BLACKSHEEP -THE GOLDMAN THEORY

A candle Components:

• Open price
• High price
• Low price
• Close price
• Real Body
• Upper shadow
• Lower shadow
You need to know about these candlesticks

• Engulfing bar (Bullish or Bearish)

• Up bar: An up bar or “bullish bar” is a bar with a higher high and higher low than
the previous bar. The up bars marked above are in an uptrend. Generally, the close
is higher than the open on an up bar, but sometimes you can have the close lower
than the open and it can still be an up bar, as with the black bar we see in the “up
bar” example above. This can happen in aggressive trends like we see above,
because as you can see the high and low of that black bar are still above the high
and low of the previous bar. Up bars show that buyers or “bulls” are still in control

• Down bar: A down bar or “bearish bar” is a bar with a lower high and lower low than
the previous bar. Notice in the example above how the close is lower than the open
in the down bars highlighted, this is typical of most down bars although it is not
necessary as we saw in the up-bar discussion. Down bars show that sellers or
“bears” are still in control.

• When the open is in the bottom quarter/third of the bar and the close is in the top
quarter/third of the bar, it is said to be bullish engulfing with the buyers in control.
When the open is in the top quarter/third of the bar and the close is in the bottom
quarter/third, it is said to be bearish engulfing with the sellers in control.

• Another definition used for this bar – especially if candlestick charts are used – is
that the open and close have to engulf the previous bars open and close and not
just the high and low of the bar. With this definition, the wide range bar or engulfing
bar does not need to have a higher high or lower low to qualify. The first definition
most probably came about with bar charts where it is harder to notice the open
and close.

A bullish engulfing candlestick formation represents those bulls are in full control
of bears. As the pattern above shows, the green body (bulls) covers completely
the red-bodied candle (bears). This shows the readiness of the market participants
to drive a particular instrument’s price higher.

What about the shadows (tails)?

A lot of you are already asking what happens with the tails. Why are they there? Do
we include them in our analysis?

These are great questions, which require more attention than is currently given to
them. In a perfect scenario like the one above, a bullish engulfing pattern should
include the shadows of the candles. A real bullish engulfing pattern forms when
the green body of the second candle fully engulfs the whole previous candle
including the tails.

Here the opinions diverge into two schools. The one is preaching that the best
bullish engulfing pattern forms when both the body and the tails are engulfed.

The second school believes that for a bullish engulfing pattern it does not really
matter if the tails are engulfed or not. What matters is only the real body of the
candle?

My opinion

My personal attitude towards the bullish engulfing pattern is that the real body is
the most important element. It is great if tails are engulfed, but it is not the end of
the world if they are not.

The bullish engulfing candlestick pattern below is an example of what I mean:

That is a great example of a bullish engulfing pattern I would have considered as valid.
As you can see the red body of the first candle is fully engulfed by the second green
candle.

The lower tail of the red candle is not engulfed by the green candle, but for me that is not
as important. What matters is the real body of the candle. As long as it is fully engulfed, I
would classify this pattern as a bullish engulfing.

Why tails are not so important?

A very good question is if why tails (or the upper and lower shadows) not so important.

I would say that they are important for two reasons- no more or less than that.

The first reason of why they are important is that they show what is the maximum and
minimum readiness of market participants to pay for a particular instrument. That is the
highest and lowest value that was reached for a particular market session.

The second reason why tails are important is to give us an indication of where to place
stop-losses and potential targets.

Don’t get me wrong- tails are extremely important. But they are not as important as to
validate the bullish engulfing pattern.

What does a bullish engulfing pattern mean?

So, what stands behind the bullish engulfing candlestick pattern. As most of you are
already familiar

with is that I am a price action trader. I read the tape and do what the market dictates.

A bullish engulfing pattern is just a confirmation of what the market participants agree
on.

When a bullish engulfing pattern forms, market participants agree that price can go
higher.

In other words, more market participants are willing to buy than to sell that particular
instrument. That is an indication for price action traders that more buyers will join the
trend and it will be extended to new highs.

A bullish engulfing pattern is like a wall of bricks. That association has always helped me
better visualize

the way this pattern works. The more bricks you add to the wall, the more solid it
becomes. Just like an uptrend…
Variations of the bullish engulfing pattern

There are many variations of the bullish engulfing pattern. One thing to remember is to
learn how to read the pattern. You need to understand that if you have a red body and
then a series of green-bodied candles, we might still have a bullish engulfing pattern.

What matters is to have the green bodies engulfing the red body of the previous candle.
Have a look at the example below:

The image above shows a two-bodied bullish engulfing pattern.

Important: It does not matter how many candles you have forming a bullish engulfing
candlestick pattern. What matters is that the body of the red candle is fully engulfed.

Below is given another example of a multiple candles forming a bullish engulfing

pattern:
NB: Again- what matters is that the red body of the first candle is engulfed by one or
more consecutive bullish (green) candles.

PART 2– Bearish Engulfing Candlestick and Price Action

What is a bearish engulfing candlestick pattern?
The complete opposite.

What has been said so far for the bullish engulfing pattern is completely right for the
bearish engulfing pattern, but in reverse order.

By definition, a bearish engulfing candlestick pattern is small green (or bullish) candle
followed by a larger red (bearish) candle eclipsing or “engulfing” the small green candle.
Have a look below for a better visualization:

This is a perfect example of a green candle that is fully engulfed by a red (bearish) candle
forming a bearish engulfing candlestick pattern. In an ideal world traders should only be
using this type of bearish engulfing pattern, but as we have seen above, there are different
variations of the engulfing pattern.

Just like the bullish engulfing, behind the bearish engulfing pattern stands pure price
action. What matters is that the number of sellers outweighs the number of buyers.

Other examples of bearish engulfing candlestick patterns

Identical (but reversed) to the bullish engulfing, the bearish engulfing candlestick pattern
could be formed of more than two candles.

In the example below, three candles are forming a bearish engulfing pattern:
That is a great example of why the bearish engulfing pattern is so powerful. In the exhibit
above a small green candle is followed by two red (bearish) candles fully engulfing the
body of the green candle.

From a price action standpoint that means that the bulls are too weak and bears take
control of the action thus pushing the price down.

Important: Bearish engulfing candlestick patterns are extremely strong continuation

patterns in downtrends.

Therefore, trying to use bearish engulfing candlestick patterns as a reversal market

indication is not as effective. The power of the bearish engulfing pattern is in following
the trend. They are most powerful when the market takes a break, makes a bullish
correction and then forms a bearish engulfing pattern. That is probably the best place for
a bearish engulfing pattern to form, just like the screenshot below:
In the example above you can see how in a downtrend the price makes a small correction,
then forms a bearish engulfing pattern and shortly after the trend is resumed.

Bullish Engulfing and Bearish Engulfing Patterns Used in Conjunction with Other
Technical Analysis Tools
Support and Resistance

In technical analysis there are different tools that could be used in conjunction with
candlestick patterns. Amongst the most famous ones is the concept of support and
resistance.

For a full explanation of this concept, you can visit my specially dedicated article on this
topic HERE

This article will really give you a comprehensive understanding of the support and
resistance concept.

For the sake of this article, we will just give an example of support and a bullish engulfing
pattern

As you can see from the example above, the red candle was followed by three
consecutive green (bullish) candles forming on top of a major support area. This gives
even further confidence to market participants and pushes the price very quickly higher.
As you can see, after the bullish engulfing pattern is formed, the next candle is extremely
long and thus marking the extremely bullish bias of the market.

Resistance and the bearish engulfing pattern

In another example, I would like to show you how powerful the bearish engulfing pattern
could be in conjunction with a resistance level:
In the example above you can see the opposite scenario. There is a resistance area and
a bearish engulfing pattern form. There are only two candles that comprise the bearish
engulfing candlestick pattern. As we have already emphasized, what matters is not the
number of candles, but the ability of the bears to “engulf” the bulls, thus showing market
participants the readiness of sellers.

As you can see above, after the bearish engulfing pattern was formed, the downtrend is
continued by two large red (bearish) candles.

Moving Averages

Moving averages are another great tool for checking for the direction of the major trend.
Different traders are using moving averages differently

In conjunction with candles, moving averages could give a very useful indication of a
possible entry. Let’s take an example of a bullish engulfing pattern.

Bullish engulfing and 200 EMA

In the chart below you can see a 200-day Exponential Moving Average (EMA) and a bullish
engulfing pattern. As you probably rightly expect already, that is a great confluence of
factors, which leads to an increased bullish enthusiasm:
It is very important to note here that different traders are using technical analysis in
different ways. If there is one thing on which most would agree is a confluence of a long-
term moving average with a candlestick pattern confirmation just like the one above.

Let’s see the reverse scenario now.

Bearish engulfing and 200 EMA

In the chart below you can see the 200-day EMA and a bearish engulfing pattern:

The example above shows a three-bodied bearish engulfing pattern. As agreed above, the
number of candles does not matter as long as they engulf the previous candle.
You can see how large the candle following the bearish engulfing is. The reason for that
is that the market is indicating a confluence of bearish factors, which lead to a lot of
market participants shorting it after the completion of the bearish engulfing pattern.

Other tools and indicators used with candlesticks

There are numerous other tools that are used in conjunction with candlestick patterns
and in particular the bullish engulfing and bearish engulfing patterns.

Some of them are:

Fibonacci Levels

RSI Indicator

MACD Indicator

Stochastic Indicator

Chart Patterns

CONCLUSION– Bullish Engulfing and Bearish Engulfing in Price Action

Bullish engulfing and bearish engulfing patterns are probably the most widely used
candlestick patterns among traders. The reasons are different, but what is more
important here is how to do traders use those candlestick patterns.

In this article I have covered how I see price action and candlesticks and in particular the
bullish engulfing and bearish engulfing patterns.

To sum it all up, I would say that apart from being an inseparable part of my professional
trading strategy, the bullish engulfing and bearish engulfing patterns are extremely
important for price action traders. Some of the most important factors for trading with
bullish and bearish engulfing patterns are:

• Bullish engulfing candlesticks represent the willingness of buyers to continue

holding a certain financial instrument

• Bearish engulfing patterns represent the willingness of sellers to continue selling

a certain currency pair or financial instrument

• Bullish and bearish engulfing patterns are extremely powerful when they are used
in conjunction with the existing trend

• Bullish and bearish engulfing patterns are having an extremely strong connotation,
especially around major/minor support and resistance areas and moving averages
In the article above has been shown that bullish and bearish engulfing candlestick
patterns could be formed in different ways and combinations. What matters is what
stands behind those patterns and it is pure price action and market psychology. It is
important to understand the principles behind those and to be able to apply them
correctly in an ever-changing environment.

Engulfing Candle pattern Illustration:

Definition of Bullish Engulfing Pattern:

• Market is in down trend

• Bottom candle is a sell candle
• Next candle is a buy candle
Buy candle overpowered the sell candle. Buy candle must close above the high of the
sell candle. Buy candle’s body must wrap the sell candle’s body.
Definition of Bearish Engulfing Pattern:

• Market is in up trend
• Top candle is a buy candle
• Next candle is a Sell candle
Sell candle overpowered the buy candle. Sell candle must close below the low of the
buy candle. Sell candle’s body must wrap the buy candle’s body.
Bullish and bearish engulfing pattern creates demand and supply zone respectively.

• Bullish engulfing zone is a buy zone. If Price close below bullish engulfing
pattern, then bullish candle is invalid for buy and it becomes Sell zone.
• Bearish candle zone is a sell zone. If Price close above bearish engulfing pattern,
the bearish candle is invalid for sell and it becomes buy zone.
Key word of this system:

• EG buy = Potential buy zone

• EG Sell = Potential sell zone
• EG buy fail = Potential sell zone
• EG sell fail = Potential buy zone
• EG buy meet EG buy = Buy signal
• EG sell meet EG sell = Sell signal
• EG buy fail > EG sell > EG sell = HLZ (High liquidity zone for sell)
• EG sell fail > EG buy > EG buy = HLZ (High liquidity zone for buy)
Failed buy zone always considers as sell zone
Failed sell zone always considers as buy zone
Draw SnR always among Supply or demand zone. These SnR is the key turning point.
Analysis time frame M15, H1 & H4
Engulfing pattern create supply and demand zone. Supply and demand zone validation
is the key point of taking entry.
Never take decision before closing your running candle/session.
For Buy entry Must form >> EG fail + EG buy + EG buy
For Sell entry must form >> EG fail + EG sell + EG sell
 Patience, Discipline and Focus is the KEY.
Step 1: Identify the Nearest & closest strong zone (EG Buy & EG Sell zone)

Zone Description: M30 Engulfing Fail

Action plan: Wait for any strong rejection to happen in this zone (to the upside because
it is a buy zone now) at the opening of next M30 in 10 minutes.
You find signal candle from lower time frame like M1, M5 or M15.
Step 2: Filter down to M1/M5 for potential sharp zone

Action Plan: wait for rejection to happen SHARPLY in the M1 box for confidence in the
presence of buyers.
Once activated, place BE because entry was done 2 minutes before M30 so volatility
can occur
Step 3: Anticipate the outcome of the potential setup and place strategy accordingly.
Where will be you take profit zone and what is your Stop loss line.

Action Plan: Understand the best possible Location to place the BE so that maximum
profit could be obtained without it eating your BE
Step 4: Question of GREED or RESPECTING the setup??

Action plan: Look at the closing and opening of the M5 candle to give an indication to
us. Follow OHLC to identify the price momentum. Is it break the structure or respect the
zone?
Step 5: ENJOY~100 PIPS tp not baboon 10-20 pips

Arrived in pink zone and first touch on green line done now we will wait to see what
price is doing in this zone.
Step 6: Reflect
1 Trade just now was 115 Pips with confidence. If you tried battling in a scalping mode,
each TP is 10-20 pips.
you have to take MINIMUM 5 trades but on average 6-7 Trades. Now I ask you, are you
confident out of the 7 times you click a day, you’re not gonna click on a HORRIBLE
direction that can potentially wash your account?
All of these begins with proper habits and mindset guys.
Dropped 70 Pips 0 float from green line, I missed this trade because it was too precise
that volume just flowed in without any confirmation, did I force myself into the trade? No
man i chill but congrats those who sold.

GOLD BUY NOW 1941.59

Now 20 PIPS burst this is where you can put your sl at entry if it reverses fuck it
because we are not looking for 10-20 pips setup.
But in the midst of finding big pips don’t blow your account.
If you are not an advocate/supporter of BE (like me) then you have to deal with the
consequences both good and bad

Approaching 30 PIPS
Step 7: Get a continuous breakout layering

Action Plan: This is where no new entries should be made and the reasons are given in
the video please watch.
This is how I make money on a daily basis guy, with a strong action plan and being
peaceful with myself. If you are trading and you’re having anxieties and thrills on the
inside, you need to breathe and relaxed.
Step 8: Sit back and relax

Running 50-60 Pips

If tomorrow hit 100 pips sl even u should not blow todays profit because net at 70 pips,
but NO some of you baboons will die due to your own stupidity.
M1 sell has appeared in pink box but I shall not take the trade personally because I’m
comfortable for an M5 instead M1
We M1 sell setup happened as informed just now and dropped 80-100 pips depending
on entry precision, why I personally did not take the trade?
Because I am more comfortable if I was able to get the M5 setup instead of M1 but
nevertheless, the KNOWLEDGE is proven.
Step 9: Understanding M1/M5

GET READY TO SELL GOLD

I need M1 confirmation in red box. Confirmation means retest the red box.
No confirmation no entry. Don’t press without my command. I’m teaching u guys
confirmation style of entries don’t chase. If u Wanna trade without confirmation u can
press sell now but that’s when u will trade with anxiety and fear. We’re not here to become
scalpers. We are here to CONTROL the market as best as possible.
If u press before M1 engulfing sell forms, u dead.

M1 broke, hence not a valid sell anymore. By theory of engulfing, it will make its way
higher now. I will never sell in such location anymore. It can drop 200 pips I don’t care.
But discipline is what got me here, so I’m here to share every drop of my hard-earned
knowledge. This discipline is what makes you a pro full margin specialist. Because when
u full margin, your account can only float 10-20 pips before it blows. To answer many
questions, no that’s not engulfing sell in the box, it broke the box and then does an
engulfing sell
This is a WEAK full margin zone no good
Step 10: Understanding the zone’s QUALITY
See the video Step 9-2.mp4
Step 11: The eye of an eagle
See the video Step-10.mp4
Step 12: Maneuvering like a cheetah
See the video Step-12.mp4
Step 13: Chill~
See the video Step-13.mp4
Step 14: Chess master’s next move
See the video Step-14.mp4
Step 15: Standby
See the video Step-15.mp4

Waterfall 70 pips
Step 16: Layers
See the video Step-16.mp4
Step 17: Baboons VS. Blacksheep
See the video Step-17.mp4
Step 18: Engulfing Style Trading
See the video Step-18.mp4
Step 19: Story line of M1/M5
See the video Step-19.mp4

Step 20: Easy 20 pips!

See the video Step-20.mp4
Step 21: Enjoy waterfall~
See the video Step-21.mp4
Step 22: Neutralizing greed
See the video Step-22.mp4
Step 23: Money come; money come
See the video Step-23.mp4
Step 24: Quick update during break
See the video Step-24.mp4
Step 25: KABOOM
See the video Step-25.mp4
Step 26: Mr. BlackSheep is the picasso and Leonardo DaVinci of Forex, which such
mappings and precision, look at how BEAUTIFUL the drawings are in the chart
Action Plan Today: I want you guys to go and win the market
See the video Step-26-1.mp4
Be careful always at the end and beginning of the new candle.

Always consider the range of Daily & H4 candle. The average daily candle range is 200-
300 pips in gold, sometimes it is 150-200 pips. The average H4 candle range is 10-200
pips is gold, sometime it is 50-80 pips. You cand grab 10-20 pips from anywhere but why
you risk 40-50 pips for 20 pips take profit. So, you always try to take entry form H4
timeframe so that you can grab 100-150 pips. You need to take precision entry in gold
trading. Full margin is profitable but it is also horrible. So, think before going in full margin
entry.
Do not change your trading system.
Always do the same thing
Maintain same trading time always
Always trade with one method/theory
Put fear a side because that fear is making you become fucking stupid.
Don’t counter trade. If you do that you are a real fucker & stupid. Don’t fight with the trend.
Find path of least resistance.
1) You came in forex to make money as a trader
a. You need to be knowledgeable
b. You need to be sharp
c. You need to be confident
 d. You need to be precise on timing
e. You need to know how to control emotion
2) You came in forex not to lose money
a. You need to become a man of patience
b. You need to become persistent
Both of these makes you ULTRA successful.
Forex trader is not a trader actually, rather he is a money manager. Money management
is most important thing. A bad trader can make money consistently if he mange money
properly.
Maroon, on top Green for eg sell
3 patterns:

• Engulfing Buy
• Engulfing Sell
• Engulfing Fail

Basic Rules:
Rule 1: When we use engulfing theory our minimum TP is 40 pips. (i.e., 1850.00-
1854.00)
Rule 2: You have to be ultra-sharp in mapping the chart. Don’t layering in general. Try to
fix a single line for reversal.
Rule 3: Find your own proof in order for you to create belief in yourself.
Remember, every breakout has a retracement. You have to identify the death zone and
wait for powerful bounce.
If weekly candle opens in Monday and begin to fall rapidly like waterfall you have to
understand and identify, is it a true breakdown or a retracement move.
If price fall first 3 days of the week it will reach or very close to reach a weekly level of
reversion.
Identifying direction:
Direction must be confirmed in bigger time frame like weekly, daily & H4: In order to
become successful trader, you must be very good in identifying weekly and daily
direction.
Identify Key level:
Finding proven history in an engulfing zone setup.
Engulfing sell fail + Engulfing Buy + Engulfing Buy = Confirmed Buy direction (Any
particular timeframe)
Engulfing buy fail + Engulfing Sell + Engulfing Sell = Confirmed Sell direction (Any
particular timeframe)
Engulfing buy: The job of an engulfing buy is to create a Buy zone. After creating buy zone
price push higher and higher. After rally price come down and meet the engulfing buy
zone. Look here, is price create another engulfing buy or break the buy zone? If price
breaks the engulfing buy zone (candle close below the zone) it means price invalidate the
buy zone and become a sell zone. This is the definition of engulfing fail pattern/zone.
When engulfing fail zone formed, price breaks a zone. Now we have to wait retest. Now
we have to wait for engulfing sell pattern to establish first confirmation for sell entry. But
we must wait for third one for confirmation of high liquidity sell. We know that if one day
we can get a buy set up in bigger time frame we can target to reach again that zone to
take entry.
Always wait for breakout confirmation. Price can spike opposite side but after end of the
session it comes to original direction. Be careful!!!
Direction and retrace are two terms.
Sell direction can be resume by meeting an engulfing buy or engulfing sell fail zone and
can start retracement. To Stop the sell direction, need to fulfill the formula (3 steps
confirmation).
Buy direction can be resume by meeting an engulfing sell or engulfing buy fail zone and
can start retracement. To Stop the sell direction, need to fulfill the formula (3 steps
confirmation).
When this setup invalidates?
If price push rapidly against the setup and close above or below the 3rd confirmation box,
then you mark the setup is invalid.
Trading with

• Reversal
o Say, price is falling and hits a zone that we have marked and boom to the
upside with heavy volume. If M1 signature setup happen we can grab
minimum 40 pips and maximum 60 to 100 pips.
• Breakout & continuation
My 3-layer entry distribution:

1st entry = 0.01 x 4

2nd entry = 0.02 x 3

3rd entry = 0.05 x 2

If price hit your BE do not take re-entry immediately because it is one kind of revenge.
Analyze chart again and if find setup then enter.

"Great works are performed, not by strength, but by perseverance."

- Samuel Johnson

I've been getting a lot of messages regarding money management so I am reposting what
I've sent before
________________________________
MONEY MANAGEMENT

$50 ACCOUNT
High risk = 0.10 lot
Med risk = 0.05 lot
Low risk = 0.01 lot

$100 ACCOUNT
High risk = 0.20 lot
Med risk = 0.10 lot
Low risk = 0.01 lot

$200 ACCOUNT
High risk = 0.40 lot
Med risk = 0.20 lot
Low risk = 0.02 lot

$500 ACCOUNT
High risk = 1.00 lot
Med risk = 0.50 lot
Low risk = 0.05 lot

$1000 ACCOUNT
High risk = 2.00 lot
Med risk = 1.00 lot
Low risk = 0.10 lot
__________________________________________

Only trade with money that you are willing to lose!

Have an amazing day ahead!

GOLD M1 BREAKOUT BUY SETUP POTENTIAL (coming H4)

1st confirmation - M1 fail zone Breakout ✅
2nd confirmation - Retest & respect into purple box ✅
3rd confirmation - Fresh M15 candle opens✅
4th confirmation - M5 engulfing buy formed
5th confirmation - Make sure Volume is high (check M1 candle make sure average range
is 40-50 pips)

Zones Definition
A zone is a region on a chart, marked by two horizontal lines around the price level
where supply and demand area are out of balance.
There are two types of zones:
Supply zone and Demand zone
Two lines make up a zone
Terminology
Distal-Farthest from current price (draw at the wicks edge)
Proximal-Closest to current price (draw at the base close price)

Supply zone is above current price

Demand zone is below current price

Advantages of using Supply zones and Demand zones

1) Provides high probability for buying at wholesale and selling at retail
2) Provides low risk entry (minimizes loss)
Origin: Origin is the point from where price has started a strong move (north or south)
The simple 3-steps process for identify trading zones
Steps to Identify Demand Zones
1. Start with current price on the chart
2. Look left & down until you find the origin of a very strong rally in price
3. Draw Proximal and Distal lines from the origin of the rally and extend them
forward
4. Look for large green candles (we want a strong move)

How to Filter Good & Bad Price Action Entry Signals

1. Look for a signal with a protruding tail that creates a false-break of a level
2. A long-tailed pin bar is a high-probability pin bar
3. Don’t “bet” on a breakout…wait for confirmation instead
4. Long-tailed pin bars work very good as reversals after a sustained move
5. Look for continuation signals after a pullback to support or resistance in the trend
6. Don’t trade signals in tight “chop”
7. Look for “confluence”
8. Avoid signals that form in “no man’s land”
1. Look for a signal with a protruding tail that creates a false-break of a level. Watch for
obvious protrusions and false-breaks of key levels in the market. This filter can be applied
to trending markets or to counter-trend trades. Wherever you have a key support or
resistance level, keep an eye out for false-breaks / protrusions of that level.
2. A long-tailed pin bar is a high-probability pin bar. Long-tailed pin bars work very well
in trending markets and as counter-trend signals, as we saw in the examples above. A
long-tailed pin bar is always something to keep an eye out for when analyzing the
markets.
3. Don’t “bet” on a breakout…wait for confirmation instead. A good filter to use for
tempting looking breakout trades is to wait for the breakout and close above or below the
level. Then, the breakout is “confirmed” and you can start looking for a signal in the
direction of the break. This will help you avoid many false-breaks, especially in range-
bound markets.
4. Look for continuation signals after a pullback to support or resistance in the
trend. Trend continuation signals are a ‘bread and butter’ strategy that you need to watch
for. Watch for trends and then retracements within those trends, then keep an eye out for
signals forming from “value” areas that indicate the trend might resume.
5. Don’t trade signals in tight “chop”. Be cautious trading pin bars or other signals that
form in thick and choppy consolidation. If you see two or three pin bars in a row as in our
example above and the market is not coming off in the direction implied by the pins, it’s
an indication that it’s probably not going to come off. We need to see momentum and a
clear breakout from consolidation before entering from a signal formed in “chop”.
6. Look for “confluence”. Watch for obvious “hot points” in the market, or areas where
two or three or more levels are intersecting…these are very high-probability levels to trade
from.
7. Avoid signals that form in “no man’s land”. This one is sort of the opposite of the
confluence point. If you see a signal that just looks like it formed without any type of
confluence and looks like it’s just placed wrong, you should probably avoid it. This filter
is especially important to use on the 4 hour and 1-hour charts.