Forex Reversal Candle Formation on the EUR/JPY 09/07/2010
Here is a great example of getting in with the current trend by using forex chart patterns that repeat themselves many times throughout the trading day. On this example the market as a whole was point towards USD strength as well as the YEN crosses being pointed down. On the EUR/JPY we were making consecutive lower lows as well as lower highs (this showed us our direction to look for). The market made a nice retracement (a place for an entry) and closed below the previous swing highs close, additionally it formed a nice shooting star reversal candle formation which gave us all 3 keys to a nice continutation trade.
1.) In the direction of the current short term intra-day trend.
2.) Reversal into an area of resistance, while still maintaing the lower lows and lower highs.
3.) The market formed a 15M reversal candle at the top of the retracement, thus showing the indecision at previous resistance.
After this candle closed (blue arrow) and the market began to follow through down, we jumped on and took it for +15 pips. Probably could have taken a bit more out of this one but overall a great day. 3 winning trades and one small 5 pip losing trade.