T2W Trading Community

In case you were wondering if this set-up can be applied to Forex markets the answer is yes. This next chart is a spot FX British Pound from September 30^th. If you apply the Pivot calculations derived from the prior days data you will have a predetermined support of 1.7568. Notice how the market bounces around and then the Doji forms. The trigger to buy initiates once the Green candle closes above the Doji high and the same sequence of events takes place, higher highs, higher lows and a continuation of higher closing highs all the way up until we hit resistance at the R-1 of 1.7680. That equates to nearly an 80 PIP or point gain.

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This next example is the CBOT Mini-Dow contract, in this example notice how the Doji forms right on the Pivot Point Support Line. Remember that Dojis form more often than not at Pivot Point Support or Resistance levels. Here the candle right after the Doji not only closes above the doji’s high but see how it entirely engulfs the real bodies of the prior two candles of the Doji as well. That helps signal the power behind the reversal formation. As you can see we have a great run in the market testing beyond the R-2 number thus giving nearly a 100 point gain for the trading session.

This is a pattern that should show an imediate positive change as the reversal takes hold. Also notice that we see more green candles develop, which reflects the market closing above the open, thus confirming buyers dominating the market with better bullish momentum.

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The rules also state that we can use confirming indicators.  In the chart below we have three indicators, my favorite being Fast Stochastics, then MACD and CCI. As you can see Stochastics indicates a bullish convergence signal, validating that prices were near an exhaustion phase and ready to reverse, as the Doji formed.

The HCD trigger would have you long at the close or the open of the next candle near 10485. However, notice the MACD triggers late and would initiate a position near 10520.

The trigger in the MACD would be verified from the moving average crossover as well as the zero line crossover method. Notice how MACD does not form a Bullish Convergence either.

 The CCI indicator is a 14 period setting. The Histogram feature does alert to a timely Bullish Convergence confirmation, but notice when we line up the zero crossover feature it also would trigger a buy at a much higher price entry similar to the MACD signal. One of the neat features of CCI is that it incorporates the Pivot Point formula in its calculation; it has great validity as a confirming indicator. It is non the less a lagging indicator and as the chart below shows signals an entry later than the HCD trigger pattern.

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