I've found this setup to work (in my papertrading) on ES 5min candles and I'd like to (drumroll!) SHARE it with ALL of ET community. It's VERY simple. You look for a big ass green or red candle. Then you look for smaller candles of opposite color inside of that big candle retracing the other way. Ideally, 3 but 2 works also. You go with the direction of the retrace, entering on break of high/low of 3d (or 2d candle). The minimum profit target is the size of the candle. The stop is the other side of the candle. CHart is attached. It's very simple. This setup does not occur every day but when it does it tends to pay off.
neat! do you wait for a doji/hammer to appear first to setup the entry? only thing i can see is that it seems slightly arbitrary to me where to enter. remember, keep things as black & white as possible! thanks for sharing....good luck with it!
If you're interested in pivot levels, apply them to these charts in order to determine whether or not they affect the probability of reversal. How do volume and ATR relate to your decision to enter or stand aside?
Do you take trades only in the direction of the longer-term trend, or do you use the fact that there is a "big ass candle" as an implicit indicator of trend? ("Big ass candle" means sudden pullback, indicating that most traders are trading in the opposite direction of the big ass candle, and we know that traders tend to trade with the trend.)
It looks like a 2 pt target with a 2 pt stop loss, is this correct? Also,I'm curious about your ma on your chart, what do you use that for? Thanks for sharing. sulong
Reminds me a bit of a failure of the classic "Three Methods" candlestick pattern. Similar initial setup, but you would (in this case) buy the break of the first bars high (A). Three Methods is a continuation pattern traditionally and I'm not sure it really looks like an up trend in this chart. Hence, playing the failure seems reasonable. Just my thoughts. Thanks for sharing.
funky: the entry is not arbitrary at all. its very simple. if you're using 2 "inside candles" for setup enter on break of 2d candle, if you wait for 3 inside candles (ideal setup) then enter on break of 3d candle in the proper direction. Break means 1 tick above/below H/L of the candle. In the chart, the short entry is 1 tick below line B. oddi: i know it tends to pay off because i've papertraded it on a real-time simulator for 3 months. i dont have the "stats" for you now. db: Volume and ATR are not part of the setup. They just happened to be on the chart. Lobster: There's no regard for the current trend or anything else that's not been described as part of the setup. sulong: Yes, Risk/Reward is usually slightly bettter than 1. That MA is 20EMA and it is not used in the setup.
tkay, although you don't have "the stats", do you have a number for %winners on this one? Or just a rough (but brutally honest) estimate? Surely it'd have to be well over 50% if your risk and reward are about (or marginally better than) even, right? Thanks.