Monthly bullish engulfing twins are a rare event when you look at the Forex market often (each minute, hour and/or day) but occasionally this candle stick pattern does appear. The EURAUD has a great example from September (see screenshot):
- The candle close closed near the candle high;
- The candle low bounced off of a 50 Fibonacci retracement level of the bullish swing high and swing low.
The EURAUD bias is therefore UP, or at least for this entire month of October. Of course price could drop lower on lower time frames (such as the hourly chart), but the bearishness will always remain a retracement of the bullish monthly engulfing twin (unless the monthly low breaks). This article will review numerous ways of entering a long trade for a medium to a long-term setup.
ENTRY TACTIC #1
One of the most straight forward methods to enter a long is to wait for a retracement of the EURAUD bullish candle. The retracement could go to any Fibonacci level but I find that the 50 Fib often provides the best balance between an order indeed getting filled and a decent reward to risk ratio (stop loss size not as big as with a 38.2 or 23.6 Fib). The details of my setup are here:
ENTRY TACTIC #2
Another entry tactic is to look for price to bounce off of support and previously broken resistance (which becomes support). In this case we will review the daily chart, which has various levels that could provide an extra confluence:
- Broken trend line (blue) – this however would require a deep retracement (78.6). If such a trade setup does occur, the stop loss would be the same but the target would be lower at the -27.2 (and not -61.8 as tactic #1).
- Armpit (green) – this would be an extremely deep retracement or even a double bottom and therefore seems unlikely for now.
- Inverted head and shoulders chart pattern (orange) – this requires price to retrace to the same 50 Fibonacci level and seems within reach of the market. The trade setup however would have the exact same details as entry tactic #1.
- Wait for a bullish daily candle stick pattern to appear on the chart and enter upon closure of pattern (stop loss below candle low; 17 pip trail stop loss below candle lows).
ENTRY TACTIC #3
Now it’s time to zoom in even further and review the 4 hour chart: a downtrend channel or bull flag becomes visible. A break of the chart pattern and the resistance spot would be another way of trading the EURAUD bullishness. Here is a summary:
- The first/immediate breakout (green arrow) of the bull flag with a stop loss below the bottom and the target at the -27.2 and/or -61.8 (see tactic #1)
- The pullback after the breakout of the bull flag (green circle) with a stop loss below the bottom and the target at the -27.2 (see tactic #1)
- The continuation bounce (candle stick pattern) after the breakout of the bull flag (blue arrow) with a stop loss below the bouncing spot or bottom and the target at the -27.2 and/or -61.8 (see tactic #1)
MORE/YOUR ENTRY TACTIC
Does the market offer more methods of entering? Certainly! The above examples do not limit any other entry options. In fact, there could be tons more… and that is why we encourage you to share too.
What entry method do you have in mind? What is the best entry method in your opinion?
Let us know down below!
Thanks for sharing and Happy Trading!
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