This post is dedicated to the fifth Bullish Setup - Big Green on C1 or C2, a single candlestick continuation or breakout pattern that forms on either the first hourly candle (C1) or the second hourly candle (C2). Unlike the previous setups, it is traded in the morning. However, it has a modest win ratio and is not very reliable.
(Fig 1.1 - Chart example of Big Red on C1)
To be considered tradable within our strategy, the setup must meet specific criteria:
Setup Conditions:
Formation Timing: The setup should complete on C1 at 10 AM or C2 at 11 AM.
The setup must meet the trade selection criteria (refer to the "Trade Selection" section for details).
Key Elements of a Big Red on C1 or C2:
Setup Formation: The big red candle on either of C1 or C2 must form under one of two scenarios. If it forms on C2, C1 should be a narrow-range candle, green or red.
Bearish Continuation: The daily (preferably weekly) trend is already bearish, and C1 (or C2) reaffirms the continuation of this trend.
Bearish Breakdown: The trend has been sideways for the past few days, and C1 (or C2) represents a clear breakdown. In this scenario, the daily trend should not be bullish; it can be sideways, preferably forming a bearish chart pattern. A breakdown from a chart pattern such as a Double Top or a Head & Shoulders is a strong confirmation. A big gap down after a buy signal the prior day is a very strong signal as it represents a buy failure.
The rationale behind taking the morning trade is to capitalize on significant breakouts that tend to trend throughout the day. Waiting for C4 or C5 in the afternoon would be too late in such cases.
By 10AM (or 11AM), you should have decided whether to take the trade or step aside. If you’re unsure, it’s better to step aside. Avoid chasing momentum at unfavourable prices when the market becomes fast.
Chart Examples:
Carefully study the provided chart examples, paying attention to annotations that explain the price action behind the setup. Observe the results after the trade execution.
(Fig 1.2 - Chart example of Big Red on C1 on Nifty Futures)
(Fig 1.3 - Chart example of Big Red on C1 on Nifty Futures)
Fig 1.4 - Chart example of Big Red on C1 on Nifty Futures)
Fig 1.5 - Chart example of Big Red on C1 on Nifty Futures)
Win Ratio: The Win Ratio, a critical input for Trade Selection, is simply the number of successful trades divided by the total trades. The Win Ratio of this setup is 61% based on backtesting past data for the last 2 years. This is a modestly successful setup and can be avoided.
Please click on "Next Post" to move to the sixth Bearish Setup - Strong Red on C1 with high above Resistance.
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