Step #1: Attach the Indicator on your Preferred Time Frame
Start first by preparing your charts ready for the battle. Simply attach the indicator on your favorite time frame. This is the only additional technical tool we’re going to use to confirm the validity of the pattern.
Using the CMF indicator, we accomplish one major thing.
The validity of the will be confirmed or invalidate instantly as soon as the develops on our Bitcoin chart. This means that the price won’t move any further from the ideal entry price.
Step #2: The Candle should come after a strong
The location, or where the develops, matters a lot.
This whole ingredient is what makes the candle performs with such a high degree of accuracy. We need a strong uptrend that has two important features:
The first part of the trend is a slow and steady move to the upside
The last part of the uptrend, prior to the candle, needs to be more volatile.
Basically, we’re looking for a full-blown market top where the bulls are exhausted and reach a climax point.
Step #3: The CMF indicator must be below the 0 lines once the candle develops
is a great tool to read and measure institutional activity in any market. Basically, a CMF reading below the zero line shows that the sellers have the upper hand and they took control of the market.
Notice that the spotted satisfies all the requirements of a . The shadows are at least two times longer than the body, small body, and very little lower shadow. This candle would have been more powerful if the closing price is below the opening price.
But it’s still a good pattern to trade due to all the other features.
Now, it’s time to highlight how to find the right entry point for .
Step #4: Sell once we break the low of the Candle
Simply place a limit sell order below the low of the . Nothing complicated about our entry strategy. It’s in line with the textbook rule.
Step #5: Hide SL above the high of the Candle.
Simply hide your protective SL above the high of the pattern. You can add a buffer of a few pips if you wish to protect against possible false breakouts.
The full-blown top creates the necessary space where the bears would find no level of support to stop the drop . The last stage of a trend has been always more volatile. When combined with the reversal pattern, it makes for a killer trading strategy.
Step #6: TP when we get inside the slow part of the prevailing trend.
In this regard when the price reaches the portion where the prevailing uptrend was moving slow, we take profits. That’s where the price will find some hostility to advance further on the downside. We want to clear out our position when that happens.
Conclusion – Best Strategy
The best strategy is one of the most reliable and efficient ways to trade trend reversals. This single pattern can offer you one of the most attractive risks to reward ratios. You can risk between 10 and 30 pips and look to gain between 200 and 300 pips which gives you a profit of 20x or 30x the risk taken.
Take that into consideration next time when you’re able to find a candle that satisfies all the rules outlined in this trading strategy guide.
A lot of traders will warn you against reversal trading. However, finding tops in the market and trading reversals can be done successfully if you have a proven methodology like our candle strategy.