We must be able to identify support and resistance levels as that’s where are going to use this strategy.

The two possible scenarios that we will see sometimes happening on charts are as follows.

• By monitoring a support level, maybe hoping to buy on the upward bounce of price on that support level but it does not happen. What we see is a very long bearish candlestick that breaks the support level without any hesitation and closes below it.
• Or, we are monitoring a resistance level and maybe hoping to sell when price hits that level and falls back but that does not happen. What we see is a very long bullish candlestick that breaks the resistance level and closes above it.

The candlestick that causes the breakout is called the momentum candlestick.

Timeframes :  15 minutes, 30 minutes, 1 hour and 4 hour.

Instrument :  Any but prefer majors because of their lower spreads.

Indicators : None

Buy setup and buy trading rules :

• Initiate a buy order at market price as soon as we see a very bullish and long candlestick that closes above the resistance level.
• Place stop loss at 2-5 pips below the low of that momentum candlestick.
• Take profit should be set at 3 times what you risked.

See chart below for a buy setup example :

Sell setup and sell trading rules :

• Initiate a sell order at market price as soon as we see a very bearish and long candlestick that closes below the support level.
•  Place stop loss at 2-5 pips above the high of that momentum candlestick.
• Take profit should be set at 3 times what you risked.

See chart below for a sell setup example :

Pros :

• Spotting this kind of setup is easy.
• No indicators are needed.

Cons :

• As the momentum candlestick is a very long candlestick, stop loss distance are going to be huge. Thus use position sizing to reduce your risk.
• Sometimes after a momentum candlestick breakout, price will not continue in that in the same manner as the momentum candlestick, it may go up and down, or sideways for a while before it continues again in the direction of the momentum candlestick.