Inside daily failure at resistance levelInside daily failure at resistance level, h1 short after retrace
IDF
DON'T fade a Daily Shooting Star on a resistance levelHi Traders,
STATEMENT
The aim of this post is to provide you a detailed explanation on how to use the daily time frame to create an explicit expectation of direction in the market you might be trading. Directional bias can give you a huge hint on how to trade on lower time frames (e.g., hourly time frame).
RATIONALE
What is the value of determining a directional bias before thinking on taking a trade on a lower time frame?
Proper identification of possible areas of support and resistance.
To avoid fading high probabilities daily candles we wouldn't be aware of their existence if we would only stick to lower time frames.
To facilitate the TP placement.
Doest it mean that I cannot fade a Daily bias?
It will entirely depend on the date that you should gather before even thinking of trading a pair.
Every traders should collect data over the past 3 years (at least) for each market he/she is trading, that provide a feedback about "How many times a D1 Candle is confirmed or faded (%)"; How long does it take for the trend to confirm/fade a D1 bias (number of days)."
THE PLAY
With that in mind, let's have a look at the OANDA:EURUSD chart on the Daiy time frame and lets focus on what happened at the end of February 2021.
First of all, we identify daily levels of support and resistance (1) and (2). We have identified those 2 as they clearly were rejected several times since August 2020.
Still on the Daily time frame we can also identified a inverted head and shoulder pattern. This one in particular is very obvious to identify, meaning that a considerable amount of retail traders are most likely going to play it long whether on a breakout or on a break and retest around the marked price in below screenshot.
If we move forward one day, the 25th of February 2021 , a Daily Shooting Star is printed showing that buyers lost control by the close of the day, and the sellers may be taking over. At that moment it's highly probable that a big amount of retail traders are trapped as they went long after identified an inverted H&S pattern. But for us, it means that we've just established a bearish bias and will seek an entry on a lower time frame.
On the H1 time frame I will look for an entry below the D1 area I marked as support/resistance level. Additionaly I'm also drawing H1 levels that I consider as potential trouble areas where the price could react significantly.
We have now identified our entry point.
THE RESULT
Price hit our TP on 5th of March 2021, generating a ROI of 4.14% .
Feel free to like, share and to leave a comment and ask any question you would have regarding this play :)
IDF Play - Fading a daily inside barSTATEMENT
This publication aim to explain as detailed as possible the IDF play strategy.
To do so, we will analyse USDCAD chart and the inside bar that was printed on 22-04-2021.
RATIONALE
Why trading the failure of an inside bar? It's commonly known that retail traders will identify an inside bar as a reversal candle. Institutions and big players know how retail traders play these kind of candles and will most likely fade them.
Also, before directly trading this technique, please backtest it through different time period (what could have workd in 2020 might not work anymore in 2021 as it's well known that market behaviour can change) and different currencies (an high strike rate with EURUSD doesn't mean it will work with GPBUSD for example). I would consider it as an edge it win rate is above 60% adn the ratio is in average above 1% ROI.
INSIDE BAR
What's an inside bar? It is a candle in which the high to low range is smaller than the prior candle; i.e., the high is lower than the previous bar's high, and the low is higher than the previous bar's low .
THE PLAY
First of all, we identify an inside bar on the daily time frame:
In this particular trade, our inside bar can also be identified as a Doji candle (another reversal candle), reinforcing the retail trader's sentiment that we are about to witness a trend reversal (meaning that most of them will be placing an order to go long with a stop loss below the wick of the candle).
Additionally, if we check the prior day we notice that price printed an Outside bar (or Engulfing candle), confirming our bias that we are most likely to find opportunities to go short.
Next step is to go down to the hourly time frame and look for a significant leven from which we can short.
So far in below screenshot we have identify a significant support level where price was rejected 6 times. As we would like to find an opportunity to go short, we need to wait for the price to break through this level.
Now, as we have short bias, we need to wait for the price to break through that support level, so we can consider placing an order (sell limit).
With 6 touches on the support level, market is telling us that we have a strong level, having saying that, we won't need any further confluence to look for entry after the breakout.
After breakout is confirmed (1) and there is no an immediate pullback (few candles between breakout and pullback to significant level) we can place our order (in this case, sell limit).
We do not place our stop loss above the latest lower high; we play it safe and place it at 1.25104 (the prior lower high).
Take profit is placed at a weekly level we have identified we do believe can represent a valid target.
THE RESULT
