In today’s lesson, we are going to demonstrate an example of the H4 and the H1 chart combination for taking entries. Both are intraday charts. A large number of traders do the job using those two charts. Thus, it is an excellent combination to trade in the Forex market.
Let us get started.
This is an H4 chart. The chart shows that the price heads towards the North. On its way, it made an upside breakout, which may play a vital role in pushing the price towards the North further. Despite having a long lower shadow, the last candle comes out as an Engulfing candle. The price may start its correction this time.
As expected, the price comes down to the flipped support and produces a bullish engulfing candle. The last swing high is far enough to offer a 1:1 risk-reward. However, we do not take an entry right after the candle H4 closes. We rather switch over to the H1 chart.
This is how the H1 chart looks. It shows that the price starts having correction by producing a Doji candle. An engulfing bullish candle closing above the Doji candle is the signal to go long here. Let us wait for a Marubozu bullish candle.
This is one good-looking Marubozu bullish candle. However, it closes right at the resistance zone. Risk-reward is 100:0 here. We must wait for an H1 consolidation and breakout towards the upside to take a long entry.
Here they come. The price consolidates and produces an H1 bullish candle, which closes above the resistance. Traders may trigger a long entry right after the candle closes by setting stop loss below the last support. The H1 chart does not show any resistance nearby. Thus, the price may head towards the North with good bullish momentum. It may get us 1:2 risk-reward or even more. Usually, the price reverses once 1:1 risk-reward is achieved. Let us find out what happens here.
The price consolidates much earlier than our expectations. Our reward is not achieved. Thus, we keep holding our position. We are risking a loss here. However, we must keep our patience.
The price makes another upside breakout and heads towards the North. The wave gets us our expected reward and starts having a pullback. If we have not set our take profit, we may manually close it; or we may use a trailing stop loss. We will demonstrate some examples of using trailing stop loss in this combination in upcoming lessons.
The Bottom Line
The H4-H1 combination is an eventful combination. A Trader needs to have skill, expertise, experience, and patience to handle it. Once he learns it well, it may have his hands full in making money by trading.