A highly profitable way to enter in the direction of the trend
What should we do if a trend has started and we're still out of the market? We can, of course, wait for the next trend, but a good trend is usually followed by a protracted period of consolidation. Or we can take a more effective approach: find a good, high-yield entry point and join the already accelerating money train.
Meet the "Touch of the Shadow" pattern - a simple yet effective way to enter the market
Tools needed: 2 moving averages and a Japanese candlestick chart.
Entry rules for purchases:
1) The fast average is higher than the slow one.
2) The bar opened above the moving averages.
3) The bar's low is below the fast moving average.
4) The bar closes above the fast moving average.
5) The shadow of the candle is larger than the body.
6) For additional confirmation, wait for the maximum of the bar that generated the signal to be broken.
7) Stop loss can be set at the minimum of the bar that generated the signal.
As you can see, the conditions are simple, but the signal filtering is very high quality.
The rules for sales are completely opposite.
For convenience, I've added this entry pattern to my universal dual-moving average indicator, " Moving Average Cross Signal." The indicator can be downloaded completely free from MQL Market.
In the end
The "Touching the Shadow" pattern is an effective and logical answer to one of traders' most vexing questions: "What if the trend has gone without you?" Instead of panicking and chasing the market or passively waiting for the next opportunity, this strategy offers a disciplined approach.
Its strength lies in three key aspects:
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Filtration. Pattern rules aren't just a signal, but a multi-level filter. They take into account the overall trend (position of moving averages), the dynamics of movement within the bar (breakout and reversal), and the strength of the momentum (long shadow). This significantly improves the quality of signals.
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Logics. The pattern does not capture the fact of growth itself, but correction within the trend — a moment when the market briefly "rests," but the trend's strength is confirmed by a quick rebound. This allows you to enter an already established movement at a more favorable price.
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Simplicity and versatility. Using just two indicators and candlestick analysis, the strategy remains accessible even to beginners, while its rules are mirrored for sales, making it applicable to any market.
However, it's important to remember: no strategy works in a vacuum. "Touching the Shadow" is most effective during pronounced trend movements and can generate false signals during periods of sideways movement or high volatility. Therefore, it should be used as part of a comprehensive approach, supported by volume analysis and key support/resistance levels.
So, having mastered this pattern, you get not just an entry point, but strategic advantage — the ability to calmly and confidently “board the accelerating money train” when others are already waving after him.
