Entering the Trade –
- The price must take out the established level by at least a few pips and form a valid signal that closes back within the level.
- The signal must form at the outer most bollinger band when trading a reverse but can form anywhere when trading a continuation.
- The signal will be as follows: First scenario, a spike candle will take out the level then close back within the level. The second scenario, a two candle engulfing signal will form, the first candle will break the level and the second candle (the engulfing candle) will close back within the range. And the final scenario, the market will stall-out for a few candles following the break, these candles are typically quite small. Following the stall candles a large candle will engulf all the stall candles and close back within the level.
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