Reversal candle’s attributes play a significant role in driving the price towards the trend. An Inside Bar is considered to be the weakest reversal candlestick. However, in combination trading, even an Inside Bar may create good momentum as a reversal candle. In today’s lesson, we are going to demonstrate an example of that.
This is an H1 chart. The chart shows that the price heads towards the South with good bearish momentum. The price has a bounce at a level of support and makes a bullish correction. The sellers are to wait for a bearish breakout at the lowest low of the wave.
The chart produces a bearish reversal candle that comes out as a bearish engulfing candle. The last candle comes out as a bearish candle as well. However, it has a long lower shadow.
The chart makes a breakout at the lowest low of the wave. The last candle comes out as a bullish engulfing candle, which is a strong bullish reversal candle. However, the sellers may still keep their hope. If the breakout level produces a bearish reversal candle, they are right on the track.
This is what the H1-15M combination traders are waiting for. It produces a bearish reversal candle. Now they have to wait for a 15 M bearish candle to go short in the pair. It is time for the combination traders to flip over to the 15M chart.
This is how the 15M chart looks. The sellers are to wait for the price to produce a bearish candle closing below the last 15M candle. Let us wait and see what the price does. Let us proceed to the next chart.
The last candle comes out as a bearish candle without having any lower shadow.
The sellers would love to see a candle like this every time as a signal candle. The combination traders may trigger a short entry right after the last candle closes. Let us find out how the entry goes.
This is the H1 chart again. The price heads towards the South with extreme bearish momentum. The last candle comes out as a doji candle. The price hits 1R within two candles. Those who love letting their winners run, they may close their entry right after the last candle closes.
If we notice, the bearish reversal candle at the breakout level comes out as an Inside Bar. However, it creates a strong bearish momentum. It is because the 15M signal candle comes out as a strong bearish continuation candle. Thus, combination traders may focus more on the signal candle. Signal candle’s attributes are more important than the reversal candle’s attributes as far as chart combination trading is concerned.