First of all I want to emphasize that I use a four hour chart in combination with Heikin Ashi candles. The advantage of this special kind of candles is that you see a smoothed chart with jumps and other movements filtered out. As a result, trends are easier to identify because the usual disturbances or background noise are missing compared to the regular Japanese candlesticks. A very decisive factor is the shadow of the Heiken Ashi candles. Strong bullish candles have a shadow above, while strong bearish candles have a shadow below.
In the following chart, you can see that all the profitable entries in this week began with strong candles. Either strong green bullish candles or strong red bearish candles.
The shadow of the candle can be one of the signs of a possible trend reversal but when deciding where to set the entry, you have to consider several factors before going long or short. The first profitable trade right at the beginning of the week was based on three factors. First of all, you could see the bearish candles stopping at the 61.8 Fibonacci level, so this level consequently acted as support. Secondly, you could witness the bulls taking over control with candles with little to no lower shadows. Thirdly, the stochastic oscillator fell below 20 on the stochastic scale indicating that the market is oversold and that traders may start buying.
So, you could take this trade putting your stop loss right below the signal candle in order to control your risk and then wait until the candles reached the 38.2 Fibonacci level which turned out to be acting as resistance level, which was confirmed by the several small candles in a row, with shadows on either side, which was a clear signal of indecision of the market and start of consolidation after a profitable bullish run. This is usually a good moment for the exit of your trade.
After you had made this profitable trade, you could wait for the consolidation to show signs of a new trend. This was the case when a long green candle with no lower shadows initiated the next strong uptrend. You could set your entry right there putting your stop loss right below the signal candle. Then, the best moment to take the profit was when the candles were getting smaller and when you could see shadows appearing below the candles.
The third excellent opportunity for a good trade in this week was a short trade. The stochastic oscillator was leaving the overbought zone and the %K line was below the %D line, which indicated bearish sentiment. Moreover, a bearish candle with no shadow above indicated strong selling pressure. You could set your entry right putting your stopping your stop loss right above the signal candle and this way you could successfully complete your third lucrative trade of the week.
In the following chart, you can see that all the profitable entries in this week began with strong candles. Either strong green bullish candles or strong red bearish candles.
So, you could take this trade putting your stop loss right below the signal candle in order to control your risk and then wait until the candles reached the 38.2 Fibonacci level which turned out to be acting as resistance level, which was confirmed by the several small candles in a row, with shadows on either side, which was a clear signal of indecision of the market and start of consolidation after a profitable bullish run. This is usually a good moment for the exit of your trade.
After you had made this profitable trade, you could wait for the consolidation to show signs of a new trend. This was the case when a long green candle with no lower shadows initiated the next strong uptrend. You could set your entry right there putting your stop loss right below the signal candle. Then, the best moment to take the profit was when the candles were getting smaller and when you could see shadows appearing below the candles.
The third excellent opportunity for a good trade in this week was a short trade. The stochastic oscillator was leaving the overbought zone and the %K line was below the %D line, which indicated bearish sentiment. Moreover, a bearish candle with no shadow above indicated strong selling pressure. You could set your entry right putting your stopping your stop loss right above the signal candle and this way you could successfully complete your third lucrative trade of the week.
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