There are many of us who take the Signals provided by a Higher Time Frame and then trade on a Smaller Time Frame in that same direction to get a better entry with a smaller Stop Loss. However, one of the traps of the market is that the signal given by the Larger Chart could be a False Signal, leading us to enter when the trend has actually ended and is about to reverse.
One of the ways to avoid this is by waiting for the smaller time frame to give a signal of its own to confirm the signal of the Larger Chart. If this signal is not given or it is not given within a certain time period, then it means there is a reduced probability of a profitable move - and an increased chance of a reversal.
The Table 7 Chart taken from my Trading Manual reveals how interconnected time frames interact to provide us with Profitable Entry Signals. If a Signal from the Larger Chart is going to lead to a profitable move, the Lower Time Frame that it controls will respond to confirm this within a certain time. If it doesnt respond with a signal, then the Large Time Frame’s Signal is likely to be a False Signal and you should watch out for Sharp Market Reversals!
Isn’t it always frustrating to see your Stop Loss being triggered way too early in your trades? Isn’t it even more frustrating when you see the market continue in the same direction and hit the trading target area that would have given you a trading gain as you had planned, instead of the annoying trading loss that you suffered?
Well traders, perhaps it is because the Stop Loss for the trade was placed at an area that was not strong enough or far enough away to protect us against these temporary market reversals. Let’s start to eliminate that problem now - which is one of the 5 Main Challenges that face us in trading - by looking at how to identify a strong Stop Loss area when trading Bear Crown Setups. The example used is taken from this recent trade made on the EURJPY that provided a 2.97% Return on my Live Account.
Before looking at the video, take a look at the 4 Hour Chart below. Where would you have placed your Stop Loss when trading this Pair short to Support and why? Give a specific Price in your answer. How does your answer compare with what is recommended in the video?
Predicting and avoiding many of the traps set by the Forex every day is key to Long-Term Trading Success. This video shows the Sharp Reversal that I accurately predicted and avoided on the EUR CHF earlier this week due to 2 Key Technical Factors…
Another two setups and movements that were accurately predicted this past week…which could provide good setups to trade to Support (AUD CHF) and Resistance (EUR USD)
AUD CHF - SMALL PENNANT BREAKOUT WITHIN A LARGER PENNANT
This video describes the Bearish Signal that I accurately predicted in the 4 Hour Chart’s Pennant last week. Despite the strength of this signal and the possibility of further moves bearish, I warn of the risks associated with this Candle that could lead to a Sharp Bullish Reversal and Trading Losses!
EUR USD - FALSE CONSOLIDATION BREAKOUT REVERSAL
This was predicted to rally back inside of the Range Setup on the 4 Hour Chart, following a brief breakout at Support…
Once you master Forex Chart Analysis with Japanese Candlestick Signals, Trendlines and Consolidation Patterns, you will be able to accurately forecast market direction to capture strong trading gains and avoid losses from Sharp Reversals!
EUR USD could provide us with a Short Position Trade Setup in the next few hours!! Overall trend is Bearish on the Daily Chart as it heads to Major Support at 1.0263. We could therefore see the 4 Hour Chart provide a Bearish Signal as part of a False Consolidation Breakout that would take us to that Support Target. Despite this potential trading gain from this in a very short time, the challenges are
Ensuring we enter at a Strong and not a Weak/Risky Signal.
Where would be our Stop Loss to avoid being Stopped Out by Temporary Reversals?
How long should we be willing to hold on to our trade - our Maximum Holding Period?
Should we exit at the 4 Hour Charts Range Support and re-enter or hold on to the trade until the Daily Support is it?
What wiill you do? Let’s see how this one plays out.
Following up on the EUR USD forecast earlier today. Due to the weak Bearish Signal that has just been given on the 4 Hour Chart, there is now a risk of a Bullish Reversal that takes us back above Resistance. It may still head down to Support but the weakness of this candle now makes it more risky! This analysis can be seen in this video that examines 7 other Pairs that could provide us with Profitable Setups in the next 24 Hours!
Key Technical Factors of these Setups
They must be in sync with the main Trend Direction of the Daily and 4 Hour Charts.
If you are trading within Consolidation on the 4 Hour, you should trade the Bearish Signals at Resistance if the Daily & 4 Hour are in a strong Downtrend.
They must be supported by a Strong Bearish/Bullish Signal.
They must offer a clear Resistance or Support Boundary/Price Point as a target.
They must have a Strong Stop Loss Area to protect trade against temporary reversals!!
They must offer a Minimum Return that you have set for your trades (3% for me)…otherwise it is not worth the risk!
USD CAD now giving us the Bullish Signal as expected at Support to start the move back to the Resistance of the 4 Hour Chart Range Setup. Supporting this move is the Strong Uptrend in place on both the Daiily and 4 Hour Charts. Despite the strong Bull Candle that has now been formed, I prefer to wait for another Bullish Signal as confirmation of the move to then take advantage of it for a Return of between 3% and 4%.
However, these are the key rules that must be met to justify this setup.
The Signal must be strong and appropriate for the Setup.
A strong Stop Loss on the 4 Hour or 1 Hour must be provided.
It must offer at least a 3% Return, even if it means waiting for a temporary pullback after the Signal is given.
GBP JPY is providing us with additional Bearish Signals as expected to resume the Main Downtrend. However, instead of a Double Top Signal, it looks to be now forming a Bear Crown Setup that will start the break below the 4 Hour Chart’s Uptrend Lines.
However, the challenges that we face when the Downtrend continues are…
Do we trade this short as soon as the 4 Hour Chart breaks its Trendlines?
Do we wait until the Daily Chart gives a Signal before trading?
USD CAD starting to pullback as expected to then continue the move to Resistance, as part of the False Consolidation Breakout Reversal taking place on the 4 Hour Chart.
Challenges to taking advantage of this setup?!!
Waiting for the right Bullish Signal
Identifying a Strong Stop Loss on the 4 Hour or 1 Hour
Deciding whether to exit at Resistance or before, in case the market reverses without actually hitting it - this sometimes happens within Consolidation.
Stop Losses now threatened on the USD CAD. This is not surprising given the risk I spoke about in this video (7:00) and why I preferred to wait for another Bullish Signal.
This Bearish Decline to Support on the 4 Hour of the EUR USD as predicted shows that as long as we are trading in the direction of the Main Trend of the Daily Chart, most of our trades will be profitable!
As explained in the first part of my Video and in the Chart below, this means that even when the market is moving temporarily within Consolidation as part of a major Downtrend, you should only trade the Bearish Waves. The Bearish Signals of these waves are more reliable and stable since they are in sync with the larger market direction and get greater support from the Bearish Momentum of the market.
EUR CHF has U-Turned Bearish as predicted in my Free Video Lesson. Accurate Forecasting Skills like this can be yours as you master Consolidations on the Daily and 4 Hour Charts, away from the dangerous Smaller Time Frames that would have led many to open Long Positions!!!
GBP JPY BEARISH FORECAST. This is continuing to move in sync with the Bear Crown Setup Forecast on its 4 Hour Chart over the last few days (see earlier GBP JPY post). Once it hits Support at 126.53 later on this week to provide us with strong trading gains, it will follow my recent Accurate Forecasts for the EUR CHF and the EUR USD.
Once Candlestick Patterns, Trendlines and Consolidation Patterns are used correctly on the Larger Time Frames - without Complicated Indicators or Confusing Economic Analysis - Forecasting and Trading Accuracy is almost guaranteed!
The key is to always identify the Major Trend Direction of the Larger Charts and continue to trade in this direction until a Major Support or Resistance has been hit. Let me know how many Pips you capture!
As predicted, EUR CHF rallied to Resistance of its Range Setup on the 4 Hour Chart to continue the False Breakout Reversal that started at Support - another example of these market patterns and how they can provide us with quick gains!
Very important to accurately identify these setups and to place your Stop Loss at the safest areas away from temporary pullbacks (Trading done on both my FXCM Demo and FxPro Live Accounts).
These False Breakout Reversals can take various forms as shown below in my Manual. In this case it was a Double Bottom Pattern that led to this reversal…
This Video Analysis of the 2.66% Return captured on the EUR CHF, highlights 5 Technical Factors related to Trend Lines, Candlestick Formations and Consolidation Setups that are important to mastering False Consolidation Breakouts and other types of Market Reversals.
Breaks of Trendlines to indicate the start of Trend Reversals within Consolidations.
Candlestick Formations of Morning Stars and Double Bottoms that start Bullish Reversals.
How the Candlestick Signals of the 4 Hour Chart support the Daily Chart.
The use of Trendlines and Bullish Engulfing Candlestick Formations for Safe Stop Loss Placement
The use of Consolidation Support/Resistance Boundaries for Trading Targets.
Checkout this latest trade on my Live Account. A 3.5% Return on the AUD NZD. In addition to describing the Bull Crown and other Technical Factors that supported this trade, I also emphasize the discipline to Never monitor our trades - a bad habit that can compromise our profitability!!!
This was the setup on the 4 Hour Chart (traded from my mobile) where I identified the Resistance target of 1.0792 using the Bullish Candlestick Signal.
…after 20 hours, the pair eventually hit the target following a temporary pullback - which would have tempted most of us to exit too early- to provide the trading gain…
