Currency Pair - EURUSD
Time Frame - Daily
Scope of Tutorial - This tutorial will help to show how I trade the currency pairs using candlestick analysis.
Part 1 - On March 30th EURUSD made a Piercing candle. A Piercing candle is similar to a Harami with the difference being the candle closed past the 50% mark of the previous candles' real body. A Piercing candle is a trend reversal indicator. The only time a market would reverse direction is at a support or resistance level. In the case here the Piercing candle is indicating a resistance level, therefore, I have added a resistance line to the high of the green candle proceeding the Piercing candle.
The next candle looks like a Hammer or a Dragonfly Doji. A Hammer candle is a bullish candle as it closes very close to the high of the session. A Hammer also has a lower shadow that is at least twice the length of its real body. The long lower shadow indicates the market was rejecting lower prices during the session. The problem is that the market normally starts rejecting lower prices once it is oversold. However, in its current location, this candle is not in an oversold price level as the downward trend is just getting started. As a result, I do not look at this candle as a Hammer but as a Dragonfly Doji. As a Doji, the Dragonfly Doji indicates a pause in the market. When a Doji appears during a trend it indicates a pause in trading but does not indicate a possible reversal ahead. Again, the only time when a Doji could indicate a possible change in the market direction ahead is when the market is over-extended. When a Doji occurs early in a new trend or during a period of increasing momentum it simply means the market is taking a break before continuing its main direction. As a result, this candle is of no concern and the main trend is expected to continue in future sessions.
The next candle is a Neutral candle. A Neutral candle identifies a session that closes midway between its high and low price of the session. Similar to a Doji candle that forms early in a trend the Neutral candle also indicates a pause in the market. Again, this candle is of no concern and the main trend is expected to continue in future sessions.
The last candle of the day is a strong bearish candle closing below mid-range. A strong bearish candle is an indication this market is still heading downward.
HOW TO TRADE EURUSD - There are two ways to trade this analysis. One way would be to a Short Momentum trade. A Short Momentum trade would be entered when the Low of the Piercing candle is taken out. A second way would be to wait for a Close below the Low of the Piercing candle occurs by the following candle. The momentum trade is a little riskier but the reward to risk ratio is better. The Close below the Low of the Piercing candle is less risky but comes at a lower reward to risk ratio. The old saying, "With higher risk comes the possibility of higher reward" applies here. The Stop loss is placed above the resistance level and the price target is set at Support.
PLEASE LIKE ME, but only if you like this trading tutorial. Also please leave a comment on how I can improve the tutorial.
Time Frame - Daily
Scope of Tutorial - This tutorial will help to show how I trade the currency pairs using candlestick analysis.
Part 1 - On March 30th EURUSD made a Piercing candle. A Piercing candle is similar to a Harami with the difference being the candle closed past the 50% mark of the previous candles' real body. A Piercing candle is a trend reversal indicator. The only time a market would reverse direction is at a support or resistance level. In the case here the Piercing candle is indicating a resistance level, therefore, I have added a resistance line to the high of the green candle proceeding the Piercing candle.
The next candle looks like a Hammer or a Dragonfly Doji. A Hammer candle is a bullish candle as it closes very close to the high of the session. A Hammer also has a lower shadow that is at least twice the length of its real body. The long lower shadow indicates the market was rejecting lower prices during the session. The problem is that the market normally starts rejecting lower prices once it is oversold. However, in its current location, this candle is not in an oversold price level as the downward trend is just getting started. As a result, I do not look at this candle as a Hammer but as a Dragonfly Doji. As a Doji, the Dragonfly Doji indicates a pause in the market. When a Doji appears during a trend it indicates a pause in trading but does not indicate a possible reversal ahead. Again, the only time when a Doji could indicate a possible change in the market direction ahead is when the market is over-extended. When a Doji occurs early in a new trend or during a period of increasing momentum it simply means the market is taking a break before continuing its main direction. As a result, this candle is of no concern and the main trend is expected to continue in future sessions.
The next candle is a Neutral candle. A Neutral candle identifies a session that closes midway between its high and low price of the session. Similar to a Doji candle that forms early in a trend the Neutral candle also indicates a pause in the market. Again, this candle is of no concern and the main trend is expected to continue in future sessions.
The last candle of the day is a strong bearish candle closing below mid-range. A strong bearish candle is an indication this market is still heading downward.
HOW TO TRADE EURUSD - There are two ways to trade this analysis. One way would be to a Short Momentum trade. A Short Momentum trade would be entered when the Low of the Piercing candle is taken out. A second way would be to wait for a Close below the Low of the Piercing candle occurs by the following candle. The momentum trade is a little riskier but the reward to risk ratio is better. The Close below the Low of the Piercing candle is less risky but comes at a lower reward to risk ratio. The old saying, "With higher risk comes the possibility of higher reward" applies here. The Stop loss is placed above the resistance level and the price target is set at Support.
PLEASE LIKE ME, but only if you like this trading tutorial. Also please leave a comment on how I can improve the tutorial.
