise, the evening star indicates a bearish signal because it comes out just before the sunset.

The other emotional price point that should be noted is the closing of any candle. If you recall the concept of Margin calls from brokers, they are based on the close of the candle alone. Thus we can expect emotional involvement when the market closes.

That’s about the anatomy of candlesticks. In the upcoming articles, we will be discussing many of such amazing candlestick patterns which are sure going to be very interesting.

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Categories
Forex Daily Topic Forex Price-Action Strategies

High Impact News Events and Risk Management

In today’s lesson, we are going to demonstrate an example of price action trading on the daily chart. The lesson has a message if a high impact news event comes in between, what daily traders should do?. Let us get started.

In today’s lesson, we are going to demonstrate an example of price action trading on the daily chart. The lesson has a message if a high impact news event comes in between, what daily traders should do?. Let us get started.

In today’s lesson, we are going to demonstrate an example of price action trading on the daily chart. The lesson has a message if a high impact news event comes in between, what daily traders should do?. Let us get started.

This is EURJPY daily chart. The chart produces a bullish engulfing candle, which suggests that the buyers may dominate in the pair. Traders on different time frames may get themselves ready to go long on the pair. Traders who trade on the daily chart, they are to wait for the price to consolidate and produce a bullish reversal candle to go long on the pair. Let us proceed to the next chart.

The pair produces another bullish candle before creating the corrective candle. It means the buyers on the H4, H1, or 15M may have found some entries and drove the price towards the North last day. Anyway, the daily traders may keep an eye on the pair to go long upon a bullish engulfing candle closing above the last candle’s highest high.

Here it comes. A bullish engulfing candle closes above the daily resistance. The buyers may trigger a long entry right after the candle closes by setting stop loss below the candle’s lowest low. The nearest significant swing high is quite far away. It offers a tremendous reward considering the risk.

The price heads towards the North for one more candle. However, it does not get as bullish as expected. The good thing is it is a bullish candle. The buyers must hold the trade at least up to the level, which offers 1:1 risk-reward.

The pair produces a doji candle. The price hits the level, which offers 1:1 risk-reward. Then, it ends up producing a candle, which neither a bullish nor a bearish candle. Technically, the buyers shall take out at least 50% profit and let the rest of it run. As far as the price action is concerned, the price still may go towards the North further. I may give you information that this is the Wednesday market dated 11/09/2019. Here I have something interesting to show you before we start Thursday trading.

Source: Forex Factory

The pair we are dealing with here is EURJPY. Look at those news events with the EURO. The EURO pairs are to ride on a roller coaster on such news days. Let us not guess, but have a look at the daily chart to find out how it looks.

The price goes towards the trend’s direction. Do not miss the lower spike. You can see that it hits the stop loss. It is painful, but this is how the Forex market is. Thus, traders must take extra care of their positions before such high-impact news event. Otherwise, they may lose their hard-earned profit by getting hit such high impact news events.

 

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

Edged Breakout Lessens Momentum and Chance of Winning

In today’s lesson, we are going to demonstrate an example of the daily-H4 combination trade, where the price produces a reversal candle, but it does not make an explicit breakout. The price heads towards the breakout direction after having more consolidation. It often happens. Thus, we need to get familiar with such price action. Let us get started.

In today’s lesson, we are going to demonstrate an example of the daily-H4 combination trade, where the price produces a reversal candle, but it does not make an explicit breakout. The price heads towards the breakout direction after having more consolidation. It often happens. Thus, we need to get familiar with such price action. Let us get started.

In today’s lesson, we are going to demonstrate an example of the daily-H4 combination trade, where the price produces a reversal candle, but it does not make an explicit breakout. The price heads towards the breakout direction after having more consolidation. It often happens. Thus, we need to get familiar with such price action. Let us get started.

Above, we can observe a daily chart. The last daily candle closes well below the last swing low. This is an explicit breakout. Let us now determine the level where the price may find its next support. The chart shows that the price closes within a swing low. However, the swing low one below may come as the next level of support. Have a look at the chart below.

The price may head towards the South and find its support at the red-marked level as far as the daily chart is concerned. The daily-H4 chart combination traders are to flip over to the H4 chart for the price consolidation and bearish breakout to go short on the pair.

The image above corresponds to the H4 chart. The chart produces a bullish corrective candle. If it produces a bearish candle closing below the last swing low, the sellers may trigger a short entry. Let us proceed to the next chart.

The chart produces a bearish engulfing candle. However, look at the breakout. It is not an explicit breakout. If the candle closed below the level of support with a 15%-25% extra red body, it would be an excellent entry. Nevertheless, it is a strong bearish reversal candle (bearish engulfing). A bearish engulfing candle in a bearish market makes a very strong statement that the sellers are in control on the minor charts. Let us find out what happens next.

The chart produces another bearish candle. Look at the last candle. It comes out as a bullish candle with a long upper shadow. The pair still looks bearish, but the bullish corrective candle goes too far up. It may be because of the bearish reversal candle that we have after the first consolidation. If it closed well below the level of support, it would have been bearish with more momentum. Often the price goes towards the opposite direction and hits the stop loss too in such breakout. Let us find out what happens here.

It goes according to the sellers’ expectations and hits the Take Profit. Here is a question. Would you take such entry next time? I would not blame if you say ‘yes.’ Because such trade may have a 55% chance of winning, however, to be very consistent and keep our confidence at the top level, it is better if we skip such entry.

Categories
Forex Price-Action Strategies

It is Better to be Safe than Sorry.

Using Stop Loss is an essential component of trade management. The Forex market gets volatile from time to time. Taking an entry without using Stop Loss may make an account empty. Thus, under no circumstances, we shall take any entry without using Stop Loss. We need to make sure that we set our Stop Loss accordingly, which is neither too tight nor too saggy. In today’s lesson, we are going to demonstrate an example of that.

Using Stop Loss is an essential component of trade management. The Forex market gets volatile from time to time. Taking an entry without using Stop Loss may make an account empty. Thus, under no circumstances, we shall take any entry without using Stop Loss. We need to make sure that we set our Stop Loss accordingly, which is neither too tight nor too saggy. In today’s lesson, we are going to demonstrate an example of that.

Using Stop Loss is an essential component of trade management. The Forex market gets volatile from time to time. Taking an entry without using Stop Loss may make an account empty. Thus, under no circumstances, we shall take any entry without using Stop Loss. We need to make sure that we set our Stop Loss accordingly, which is neither too tight nor too saggy. In today’s lesson, we are going to demonstrate an example of that.

The above chart is a daily chart. We see that the price finds its support and produces a bullish engulfing candle. The candle closes within the last swing high. The daily-H4 combination traders are to flip over to the H4 chart to take a long entry upon consolidation and bullish breakout. Let us have a look at the H4 chart.

The H4 chart looks extremely bullish. The chart produces a morning star right at the support zone and heads towards the North for one more candle. Traders are to keep an eye on the chart for the price consolidation.

The chart produces one more bullish candle. It then consolidates and creates a bullish engulfing candle breaching the last highest high on the chart. This is an ideal price action opportunity to trigger a long entry right after the last candle closes. Traders shall set the stop loss below the level of support, where the engulfing candle bounces.

The next candle comes out as a bearish candle approaching the Stop Loss level. However, if we set the Stop Loss below the support level, we would be safe here. Things do not look as good as we expected. Let us proceed to the next chart.

The next candle comes out as a bullish engulfing candle. Things look much better now. However, we must not miss the fact that the bullish engulfing candle has a bounce right at the Stop Loss level. If we set too tight Stop Loss, we would have to encounter a losing trade here. Instead of making the profit, we would lose money.

It is a debatable issue how far we shall set our Stop Loss. It is not recommended that we should set our Stop Loss too far. However, we shall set our Stop Loss below the level of support/resistance and add some extra pips. For intraday trading on the 5M, 15M, 30M, H1, and H4 chart, to measure the number of extra pips, we may use the spread of that particular pair. Let us assume we are taking a long entry on EURUSD. If the spread is three pips, we may add three extra pips to set our Stop Loss. We must do a lot of back-testing with our favorite pairs to find out the perfect measure for this to be safe with our entries. As they say, “it is better to be safe than sorry.”

 

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 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.

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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.

 

Categories
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.

Categories
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.

Categories
Forex Elliott Wave Forex Market Analysis

Dollar Index Long Term Wave Analysis

The US Dollar Index (DXY) from last October shows signs of exhaustion of the bullish cycle that started in February 2016. What says us the Elliott Wave Principle about the next path of the US Dollar? In this article, we will discuss what to expect for the Greenback.

The US Dollar Index (DXY) from last October shows signs of exhaustion of the bullish cycle that started in February 2016. What says us the Elliott Wave Principle about the next path of the US Dollar? In this article, we will discuss what to expect for the Greenback.

The US Dollar Index (DXY) from last October shows signs of exhaustion of the bullish cycle that started in February 2016. What says us the Elliott Wave Principle about the next path of the US Dollar? In this article, we will discuss what to expect for the Greenback.

Fundamental Perspective

The Federal Reserve, during the last FOMC meeting, realized on December 11, decided to keep the interest rate at 1.75% by letting it unchanged for the second consecutive month.

The FED’s Chairman Jerome Powell, in his latest statement, indicated that the current monetary policy is adequate to sustain the expansion of economic activity in the United States. On the other hand, the labor market conditions remain stronger, and inflation continues in the 2% target.

In its projections for next year, the committee members do not visualize any further cut changes in the reference rate.

Technical Perspective

Dollar Index (DXY), in its weekly chart, shows the price action developing a downward corrective structure. This bearish structure began on January 03, 2017, when the DXY reached the level 103.82.

Until now, DXY has carried out two internal waves, which we identified as wave ((A)), and ((B)) labeled in black. In the weekly DXY chart, we observe that wave ((A)) progressed in five waves.

According to the Elliott Wave Principle, the formation developed by DXY should correspond to a corrective structure that presents the characteristics of a zigzag pattern. A zigzag formation is characterized by a 5-3-5 internal sequence.

The graph below shows the daily DXY chart, which reveals a bullish sequence that develops into three internal waves, labeled in blue as (A), (B), and (C), which corresponds to the complete movement of upper-degree, identified as wave ((B)).

Likewise, we recognize how the price developed a structure in the form of an ending diagonal, that in terms of the Elliott Wave Theory, appears typically in waves “5” or “C.”

On the other hand, the pierce and closing below the August 2019 low at 97.17, make us suspect that the price could be making a change from the upward cycle started in February 2018 to a downward trend.

This movement could start the third internal move of the corrective wave, which should be developed in five waves.

Our Forecast

The 4-hour chart shows DXY has completed its first bearish motive wave labeled as (1) in blue. Once its five internal segments has ended, the price bounded off from the level of 96.59 on December 12.

Short term, we expect a bullish rebound in three waves that could reach the zone between 97.94 and 98.44. From this zone, the Greenback could find sellers waiting to activate their short positions.

The long-term target is located in the zone of the 90 points as a psychological round-number level. Further, this zone is the area of the 2018’s lows. This target area coincides with the lower line of the downward channel.

The invalidation level of the bearish scenario is located at level 99.67, which corresponds to the highest level reached in early October 2019.

Categories
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.

Categories
Forex Price Action Point and Figure

Point & Figure Introduction: The Problem with Japanese Candlesticks

Problems with Japanese Candlestick Analysis

Problems with Japanese Candlestick Analysis

Problems with Japanese Candlestick Analysis

One of the big buzz words or methodologies used in trading over the past ten years has been the term and/or style called ‘Price Action Trading.’ It is also known as ‘Naked Trading’ or, much less known as ‘Dynamic Impulse Trading.’ Price Action Trading is a style and methodology that teaches students to utilize candlesticks charts with no lagging indicators or oscillators. Students learn to utilize very little in the form of any tools beyond trend lines, subjective horizontal support/resistance, and pattern recognition. Not surprisingly, many people fail at Price Action Trading. I would venture that out of all the methodologies taught to new traders and analysts, Price Action Trading with Japanese candlesticks causes more new trader accounts to go bust than almost any other trading style or system.

The problem with Price Action Trading using Japanese candlesticks gets exacerbated the faster the time frame used. Japanese candlesticks are, believe it or not, a very advanced form of analysis that requires a significant amount of study to interpret and apply today’s financial markets properly. Traditionally, the application of Japanese candlesticks did not occur on fast time frames. Instead, they were limited to longer time frames such as weekly and monthly charts, and those are timeframes where the analysis, interpretation, and execution of Japanese candlesticks have very few equals. To make Japanese candlesticks work on fast time frames in modern markets requires the use of a myriad of supporting tools such as oscillators and indicators. The use of oscillators and indicators with Japanese candlesticks is necessary is because Japanese candlesticks are three-dimensional: price, time, and volume. Point & Figure only records price.

 

Point & Figure Analysis

For the Price Action Trader, no chart style is purer than Point & Figure because Point & Figure records only price. In Point & Figure Analysis, time is not measured or used, and volume is anecdotal. That may seem anathema to many traders, but it makes perfect sense from the perspective of a Point & Figure user. Because Point & Figure only records price moves, it makes sense why volume is anecdotal and not significant. If you think about it, the volume itself isn’t relevant unless there is a corresponding price move. Price is the only thing that matters. One of the greatest authorities and written works of Technical Analysis is de Villiers and Taylor’s Point and Figure Charting. They make a compelling case for the weight and authority of this chart and analysis style.

  • Point & Figure is logical in its application.
  • Simple and easy to master.
  • Point & Figure is void of mystery, guessing, and complications caused by subjective analysis.
  • News, economic reports, and other sources of market noise are not necessary.
  • Losses are limited while profits accrue – easy stop and profit target calculations.
  • Point & Figure signals are clear and unambiguous.
  • The method avoids and dismisses manipulation.
  • Inside information not necessary.
  • Volume manipulations are pointless and irrelevant.
  • Solo traders outperform professional money, proprietary trading firms, and traditional buy and hold investors with this method.
  • Insignificant price moves are ignored.
  • Support and resistance easy to identify.

 

Sources:

Dorsey, T. J. (2013). Point and figure charting: the essential application for forecasting and tracking market prices (4th ed.). Hoboken, NJ: John Wiley & Sons.

Kirkpatrick II, C. D., & Dahlquist, J.R. (2016). Technical Analysis: The Complete Resource for Financial Market Technicians (Third). Old Tappan, NJ: Pearson.

Plessis, J.J. (2012). Definitive Guide to Point and Figure – a comprehensive guide to the theory (2nd ed.). Great Britain: Harriman House Publishing.

DeVilliers, V., & Taylor, O. (2008). Point and figure charting. London: Financial Times/Prentice Hall.

 

 

Categories
Forex Elliott Wave Forex Market Analysis

NZDUSD Long Term Wave Analysis

The NZDUSD pair has shown signs of recovery in recent weeks. Have we to think in the buy-side for the coming weeks? In this article, we will review the probable next movement from the oceanic pair.

The NZDUSD pair has shown signs of recovery in recent weeks. Have we to think in the buy-side for the coming weeks? In this article, we will review the probable next movement from the oceanic pair.

The NZDUSD pair has shown signs of recovery in recent weeks. Have we to think in the buy-side for the coming weeks? In this article, we will review the probable next movement from the oceanic pair.

Fundamental Perspective

The Reserve Bank of New Zealand (RBNZ), realized in November its last monetary policy decision, from where the policymakers kept the Official Cash Rate unchanged at 1%.

In the decision statement, Governor Adrian Orr stated that employment remains at high levels; however, inflation remains below the 2% target. Moreover, the RBNZ projections for the coming year 2020 pointed to stable interest rates at low levels so that inflation can be ensured to reach the target level.

The next meeting of the reserve will be in February 2020. As a consequence, the fundamental traders will have to closely monitor the evolution of macroeconomic data during the following two months.

Technical Perspective

From the technical point of view, the NZDUSD in its weekly chart moves sideways in a corrective process that found the first support in August 2015 at 0.61968.

During 2019, NZDUSD approached the lowest level of 2015, developing Elliott’s ending diagonal pattern, which found support at 0.62037 in early October.

According to the Elliott Wave Principle, a diagonal ending formation is an impulsive pattern that has an internal structure that is divided into 3-3-3-3-3. In turn, this formation can be found in a wave ‘5’ or ‘C’ within a corrective structure.

Once NZDUSD touched the level 0.62037, the pair found buyers and began to realize a bullish movement in three waves. The completion of this upward sequence makes us foresee the possibility of a new decline. Probably the next move will be in three waves.

Our Forecast

The NZDUSD pair in its 4-hour range shows the possibility of a corrective move to the area between 0.64647 and 0.64078. This zone could bring us the opportunity to incorporate us in the potential long-term next rally.

The invalidation level is placed at 0.62028, which corresponds to the lowest level reached by the NZDUSD in October 2019. Our long-term target is at 0.7558 level.

Finally, depending on the retracement level of the NZDUSD, the corrective sequence will reveal to us the strength or weakness for the next path.

Categories
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.

Categories
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.

Categories
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.

Categories
Forex Chart Basics Forex Daily Topic

Caution! A Big Round Number Ahead

In today’s lesson, we are going to demonstrate an event to find out what the price may do around the big round number. A big round number plays a significant role as far as traders’ psychology is concerned. The price usually gets volatile around a big round number. It may get tough for the traders to find out entries around the big round number. Let us now dig into USDCHF recent activities around the big round number 1.00000.

In today’s lesson, we are going to demonstrate an event to find out what the price may do around the big round number. A big round number plays a significant role as far as traders’ psychology is concerned. The price usually gets volatile around a big round number. It may get tough for the traders to find out entries around the big round number. Let us now dig into USDCHF recent activities around the big round number 1.00000.

In today’s lesson, we are going to demonstrate an event to find out what the price may do around the big round number. A big round number plays a significant role as far as traders’ psychology is concerned. The price usually gets volatile around a big round number. It may get tough for the traders to find out entries around the big round number. Let us now dig into USDCHF recent activities around the big round number 1.00000.

The price is heading towards the North with good bullish momentum. Look at the last candle. This is one good bullish candle, which states that the buyers are dominating the pair. Do you notice anything unusual here?

Here it is. The candle breaches through the level of 1.00000. As a trader, you must not miss such a big round number. Now that the price makes a breakout, you are to wait for the breakout confirmation and a strong bullish reversal candle to go long on the pair. This might be one of the best trades in your trading life if things go accordingly.

The price comes back in. However, it still looks all right for the buyers since if we consider the spikes at the last swing high. A bullish engulfing candle closing above the last bearish candle would be the buying signal. On the other hand, if it keeps going towards the downside, the sellers may take over the baton.

The price does not produce any bullish momentum. For the last four H4 candles, it could go either way. Traders are to wait patiently since this is the game around a massive round number.

Here it comes. It has now become sellers’ territory. The candle forms right at the level of 1.00000. The level could have been a level of support. It is now a level of resistance. The sellers on the minor charts keep going short; on this chart, they are to wait for consolidation and downside breakout to ride on the next bearish wave.

It consolidates and produces a sell signal after four H4 candles. The last H4 candle suggests it may be time for the price to consolidate again. An explicit bullish breakout at the level of 1.00000, did not work for the buyers. It could happen at any level, but when we deal with a massive round number, we happen to see it more often.

The Bottom Line

The market runs on many aspects, and traders’ psychology is one of them. Many traders set their Stop Loss and Take Profit at round numbers. Thus, the price may get extra volatility around a big round number. We may get breakout even on the H4 chart, which may turn out to be a fake breakout. We must remember this every time we see a big round number.

 

Categories
Forex Basic Strategies

No Breakout Confirmation or No Consolidation Means No Entry

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

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

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

Let us find out.

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

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

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

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

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

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

The Bottom Line

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

Categories
Forex Basic Strategies

Is Drawing One Trendline Enough?

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

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

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

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

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

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

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

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

The Bottom Line

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

Categories
Forex Psychology

What Wastage of Time!

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

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

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

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

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

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

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

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

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

Categories
Forex Chart Basics

An Inverted Hammer at a Double Bottom

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

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

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

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

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

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

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

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

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