The daily–H4 combination traders are to wait for the daily chart to produce a reversal candle first to look for entry. Once the chart produces a daily reversal candle, traders are to flip over to the H4 chart; wait for consolidation and an H4 reversal candle to trigger an entry. We must not forget that if the daily chart is trending, the daily-H4 combination trading strategy may offer entry as well. In today’s lesson, we are going to demonstrate an example of that.
This is a daily chart. The pair produced a bullish engulfing candle and three more bullish candles followed. The daily-H4 combination traders are to keep their eyes on the pair right after it produces that bullish engulfing candle. Let us assume on the fourth day, we flip over to the H4 chart as well.
This is how that H4 chart looks. The chart shows that after making a bullish move, the price starts having consolidation. The last candle comes out as a bearish pin bar. It seems the chart may take time to produce a bullish reversal candle to offer a long entry. Then again, we never know. It may be just around the corner.
The char produces a good-looking bullish engulfing candle closing well above consolidation resistance. The buyers may trigger a long entry right after the last candle closes by setting stop loss below consolidation support and by setting take profit with 1R. Let us move to the next chart to see how the trade goes.
The price consolidates again. After producing such a good-looking signal candle, it seems a bit unusual. The last candle has a bearish body but it has a long lower shadow. Be patient and see what the price does next.
Look at the last candle. It comes out as a bullish engulfing candle. This is a strong sign that the price may head towards the North now. As far as the last candle is concerned, the price may not take too long to hit the target.
As expected, the price heads towards the North with good bullish momentum. It produces only one bearish candle before hits the target. As it seems, a bearish inside bar followed by a bullish engulfing candle may push the price towards the North further. Anyway, the buyers have achieved their 1R here with ease.
The message we get from today’s lesson is that if the daily chart is trending, we may keep an eye on the H4 chart to take entries with the trend as well. If it produces a reversal candle, we may look for entries too. However, we must not look for short entries if the last daily candle is bullish and vice versa.