The EURSGD has moved lower after forming a really high probability Bearish Engulfing Bar = BEEB on the 4 hour price action chart. Often in the daily Forex market summary blog I am disusing price action and where you need to be looking out for the next setup or where a setup has just formed, but in today’s post I am going to be looking at a really high probability trade setup that has already formed and the major points we can learn from it.
A shout out goes to the members who posted and discussed this setup live time in the members live price action setups forum before it broke lower and played out. Part of that discussion was what made this setup a high probability trade, and that is what I want to look at today.
The first major point is that the engulfing bar was formed at a major daily resistance level that was a proven price flip level. This level has been a proven major support and resistance level in both the longer and shorter terms, so hunting for trades at this level on smaller time frames was ensuring we were trading at a major level.
This level was also a Very Big Round Number (VBRN) in 1.6000. These Very Big Round Numbers can act as major psychological areas for price to hover around and reject and you can see them on every chart for example; on the EURUSD, 1.4000, 1.5000 etc.
There was room for price to move lower into once it broke the BEEB lower and confirmed the setup. Once the trade was confirmed, there was then space for price to make a move into. This is SUPER important because if price breaks and is then trading straight into a support or resistance it is going to be very hard for price to make any sort of solid moves.
The Engulfing Bar was a commanding one. As you can see from the 4 hour chart below; the BEEB was large and what was also very important was that it closed right down towards the low of the bottom of the BEEB. This showed us that the bears were right in control when the BEEB closed.
All of these factors combined show a really high probability trade setup. This is the sort of way you need to think about your trade setups and the way you need to piece your trading together. Rather than just looking for a quick pin bar by itself here or there, you need to build a really compelling story. Always remember; the price action story is KING! Any questions put them in the comments below.
Daily Chart
4 Hour Chart
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