Anyhow, I just discovered this thread a few days ago. I spent the last couple days reading the first ~60 pages of this thread, watching the videos and reading most of the articles. I really like what you’ve got here Johnathon. I’ve been learning to trade the forex market to a greater or lesser extent in my free time for more than two and a half years now. I started like most people, looking at indicators. Fortunately, I have patience on my side. After about 6 months of inconsistency with indicators I was introduced to Michael Huddleston, known as ICT on this forum. I spent about a year studiously looking at his material. To his credit, I learned a lot about support and resistance and intraday trading from him. However, I couldn’t consistently apply his method, I just wasn’t profitable. Neither was I really involving myself in his thread, perhaps that was my mistake.
I would get lost in the sheer amount of data he had at his fingertips.
Another year goes by, I went back to indicators and I’ve since come out with a strategy which has tested well over 18 months of data. I have gone live, and now that I feel like I’ve actually made some progress in my trading education, it’s time to go back to price action. I’ve been continuously drawn to it since I heard about it, it seemed the most elegant strategy for trading, especially with naked (or nearly, considering S/R lines) charts.
My renewed search brought me to this thread! After a couple of days this really seems like it will sink in well with me, I won’t be suffering from information overload.
Anyway, now that my over-long introduction is over with, I’ve got a couple questions.
I’ve started marking up charts with support and resistance, and looking for plays with the trend off of those levels.
I recently looked at the EUR/USD 4 hour chart and saw this:
Is this a bearish 2 bar reversal? The bars stood out to me but when I looked at them I noticed three things which make me think this may not be an A+ setup.
The tremendous up-surge on friday with over 170 pips on one 4 hour bar shows a strong bull presence, despite the overall downtrend.
The two bars prior to this possible setup are easily 2/3 of the size of the bars in the setup. The best 2 bar reversals, it seems to me, are significantly larger than the prior bars.
Last, and possibly most important, the low of the second of the two bars does not close at or below the low of the previous bar. Does this alone invalidate the setup?
Thanks for your time, you can expect to see me poking my nose around here fairly often.
Nice zones you have there. I cant zoom in on your picture but it looks as though your EUR closed stronger than mine. Even still its not a strong closing below the open of previous bar. Have a look at more 2bar to get the feel of them.
You must also remember when that happened all the big boys were asleep, wait for UK session to open especially first thing Monday morning
there looks to be a lot of new members in here so I firstly wanted to say a very warm welcome!!
There seams to be some confusion over what we call engulfing bars in here.
Firstly can I say the area is the most important thing when looking for a trade. The price action signal comes last, after we have found a great area to trade from. All the signal does is confirm the market is also looking to go in the direction we were looking.
Put it this way we do not look for a signal and then look if it is a good signal. We look for areas we think the market will move from. An example may be that price is moving lower in a downtrend and we then look for a logical area of resistance we could look to enter the trend from. We then wait for price to pull back higher to this resistance area. When price gets to this area we have already identified, we then start looking for a price action signal to confirm what we thought such as a bearish Pin bar at this level to short.
So as for the engulfing bar. The engulfing bar must do what the title says: It must engulf the previous bar/candle. The engulfing bar can engulf more than one bar but it must engulf the previous bar.
When I say engulf I mean the low must be lower than the previous bars low and the high must be higher than the previous bars high. Now some people get confused about the wicks of the candles but if you remember that the low and high must be outside the whole of the previous candle you will be alight.
I have attached 2 examples below. The first is an engulfing bar. The second is not. The second signal is what people are getting confused over. The bodies of the previous candle may be engulfed but all of the candle is not so this is not an engulfing bar.
Valid Bearish Engulfing Bar
This is a correct engulfing bar pattern with the low lower and high higher.
Incorrect Engulfing bar
Thsis example is not an engulfing bar. Whilst the previous candles body is engulfed all the of candle is not. Just always remember the engulfing bar must fully engulf the previous candle.
It is like everything in Forex. Of course you can start trading the engulfing patterns that “almost” make it but not quite. There is nothing stopping you. There is no rules. Where does this stop however? The only rules in forex are the ones you impose on yourself and trust me the stricter you are on yourself the better the results you will achieve. This is also why one thing all traders who are consistently profitable have in common is self discipline.
As Johnathon said: “You have to ask your self, does it really convince u to take the trade? Is the candle screaming for u to take it, does it look dominant?” And most important - don’t second-guessing.
yes it was screaming at me to take it so i did, it was a few candles ago on gbpcad 4h. but in general i just want some clarification on the proportion requirements of the real body vs the wicks when spotting engulfing bars, yes, we know that the wicks must engulf the wicks but what if there is no significant real body?
edit: @ang101 - ok that helps, so that would be what is called indecision rather than engulfing?
Lol @ that EB. An engulfing bar is all about the body than the wicks. Once the body totally engulfs the other then its an EB imo. I always avoid those with long wicks and small body, those are still indecision candles imo.
I wasn’t about to take the trade right away because of those reasons I mentioned, but I’m glad to know that my thoughts on the 2bar pattern were correct with regards to its strength.
If you look now you’ll see that price did trade down, but it found a support level ~30 pips from a reasonable entry on the break. If I had taken it I would have been trading right into support, just another reason not to take that trade. Thanks for the reply Spongybob.
I’ve been away for a week and want nothing more to place a trade and make some pips… But things look like they need some time to shape up… On all my charts anyhow.
