Big Shadow Trade opportunity

Hey there,

I am reading ‘Naked Forex’ and have a question to a possible big shadow trade.

For that I have the follwoing EURUSD H1 chart where I like to hear your advise:

Chart (EURUSD H1):


The blue marked candle is the big shadow. Here I see all criterias met:

  • high/low embracing the previous candle
  • higher range than at least 7 previous candles
  • sufficient space to the left

Therefore I would enter the trade with:

  • buy-stop a few pips above the candle
  • stop-loss a few pips below the candle
  • take-profit??

I have problems determining the take-profit, because normally I would choose the next zone for it (a few pips below). But as the price climbs for several weeks there is no such. Can I set the take profit at [ buy-stop + (buy-stop - stop-loss) ] or where would you suggest to set it?

I am glad for any ideas on trade in general or the take-profit determination.

Hi,

Mostly shadows formed means there is a chance for reversal in the movement. Suppose if there is a strong bullish trend, a candle moved long upwards then it suddenly moved downwards and the candle’s body became very small in size and length of the shadow is long. It means the Buyers lost their strength and exhaust and the Sellers started to conquers the market. So reversal may be happen. A candle with long shadow is called as pin bar.

You will get false idea about shadows on the lower time frame such as 15 mins, 30 mins, 1 hr charts. Try daily charts for the shadows(pin bar). Initially it is difficult to trade with higher time frames. Analyse the market and its movement carefully in higher time frames.

Set your Entry Price is more important when compared to set Target Price and Stop Loss. You look into Support and Resistance when you set your Entry Price. Based on market’s previous movement and time frames you have to set Target Price. Based on your capital, lot size and risk management you have to set your Stop Loss.

Hi
for my part i have a pending buy order at 1.089 with TP 1.14
SL 1.081
good R/R isn’t it ?
cheers
kekidi