Part 28 Technical Analysis – Trade With The Big Players

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Technical Analysis Strategy – Four Candle Hammer Strategy

Technical Analysis Strategy – Four Candle Hammer Strategy

In this article, we’re going to teach you one of our favorite technical analysis strategy. The four candle hammer strategy is a pullback strategy that has been long used by hedge fund managers and professional traders.

Our team at Trading Strategy Guides has decided to bring to light one of the best secrets kept by hedge fund managers that they don’t want you to know.

We used this technical analysis strategy for more than 20 years, and we still find it producing the same kind of performance in today’s market. Technical analysis trading is useful for any type of market from stock trading, Forex trading and, even cryptocurrency trading.

The four candle hammer strategy works both intraday for day traders and for swing traders who tend to hold positions for a more extended period of time. We recommend using the hammer strategy on the daily time frame because it yields bigger profits.

The four candle hammer strategy can be used to take both long and short positions.

This guide will include every step that you need to follow so you have a better understanding on how hedge fund managers trade the market. But first let’s define what is technical analysis, and what it’s not.

Once you understand what is technical analysis, you’ll gain a much better understanding of how to read a chart price. Also, read the weekly trading strategy that will keep you sane.

What is Technical Analysis?

In trading, technical analysis is a method used to forecast the direction of the market price or the strength of the trend by analyzing the past market price. Technical analysis trading focuses on the charts and other technical indicators to forecast the market

The three fundamental principles behind technical analysis basics are as follows:

  • Market price action discounts everything. So, wherever the market is trading now that’s the fair market price. All the hopes, fears and market expectations they’re all factored into the price.
  • Markets move in trends. The markets take a while to get to wherever they are going to go.
  • The third assumption is that history tends to repeat itself so price levels that were vital in the past can often be important in the future.

A technical analysis strategy is not a magic method that’s going to predict every swing in the market. A typical misconception traders have is that technical analysis trading is the answer to getting rich quick which is apparently not the case.

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The majority of retail traders will look at technical analysis trading and charts.

Now, let’s don’t waste any more time and jump straight into the hammer strategy rules and how to trade pullbacks or retracements in any type of market.

Technical Analysis Trading – Buy Rules

Moving forward, we’re going to outline a step-by-step process so you can learn how to trade pullbacks in any market in a systematic way. We live by these rules on a daily basis, and we’re confident they will help you execute good trades right from the start. Here is another strategy called trading volume in forex.

The basic concept behind the technical analysis strategy is first to spot a strong market trend followed by a pullback in price. The retracement should only last a short period of time.

Once the market retracement pauses, the trend will resume and continue moving in the direction of the dominant trend.

Essentially the four candle hammer strategy is also a trend following strategy.

Note* Remember to pull out a piece of paper and a pen to write down the technical analysis strategy rules. For this article, we’re going to look at the buy side.

Step #1: The market needs to make a 20-day new high

The first step is to identify the market trend. This makes sense since the four candle hammer strategy is a pullback strategy it needs a prior trend.

The first and most important thing are to identify a strong trend that is moving vigorously up. Identifying strong trends can be done through technical indicators. However, our retracement strategy doesn’t use any technical indicators and rely solely on price action.

Price action is the most accurate way to determine trends and hedge fund managers know this best.

The 20-day high rule is an excellent way to identify markets that are having a strong trend and is it’s rather a simple way to spot the trend.

Note* We’ll demonstrate this trading method on a recent trade so you can see how the pullback strategy works on a life trade.

We can see EUR/USD is in a strong bullish trend, but it’s not overextended but still trading sharply in one direction.

Now, this brings us to the second rule.

Step #2: Identify a 4 day pullback that goes against the prevailing trend.

As a general rule, the second part is to spot a pullback that moves against the prevailing trend. This step is quite important because the pullback will create our entry opportunity before the market starts resuming the prevailing trend.

The four candle hammer strategy will relay again on the price to identify the retracement. Technical analysis trading can be done even without indicators. However, the retracement still needs to satisfy some trading conditions.

Namely, we want to see 4 consecutive days retracement in a row after the 20-day high was put in place.

The next step will also outline our pullback buying strategy.

Step #3: The 5 th day closing price needs to be above the 4 th day closing price

It’s our job to identify when the short-term retracement will end and jump on the wagon before the dominant trend resumes and leaves us in the dust.

On the 5 th day, we’re looking for the market to put an end to the retracement. The upside momentum should pick up on the 5 th day.

The stronger the momentum at this stage, the better.

Note* It’s sufficient for the 5 th day closing price to be above the 4 th day CLOSING price. Please note that we didn’t say the 4 th day HIGHEST price. The rule is that the higher the 5 th day closing price is, the better.

This is a crucial day because it’s the day prior to our possible entry point.

The next part of the four candle hammer strategy is detecting the right spot were to enter the market.

Step #4: Buy at the close of the 5 th day of the pullback

Our retracement strategy is offering us a good entry point that is close to the end of the pullback. This is also the point where the market will begin resuming the primary trend.

In this regard, we buy at the close of the 5 th day of the pullback. Or you can say that we buy at the opening of the 6 th day.

Our entry strategy will help you maximize your profit potential and minimize your risk level.

The next important thing we need to establish for our pullback strategy is where to place our protective stop loss.

Step #5: Place protective Stop Loss 10 pips below the 5 th day low

Usually, the lowest risk trades happen when the retracement of a strong trends end. This is the reason why we’re able to use such a tight stop loss.

Place your protective stop loss 10 pips below the 5 th day low. We’ve added a buffer of 10 pips to protect ourselves in case of any false breakouts.

Note* Remember to always use SL because not using stop loss is the number 1 reason why traders take significant losses.

Last but not least, we also need to define the technical analysis trading methods and techniques for four our take profit level which brings us to the last step of our technical analysis tutorial.

Step #6: Take Profit equals 3 times the distance between your entry price and your stop loss price

The best way to establish your profit targets is to multiply the distance between your entry price and your stop loss price by 3. In other words, we want our profit target to be 3 times greater than our stop loss giving us a positive risk to reward ratio of 1:3.

Note** the above was an example of a BUY trade using technical analysis trading. Use the same rules for a SELL trade – but in reverse. In the figure below, you can see an actual SELL trade example.

Conclusion – Technical Analysis Trading

Many hedge fund managers believe that technical analysis trading has a role and a place in every investor’s toolkit. One of the biggest mistake retail traders make is not looking at the big picture trend, and the four candle hammer strategy capitalizes on this market pitfalls. You can also trade with the breakout triangle strategy.

If you correctly follow this technical analysis strategy guide, then you should have a better understanding of how the market moves and how the smart money operates in the market.

Thank you for reading! Be sure to read more about candlestick trading in the Best Candlestick Strategy Guide.

Please leave a comment below if you have any questions about what is technical analysis!

Also, please give this strategy a 5 star if you enjoyed it!

(22 votes, average: 4.36 out of 5)

Please Share this Trading Strategy Below and keep it for your own personal use! Thanks Traders!

Technical analysis of trading with gold

Hello! I am glad to see you on website where I share with you some simple and interesting strategies based on 1-2 indicators. As I have emphasized before, there is no universal tactic for any currency pair. Each indicator works specially on separate timeframe and works best only on a certain currency pair. In my articles I share with you proven tools that may not bring in the “Golden mountain”, but will help not to lose the Deposit. The risk of trading on these tactics is minimum

Strategy for trading with gold in Forex

Before I paid attention to only the major currency pairs. Today you will meet a slightly different tactic – strategy of gold trading in Forex, which is based on the high volatility of the metals market. In other words, we catch a strong trend and enter the market.

The advantage of the strategy is that there is no need to be at the computer. Arrange the order as described below and periodically check the position.

Trading conditions:

  • Currency pair – XAU/USD;
  • timeframe – 24 hours;
  • trading terminal – Metatrader 4.

It is noteworthy that the strategy for gold trading in Forex does not require any indicators.

Conditions for opening a position: at 00.00 ЕЕТ, put 2 pending orders, after the closing of daily candle, of the following types:

  • Buy Stop on maximum level of the closed daily candle “+” 100 points;
  • Sell Stop at the minimum level closed daily candles “-” 100 points.

If the value of the candle High-Low less than 1000 items – do not enter the market. If triggered during the day one order, the second must not be removed. After 24 hours, remove the pending orders that did not work.

Do not forget to insure the item: stop loss is set at the level of the opposite order, but not more than 1800 points:

  • fold-over Buy Stop – set a stop loss on the Sell Stop level (“minimum” – 100 points);
  • for turn-down Sell Stop – set stop-loss to the level of the Buy Stop (maximum – 100 points).

Exiting the market to achieve revenue of 250 points (at this level, move the stop loss to breakeven). In the case where income is already partially guaranteed. If you’re lucky, you’ll be able to put the squeeze position to the end, closing it in 23.30-00.00 (Eastern European time.

In conclusion, some recommendations:

  • if by the end of the day (22-23.00) the price is approaching one of the pending orders, I recommend to delete it before it will work, because for the remaining 1-2 hours there will not be adequate profits;
  • the volatility of gold during the day is around 1500 points. Therefore, if you notice that the profit already made 1000 points, close the position, as trend reversal is probable;
  • stop losses will be triggered rarely, but the loss should not be afraid, because one profitable trade will cover several loss-making.

Strategy for trading gold on Forex is quite conservative, but can serve as a basic for those who are trading in multiple assets.

Forex Trading Strategies — Beware The Big Banks

February 6, 2020 by VP

Any Forex trading strategies you find out there are useless unless you know who controls price, and how they do it. Actually, it’s a must-know if you’re going to have any chance of winning. We should get started.

If you’d rather watch the video, you may do so here:

So Picture This

You’re a professional fighter. You have a fight scheduled with a much larger man who knocks people out cold, and does it often. What do you do?

Hint: You’re not Mike Tyson

1) Study how he fights, what his tendencies are, and what makes him react the way he does?

2) Don’t do any of that, waltz right into the ring on fight day, and hope for the best.

If you value your life, even a little, you’re obviously going to do whatever you can to not only figure out how to defend yourself, but how you can exploit his weaknesses and maybe, just maybe, come out the winner.

Not doing anything is obviously a terrible strategy. Nobody in their right mind would go that route.

Yet everyone wants to know all these little Forex tips and Forex trading strategies — these quick little cutesie-poo things they can do do make a profit, yet they have no idea who they’re battling, and have even less of an idea what that enemy does.

Because of this, they can learn every Forex trading strategy in the book, and it won’t matter. It’s all a gigantic waste of time.

But good news! This “enemy” I’m talking about can help you win big — over and over again. But you’ll need to read this blog entry to understand how.

And I prove my case at the end.

One Of The Best Forex Trading Strategies There Is

In the Forex market, do you know who ultimately makes price go up and down on a day-to-day basis? It’s not us. This isn’t stock trading.

It’s not central governments either. They’re involved in much longer-term dealings, not so much the day-to-day stuff.

Forex is a 4-5 trillion dollar a day market. It would take entities with extraordinary trading capital to move such a market every day like that.

Those entities exist. They are our “enemy”. I refer to them as the “Big Banks”.

Yep, they’re one of them!

I try not to include boring, useless info in my blog posts, I almost obsess over this one detail. This is No Nonsense Forex after all. I want every line to have tremendous value to you as a Forex trader.

But for the sake of qualifying what I’m saying, these next three lines are important.

Forex is dominated by something called the Interbank Market, where banks of all sizes amongst each other. The largest banks control over 50% of this Interbank Market.

From what I remember, and sites like Investopedia reinforce this, those banks are….

JP Morgan Chase

and maybe now a Chinese bank or two.

But that part isn’t important to you. What absolutely is, is how they manipulate price.

And yes, they do manipulate price, over and over and over. Forex is a rigged game.

But that’s the beauty of it! If you know how it’s rigged, you can profit tremendously. If you don’t, you’re always going be on the side that’s getting screwed.

You’re not beating him.

You Must Understand How This Works. (It’s kinda cool, actually)

I’m going to reference the “Big Banks” (and I’m going to stop putting it in quotes now) over and over in my blog posts and on my YouTube channel, because they are that important. Listen up.

I’m going to over-simplify this process a lot here, but it really doesn’t need to be any more complicated than this….

If you are a trader for these banks, your job is to do two things:

1)) Take money out of the spot Forex pool (where our money is)

2) Redistribute that money back into the market, so you can make the price of a currency go up or down

Now the real shit begins.

Whose money do they take? Some home traders do make lots of money in spot Forex trading, so how does this whole thing go about?

Read this carefully.

Traders for the Big Banks get a chance to see something most of us cannot — where the money is sitting.

Let’s take the Euro for example. They know if most of the money is currently long or short the Euro. They also know where most of the pending orders are sitting — long or short.

Let’s say most of the money and pending orders are certainly net long. Now they have a choice to make.

  1. Take the price of the Euro long for a good long while, and reward everyone who went long with a nice profit. (Big Banks lose)
  2. Take the price of the Euro immediately short, forcing most of those long traders to exit out at a loss. (Big Banks win)
  3. Take the price of the Euro long, just enough to trip those long orders, THEN take the Euro short. (Big Banks win even more)

I’ll spoil the surprise, it’s mostly options 2 and 3.

It is sometimes option 1, and that’s the sneakiest move of them all. I’ll explain towards the end.

But they get to use options 2 and 3 over and over again, every trading day of the year, because spot Forex traders don’t learn from their mistakes. How nice it must be! The gift that just keeps on giving.

A wry smile should have come across your face at this point, because you may be slowly starting to understand one gigantic thing here:

We can REALLY use this to our advantage. The payoff is towards the end, but keep reading. You must know why they lose first. It’s crucial to everything you’ll ever see from me in the future.

Why the Big Banks Get You Every Time

As I’ve said before, what you eliminate is often more important that what you do instead. Nowhere is this more true than it is here.

Let’s ask ourselves this: Why is most of the money long or short for a given currency pair?

Most Forex traders use primarily technical analysis to trade, which is good, they should be. Technical Analysis in Forex is key to beating this game.

The problem is, they do it all wrong.

I reference a very popular set of Forex technical analysis tools called the Dirty Dozen. You are probably using some combination of them right now. If you’re looking for Forex trading strategies somewhere else, they will probably include one of these losers. They are….

Support and Resistance lines

Moving Average Crossovers

Rarely is there a Forex trading strategy that does NOT use one of these 12 concepts.

Here’s the rub: When the vast majority of traders are using the same tools, they all tend to go long and short in the same places. This tells the traders for the Big Banks what to do!!

Spot Forex traders give the Big Banks a freaking road map to where to go take their money.

Why are you still one of these people?

Forex Brokers Know This Too

Many Forex brokers are “Dealing Desk” brokers, meaning they make their money simply by automatically taking the other side as you do. To me, this is a great model since most traders lose their ass, and you now get to actually BE the casino.

This also protects them against financial disasters like when the EUR/CHF crashed. Right before it happened, 70 traders were net long for every one trader who was net short. Read that last sentence again. 70 to 1!!

Knowing what you know now, what do you think happened? Care to guess?

Dealing Desk brokers made out like bandits. Brokers who weren’t, like my beloved FXCM, took it on the chin so hard, they had to get bailed out, or risk completely going under.

And Oh, By the Way….

Do you remember how I told you how traders for the Big Banks will sometimes give spot Forex traders a win here and there? It was above where I told you the three things they do. I’m referring to option #1, “Reward everyone who went long, for example, with a nice profit”.

The reason why was always obvious to me. Then again, I’ve lived in Las Vegas for the past 12 years.

Just like casinos, if they don’t give you a win, or even a series of wins here and there, you’re going to give up and stop playing. This is a very bad long-term strategy. But like casinos, Big Banks are rich beyond belief for a reason. They understand this “long game”.

And what does these small “wins” for traders create? People who SWEAR by Support and Resistance lines, people who SWEAR by Fibonacci trading, and people who will actually come to the defense of something as terrible as the RSI indicator.

Is it because they’ve achieved their wildest dreams in FX trading using these tools? LOL, no.

It’s because humans are emotional, and they remember the times they won because of how great and intelligent it made them feel, and they wrote off the losses.

Because this is just what we do. We’re all guilty of it.

The Big Banks understand this balance between keeping Forex traders in the game, and extracting every dollar they can from them at the same time.

They could care less that there are some of us who consistently win, because over the long haul, they still win big in the overall game.

And unlike casinos, if you are a consistent winner, they can’t kick you out!

So This Is How We Win

We don’t try to “beat” the Big Banks.

We take our cut of the money sitting there in the spot Forex pool, and the Big Banks never even see us do it!

1) Using really great Forex technical analysis, because by having it, you can still predict very accurately where price is going

….but especially by

2) Making sure we avoid the tools that make us part of the popular crowd.

Just like life, once high school is over, the popular kids typically fall apart, and the nerds take over. In FX trading, the last thing you want to be is popular. It puts you on the Big Banks radar, and that’s the last place you want to be.

Do not misunderstand this. The Big banks cannot see YOUR order personally, but they can see which position is the most popular.

And I’ll repeat: You do NOT want to be popular in the world of Forex trading.

Be hidden from the banks. Like ninja!

If there’s a “major price level” at 1.4500 on the GBP/USD for example, don’t you think the Banks know that? Don’t you think they know there are going to be tons of orders there?

If the RSI indicator, the Stochastic Oscillator and Bollinger bands are all telling you the EUR/USD is “overbought” on the 15 minute chart, you don’t think the Banks know that too?

They don’t even need to have these tools themselves. They’ll know right when they see a bunch of short orders popping up all at one time.

Avoid being popular. Avoid using the tools that make you popular.

There are thousands of technical indicators out there, did you know that? And many of them were actually created this century, and specifically designed for Forex trading!

But almost nobody uses them. Some may have tried, but they weren’t good traders to begin with, or they gave up too soon, or they used it on the wrong time frames and not in conjunction with other tools they should have been using.

And the great eliminator, many of these people who were onto the right tools screwed it all up anyway with terrible money management.

No Nonsense Forex is dedicated to not only getting you away from these tools, but putting you with the right ones, and making sure bad money management never comes into play either.

Still Don’t Believe Me?

So you still think this isn’t what really goes on? You think I’m talking some crazy conspiracy over here?

There’s a tool that proves I’m right. Watch this.

The IG Client Sentiment Indicator (Formerly the SSI Indicator at FXCM) is a series of charts that show where their traders’ money (the dumb money) goes, long or short — and then above that shows where price ended up going.

I encourage you to go look at it, it’s pretty fascinating. I’ll spoil it for you though — it’s inversely correlated.

Meaning, if traders started moving net short for example, surprise surprise, guess where the price went? Net long.

If they continued getting shorter because of this, thinking the pair was “overbought”, where do you think price went? Looooonnnnngerrrr.

And price only reverses course and starts going short as soon as dumb money traders gave up and start going net long!! Too funny.

Over and over again. With a few exceptions of course. The Banks gotta let them hit blackjack every once in awhile. Can’t scare them off completely. Then there would be no dumb money for the taking.

You will see this phenomenon happen less on pairs that have less liquidity to them. This is generally a good thing for us, because there is less manipulation going on there, and we can let our charts do all the work.

It’s why I love cross-pairs. This is why I made an entire blog post and video on whey you should usually avoid trading the EUR/USD. Blasphemy, right? Nope, very smart actually.

If you don’t want to be popular, why would you purposely go where all the popular kids hang out?


My conclusion is simple — stay with this site. It’s the only Forex trading blog out there that’s designed to keep you away from tools that end up making you lose, and getting you to a point where you can finally succeed at this.

I add new material every week. Each blog is crafted to make you a much better and more educated Forex trader than you were before you read it.

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