​More precisely, classical reversal patterns will tend to appear inside of the rounding formation as part of the overall turn in the market sentiment.

​When this occurs it’s a stronger signal that the reversal will be genuine as multiple price levels and tools can now be used to confirm the validity of the reversal.

The rounding top and bottom formations should visually be roughly symmetrical, although of course perfect symmetry can be seldom expected in the real market.

The rounding formation will be usually outlined by a turning path in the trendlines highlighting the reversal of the prior trend. That is, in a rounding top the slope of the trendlines will change from up, to horizontal and finally, it will turn south sloping down just before the breakdown to confirm the reversal.

In a rounding bottom, the trendlines will follow exactly the same pattern only of course in the opposite order.​

All the rules and tactics that apply to a rounding top pattern are the same and should be applied to the rounding bottom pattern in reverse order, thus we will describe the approach for trading the patterns by using the bearish rounding top pattern.​

Entry rules:

1. Identify a rounding top formation.
2. Wait for a turn in the trendlines from up to horizontal to down (as shown in the chart examples below).
3. Enter into the trade:

   A) Enter on a breakout of the support trendline (which can be either upward sloping or horizontal).

   B) Enter on the newly formed resistance trendline that helps to define the new downtrend.

   C) ​If the pattern is completely round, and there are no recognizable trendlines, which does happen sometimes, then the entry can be executed as price makes its turn toward completing the rounding formation. In this case, the Stop-Loss should only be placed above the highest high of the whole formation.

Initial Stop-Loss placement:

• Above the highest high of the rounding top formation (this is the ultimate stop out level).
• Or, alternatively, the stop can be placed behind the most recent swing high (keep in mind that although the risked amount is smaller with this approach it’s also more likely that the stop will be taken out before the trade moves in the desired direction).

Trade management:

If a resistance trendline is present toward the completion of the pattern (there usually is), then it should not be broken if the reversal is going to be genuine. Closing the trade is recommended if price returns back above the resistance trendline (in a bearish rounding top) and below the support trendline (in a bullish rounding bottom).

​The bullish case of the pattern is shown on the USDCAD chart below. Notice how the trendlines here took a turn from steep down to gradual down to gradual up and finally to a steep upward slope.

Profit-Targets:

• There is no reliable approach to set profit targets based on the rounding top formation alone. However, we can use any other accompanying pattern to set profit targets (remember the rounding top pattern usually appears together with other technical patterns).
• If no other patterns have formed, then support or resistance levels from higher timeframes can be used as reliable targets as is the case with most technical trading strategies.
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• The trader must be aware of the potential risk-reward and always aim for a ratio of at least 1:1 or even better a 1:2 risk – reward ratio.

The triple top and the triple bottom are similar to the double top and double bottom patterns. In fact, a triple top consists of a double top plus one top just as a triple bottom consists of a double bottom plus an additional swing low.

​Yet, it’s fair to say that the triple top and triple bottom are somewhat more reliable than the double top and double bottom. After all, resistance that holds 3 times is stronger than resistance that holds twice, right?

A triple top is formed when price fails to break a double top, or better said fails to break below its neckline and instead runs for the highs one more time. Hence, it follows that the same rules for drawing the neckline on a double top or bottom pattern apply for drawing necklines on triple tops and bottoms as well.

The triple top and bottom patterns often appear together with, or as part of a larger range. In such situations, both patterns should be examined to arrive at a better judgment of the overall situation on the chart.

All the rules and tactics that apply for a triple top pattern apply for the triple bottom pattern as well, only in inverted order. We will describe the approach for trading the patterns by using the bearish triple top example.

Entry rules:

1. Identify a triple top formation as described.
2. Wait for a break of the neckline to the downside.
3. The entry trigger is a close of the session below the neckline.

Additionally, it’s wise to take a look at Momentum oscillators and look for confirmation of the triple top pattern. Particularly bearish divergence on the oscillators can confirm that the prior uptrend is indeed slowing down and hence a bearish reversal is more likely.

Initial Stop-Loss placement:

• Behind the highest top of the 3 tops (this is the ultimate stop out level).
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• Or, alternatively, the stop can be placed behind the most recent swing high (for a tighter stop).

Trade management:
Although, it doesn’t automatically negate the whole pattern price should not return back above the neckline on a close after it already broke it to the downside. If that happens it’s a warning sign that the pattern may fail.

The above 5m AUDNZD chart was an example of this situation, however, the pattern still worked in the end and price reversed.

After breaking below the neckline price should move in the breakout direction soon and in an orderly manner. If the price is just consolidating after breaking the neckline and possibly even coming back to it several times and playing with it then those are warning signs that the trade might not work out as planned.​

Profit targets:

• Measure the vertical distance between the neckline and the highest point of the 3 tops / bottoms.
• 1st target – Project this measurement from the neckline to the right of the chart.
• 2nd target – Project 2x the 1st target.
• 3rd target – Project 3x the 1st target.

​The bullish triple bottom is shown in the EURGBP example below. Notice how the pattern works exactly the same on the weekly timeframe as it does on the 5-minute timeframe.

The Master Candle trading strategy is famous for the fact that it provides clear patterns and also helps in the identification of breakout points, making it especially useful for traders in the long run.

It is always useful to follow a certain set of guidelines or rules when using any trading strategy and the same is true for the Master Candle trading strategy. Following is a brief set of rules which should be kept in mind when using this particular trading strategy.

1. You should not try to trade near a Support / Resistance (SR) zone.
2. There should be no trade against a Support / Resistance zone that is closer than the Master Candle’s height.
3. Only take a trade when a candle breaks the Master Candle’s High or Low.
4. For Great British Pound / Japanese Yen (GBP/JPY) and Great British Pound / United States Dollar (GBP/ USD), the range of 40 to 105 pips is the most likely daily trading range and therefore it should be used as a general guide when day-trading the Master Candle strategy on these pairs.
5. You should not be looking to trade if the size of the Master Candle is outside the above-mentioned pip range.
6. When considering to enter a long position, use the formula, “Place buy stop pending order five pips above High of Master Candle + the Spread”.
7. When considering to enter a short position, use the formula, “Place sell stop pending order five pips below low of Master Candle”.
8. Profits will vary in pips and are dependent on the chosen currency pair and its volatility.
9. It is recommended to always target the Master Candle size when exiting the trade. So, for example, if the Master Candle size is 40 pips, consider setting your profit target at 40 pips.
10. Place your Stop-Loss order in the opposite direction of the entry at the other end of the Master Candle. So, in a long trade, the stop should be at the Master Candle’s low, while in a short trade the stop should be at the Master Candle’s high.

It is also worth mentioning here that trading with the Master Candle is not a smooth road and in fact, some experts argue that this particular strategy gives a considerable number of false breakouts. This is especially true in the case of volatile pairs involving JPY. Hence, you must be looking for the so called Scouting Parties.

These are the candles which get reversed after breaking through the Master Candle which can, of course, lead to failed and losing trades. For this reason, some professional traders avoid entering on the first break of Master Candle. Instead, they wait till the formation of a scouting party and then enter after price breaks out of the scouting party.

It is true that the Master Candle is considered to be one of the simplest trading strategies and it is widely used because of this. Moreover, it is also known to provide favorable results.

However, the fact of the matter is that the results are not identical everywhere. Each trader trading in the FOREX market has his own style of decision-making and trading, hence, it is expected for results to differ even when following the same strategy.

Therefore, it is strongly recommended to develop your own understanding of the Master Candle trading strategy and master it with a trial and error approach. Take real life scenarios and make your decisions according to your experiences. Slowly, your knowledge and skills will be refined and you will be in a better position to make use of the Master Candle trading strategy.

However, it’s important to realize that it’s a normal part of trading the Forex market and it’s best to be viewed as part of the learning process. By understanding these situations, we can better protect ourselves from losses and make profits as well.

This article partly explains why this phenomenon happens in the markets and further, we’ll discuss how you can profit from a common situation that often traps traders on the wrong side of the market.

Without further ado let’s get into the strategy.

The key to this strategy is monitoring how the price reacts after the tall candle is formed. A tall candle that is fully erased is a signal that the price will go in the opposite direction of that candle. The tall candle reversal strategy tries to capitalize on these situations.

1st condition is:
A significantly larger candle needs to be formed on the chart (at least 2 – 3 times larger than the bars preceding it).

Keep in mind, this situation is even better felt live than explained or noticed on a historical chart. The sudden huge spike in volatility and wild price action in those moments are what usually characterizes such a spiking candle.

The reasons for these kinds of wild price action are usually a surprise in the fundamentals of the currency pair or a panic among traders hence a sharp move is triggered.

2nd condition:
We are looking to see whether the gains, or the losses caused by the big candle stick are reversed.

3rd condition:
The 50% retracement needs to be broken on a close.

We measure the 50% point of the tall candle (from its high to its low) which acts as the trigger point for a trade. Very often the 50% retracement of tall candles acts as support or resistance and once it’s broken it usually means that the whole candle will be erased soon.

Entry signal:
Long: Buy on a close above the 50% Fib retracement (in this case we trade a tall red candle that is reversed to the upside).

Short: Sell on a close below the 50% Fib retracement (in this case we trade a tall green candle that is reversed to the downside).

It’s even better if the break of the 50% retracement occurs on strong momentum which will just help to confirm the reversal.

Stop-Loss:
Long: Below the low of the tall bar

Short: Above the high of the tall bar

Profit-Targets:
Support and resistance on larger timeframes or trailing Stop-Loss to ride the trend

If the tall candle is fully reversed it means that investors strongly believe in the trend that they are comfortable erasing such a sharp and large move. The fact that a huge move was completely erased is enough of a proof that there is strong buying or selling pressure in the market.

Further, all the traders that got in on the spike have their Stop-Losses behind the spike and now when those Stop-Losses are taken out it creates an additional squeeze contrary to the direction of the tall candle and in the direction of the trend.

Most often, if it’s going to be reversed, the tall candle will not close near the highs (in an uptrend) or near the lows (in a downtrend). But instead, it will have a reasonably long wick, or even better a very long wick. Of course, the longer the wick the stronger the reversal signal.

This strategy tends to work even better if a strong trend precedes the big candle in the contrary direction (as is the case on the EURUSD example below).

EURUSD:
On this 15-minute EURUSD chart, we can see a strong uptrend from left to right on the chart with the tall candle in the middle. The tall bearish candle engulfs the 70 previous bars on the close and 80 previous bars when its wick is taken into account. That’s quite a shock given the uptrend that was in place before it.

However, the whole shock, the spike, and the tall candle are just a fake-out. Imagine how many Stop-Losses of traders who were riding the uptrend were taken out!

Eventually, in such situations, as is evident from the following chart, the fake move is quickly and completely reversed and the uptrend continues at about the same pace.

USDJPY Brexit example:
This USDJPY daily chart is a striking example of this pattern in action.

Namely, the low reached here is on Brexit day, right in the aftermath of the vote which triggered a broad risk-off move in markets and as a result, USDJPY fell all the way to 99 from 106. A 700 pips move in a matter of hours, and yet it turned out to be a multi-month low as is apparent now in 2017.

However, upon closer inspection, again, the 50% retracement of the tall candle acted as resistance and as the key level for the reversal later. The 50% line was first penetrated without a decisive close above it, and as a result the market went for another retest of lower levels. However, even the fact that the price reached the 50% level is significant by itself.

Though, the final confirmation for the trade comes on the second push above the 50% line with a decisively tall green candle. The full reversal of the tall candle to the upside is just a matter of time now.

Note that in this example, in contrast to the EURUSD example, the tall red bar came after a downtrend!

Hence, the difficulty of the market erasing it and the time it needed to march higher on the new uptrend can be attributed largely to the previous overall trend which was down.

The OOPS pattern, as discussed by Larry Williams, is observed when:

1. The daily bar opens below the previous day’s low.
2. Or when the daily bar opens above the previous trading day’s high.

The theory behind this pattern is very simple and logical. Larry believes that non-professional traders check common charts at night and enter their orders for the upcoming day.

On the other hand, professional traders wait for the trend to be actually developed in the day and place their orders accordingly at the daytime.

Hence, if the market opens considerably lower or higher than yesterday’s range, it is an indication of the panic of non-professional traders. This provides a great opportunity to professional traders to use the non-professionals’ emotions against them by placing a contrarian trade and earn profits.

Soon, these traders notice that they overreacted in response to the initial event or news. At this point, the traders realize their mistake and reevaluate their position. This causes prices to reverse and a movement in the opposite direction occurs.

This trading system provides a lot of valuable information related to buying and selling in the FOREX market, even though gaps occur rarely since it’s a 24-hour market. However, weekend gaps at the open are quite common in the FOREX market, so the OOPS trading system will work best on daily and weekly charts.

The OOPS buy strategy is explained in the following points:

1. There needs to be an existing downtrend on the chart for at least a few trading sessions. This will be usually indicated by several red candles on the daily or weekly chart.
2. During the last stage of the downtrend, the market needs to gap down way below yesterday’s low. This gives rise to the OOPS buy signal.
3. As reevaluation by investors happens, the price starts rising and crosses yesterday’s low and yesterday’s close. This generates the buy signal and a long trade should be initiated here.
4. The Stop-Loss is the low of the same day.

Similarly, the OOPS sell is generated according to the following pattern:

1. Closely observe the chart and find if there is a prolonged uptrend for at least few trading sessions indicated by white or green candles.
2. During the last stage of the uptrend, a gap higher should occur to beget the OOPS sell. It’s even better if the price opens much higher than the yesterday’s high.
3. As reevaluation by investors progresses, the price starts falling and eventually crosses yesterday’s high and yesterday’s close. A short trade should be opened once this has occurred.
4. The Stop-Loss is the high of the same day.

The Larry Williams OOPS pattern has been used by numerous investors and traders and it is known to have a high level of accuracy and validity. It provides an opportunity to get valuable profits from fading the gaps.

However, it is still very important to remember that it is not a purely mechanical concept and it is possible for variations to occur in this system. Also a proper exit strategy should be defined as well.

Therefore, the best way to get started with the OOPS pattern is to use trial and error method. It is you who will have to figure out the best application of the OOPS system in different trading conditions and across different markets.

The sudden change in volatility and volume between the quiet Asian session and the busy – volatile London session makes the occurrence of a breakout highly probable and hence the high probability of success with the London session breakout strategy.

​Traders who are aware of this can trade accordingly and reap significant gains.

​The best time to use the London open breakout strategy is when volatility is at its highest – during the first 3 hours of the London session after which volatility tends to die out before picking up again at the opening of the New York session.

In order to make the most of the London session, traders should trade only the major currency pairs such as the EUR/USD, the GBP/ USD, and the USD/JPY.

The hourly chart has proven to be the best timeframe to use for this strategy since the opportunities exist for just approximately 3 hours.

One indicator is used for this strategy and that’s the 50-period simple moving average (SMA).

Ensure that you are online at 7:00 GMT at which point you should take a look at the last 4 candlesticks (considering we use H1 time-frame) and note the highest high and the lowest low of those 4 candlesticks (4 hour period). This is the Asian trading range that we are looking for price to break out of.

Buy signal
So, if the next candlestick goes above the highest high of the previous 4 candles, and if the price is above the 50 SMA, then that’s a signal to go long on the currency pair.

• Place your stop loss below the lowest low of the last 4 candles.
• The take profit target is the height of the range projected above the breakout.

Sell signal
If however, the price breaks below the lowest low of the range and price is below the 50 SMA then that’s a signal to take a short trade.

• Place your stop loss above the highest high of the last 4 candles.
• The take profit target is the height of the range projected below the breakout.

An example is shown on the 1-hour GBPUSD chart below.

The Asian trading range is marked with the blue rectangle.

​It’s wise to take profit on half of the position at the target, and let the other half run in case the move continues.

You can also use pending orders so that there is no need for you to constantly watch the price moves and basically with that it will be almost like trading on autopilot.

Only one trade per day should be executed and all trades should be manually closed at the end of the day if the Stop-Loss or Profit-Target is not initiated.

Regarding risk management with the London session breakout strategy, it’s best to not risk more than 1% – 2% of your account (as with any other forex trading strategy – the exact risk % depends on your money management).
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Some traders prefer to use the previous 3 candles rather than the previous 4 candles. Both strategies give similarly good results so, in the end, it’s up to you to test and decide which one works better for you.