+3.45% ROI thanks to a simple Daily Shooting Star reversal strat
Hi Traders,
STATEMENT
Let’s keep diving into the daily time frame to build an expectation of the direction the market could be heading to on the
AUDUSD
pair.
A directional bias is a powerful tool that can facilitate your trading journey when executing on lower time frames.
RATIONALE
Analyzing the daily time frame before thinking on taking a trade on a lower time frame can help you to:
1. spot robust areas of support and resistance,
2. Avoid fading strong daily candles (high probability candles) that you wouldn’t be aware of if sticking to lower time frames.
3. Identify potential take profit placement.
THE PLAY
For this example, we will be checking at the
AUDUSD
chart, and more precisely the Daily Shooting Star that was printed on 13th of January 2022.
1. First of all, on the daily time frame when I recognize a high probability daily candle -in this case, a D1 Shooting Star- I ask myself following questions:
a. Is the candle placed at a significant level? *Yes, on a resistance level.
b. Did the price rejected a significant level? *Yes, it rejected a resistance area.
2. I draw a level from the candle low.
3. As we are on a Bullish trend since 6th of December 2021, I’m conscious that I’m trying to go against the trend. When I play reversal I always pay attention to the D1 EMA 21. I noticed that reversal have a higher probability of success when the distance from the candle low to D1 EMA 21 is equal to 1 ATR (considering a lenght of 20 in the setup of the indicator).
When dropping down to the H1 time frame, we can clearly see that price is not above resistance level and stands on a support level, meaning that the only way for us to execute a trade is to way for the price to:
1. Create a break of market structure (breaking support level),
2. and print a lower low and a lower high.
Beside that, when playing reversal I like to have an extra confluence by looking at the RSI and seeking for a divergence (it won’t appear everytime).
Another level that should be drawn in this kind of setup is the candle high from previous day before D1 candle shooting star happening. With all our level marked we can now wait for the price to develop.
We can see a break of market structure happening (BMS) and a lower low getting printed:
Then, at 10:00 we have our entry when a lower high is printed and the H1 candle closes as a Shooting Star. Additionally we have 2 extra confluences: FIB 0.5 level and H1 EMA 21 rejection.
Last but not least, our Take Profit is placed at the low of the previous candle before the D1 Shooting Star:
THE RESULT
Price hit take profit after 9 hours for a ROI of 3.45%:
CONFLUENCES SUMMARY
On D1:
1. Directional Bias: D1 Shooting Star on resistance level.
2. Enough space for reversal between D1 EMA 21 and Candle Low.
On H1:
1. RSI Divergence.
2. Break of Market Structure.
3. Lower Low and Lower High.
4. Fib 0.5.
5. H1 EMA 21.
6. Price action: H1 Shooting Star.
STATEMENT
Let’s keep diving into the daily time frame to build an expectation of the direction the market could be heading to on the
AUDUSD
pair. A directional bias is a powerful tool that can facilitate your trading journey when executing on lower time frames.
RATIONALE
Analyzing the daily time frame before thinking on taking a trade on a lower time frame can help you to:
1. spot robust areas of support and resistance,
2. Avoid fading strong daily candles (high probability candles) that you wouldn’t be aware of if sticking to lower time frames.
3. Identify potential take profit placement.
THE PLAY
For this example, we will be checking at the
AUDUSD
chart, and more precisely the Daily Shooting Star that was printed on 13th of January 2022. 1. First of all, on the daily time frame when I recognize a high probability daily candle -in this case, a D1 Shooting Star- I ask myself following questions:
a. Is the candle placed at a significant level? *Yes, on a resistance level.
b. Did the price rejected a significant level? *Yes, it rejected a resistance area.
2. I draw a level from the candle low.
3. As we are on a Bullish trend since 6th of December 2021, I’m conscious that I’m trying to go against the trend. When I play reversal I always pay attention to the D1 EMA 21. I noticed that reversal have a higher probability of success when the distance from the candle low to D1 EMA 21 is equal to 1 ATR (considering a lenght of 20 in the setup of the indicator).
- In this situation we 1 ATR (20) corresponds to 60,4 pips. And when measuring the distance between the candle low and D1 EMA 21 we have 60,6 pips. It means that we have enough space to be playing the reversal.
When dropping down to the H1 time frame, we can clearly see that price is not above resistance level and stands on a support level, meaning that the only way for us to execute a trade is to way for the price to:
1. Create a break of market structure (breaking support level),
2. and print a lower low and a lower high.
Beside that, when playing reversal I like to have an extra confluence by looking at the RSI and seeking for a divergence (it won’t appear everytime).
Another level that should be drawn in this kind of setup is the candle high from previous day before D1 candle shooting star happening. With all our level marked we can now wait for the price to develop.
We can see a break of market structure happening (BMS) and a lower low getting printed:
Then, at 10:00 we have our entry when a lower high is printed and the H1 candle closes as a Shooting Star. Additionally we have 2 extra confluences: FIB 0.5 level and H1 EMA 21 rejection.
Last but not least, our Take Profit is placed at the low of the previous candle before the D1 Shooting Star:
THE RESULT
Price hit take profit after 9 hours for a ROI of 3.45%:
CONFLUENCES SUMMARY
On D1:
1. Directional Bias: D1 Shooting Star on resistance level.
2. Enough space for reversal between D1 EMA 21 and Candle Low.
On H1:
1. RSI Divergence.
2. Break of Market Structure.
3. Lower Low and Lower High.
4. Fib 0.5.
5. H1 EMA 21.
6. Price action: H1 Shooting Star.