Consolidations and Pullbacks trading
In trading Consolidations and Pullbacks I use lower time frames because it might provide a clearer picture of the imbalance that is occurring in higher time frames.
This may lead to:
Better entry allow the trade to run before any possible support or resistance zones show.
Keep out of trades that appear strong on the daily but show weakness on the four hour chart.
Can set up lower time frame trades in opposition to higher time frame trades for rapid trades.
One thing I did not mention is that it allows you to make lower-risk trades. There is no such thing in the basic idea of risk, although there may be trades where a distinct risk profile is used.
I frequently take a smaller position on reversal trades against the trend, but the overall risk is not reduced – I can still lose.
Inside Bar Consolidation Pattern
Let us take a look at consolidations,
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| Inside Bar Consolidation Pattern |
Lower time frame consolidations (sideways range) can provide indicators as to whether the imbalance favours buyers or sellers. Pokes below a range's support and rapid returns inside the range (for long trade interest) show that lower prices are being refused.
That is bullish, and I will often enter trades in such levels.
The crucial point is that I am not using a range trading approach in which I purchase lows and sell highs.
I am positioning within the higher time frame pattern by utilizing the lower time frame pattern. This is critical to comprehend. Furthermore, all choices, from stop loss to trade goals, are made using the higher time frame chart.
Also Read: Top Scalping Strategy In Forex Trading
Why Wait For A Pullback?
To be clear, I consider pullbacks and ranges to be consolidation moves because they frequently serve the same function. The character of the pullback will also show who holds the balance of power.
This chart depicts the 1 hour time frame with an inset of the weekly, showing that the weekly did show indications of strength. I have also added a daily chart inset showing what you do not want to see in a pullback for a continuation trade.
Advanced traders might see on the four hour chart what the one hour chart reveals, therefore I will utilize the one hour chart for clarity.
The vertical line represents the start of the trading week. The red lines represent interest swings, and the question is, what type of trending pattern is that?
It is not a trending pattern and indicates consolidation rather than a trending pattern. To contemplate a long trade, we would need to see higher lows hold or increase. – That is not the case.
Is this to say that longs are no longer an option?
Yes, for the time being. Since that thrust, the market has never shown bull vigour, and the character of the pullback really reflects weakness in the EUR on this pair.
The consolidation did not show a clear bias in either direction.
The pullback began to break down with momentum, which is not desirable for a continuation trade.
Remember Big Momentum Shifts?
I said before that strong momentum surges often signify revert and will frequently set up another push in that direction.
I would like to call your attention to the chart's green arrow. What do you notice that makes you give confident about a short trade?
Strong downside momentum ate up the majority of the range.
Price pullback is sluggish (bear flag)
Profit objective is A-B=C-D, and price terminates at the latest pivot low before price breaks through.
These patterns appear on all time frames; I just favour higher time frames for larger runs and a more "hands-off" trading strategy.
The Approach Is The Same Every Week
This is the typical approach I look at every single chart when I post my setups for both Forex and cryptos online. There is no secret, but it does need a lot of appropriate chart time spent searching for items that have a market edge. Unlike other techniques that trade ideology, this approach has an edge
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