So you’ve found the perfect trade setup, now how do you actually trade it?
The first step is to plan your entry. Let’s use the following chart to practice… It’s a EUR/JPY 4H chart with trendlines and S&R zones already drawn. Can you see the trade opportunity?
As you can see, the last candle on the chart is a Long Wicked Candle, and it has bounced directly off both an S&R zone and off a trendline. This makes it an excellent trade opportunity!
Before we enter we need to confirm that this is a valid price reversal. Even though all the signs of a reversal are there, we need to be safe and wait for the actual reversal to start. To confirm the price is reversing we want to set a pending order that will enter the trade automatically once the price moves a few pips above the red LWC that signaled the reversal. This pending order is represented by the orange 132.45 line on the chart below.
After the price breaks above that orange line our pending order will be triggered. That small 5 pip buffer above the previous candle is just enough to confirm that this is a good trade. Some people like to wait for the candle after the LWC to close, and you can do that if you want to be ultra-conservative, but if we wait for that we can miss out on too much profit!
Of course you won’t be entering into any trades without knowing what your stoploss will be, so let’s take a look at how we’d place our stop on this trade.