Which zones qualify
A small base of quiet candles followed by a violent departure. The departure has to be genuinely sharp — if price wandered away, both sides were balanced and there is nothing there. Marking every consolidation on the chart produces a screen full of boxes and no information, so require the sharp move and mark far fewer.
Narrow, or not at all
Draw from the body extreme of the base to the wick extreme, and nothing wider. The width of the zone becomes the width of your stop, so a generously drawn zone is a generously sized loss. The working test: if you cannot place a stop just past your zone and still risk your normal percentage at a sensible position size, the zone is drawn wrong.
First touch, with the trend
Take the first return to an untouched zone that points the same way as the higher timeframe. Each subsequent touch has fewer of the original orders left in it, and by the third the zone is more likely to break than to hold. Counter-trend zones can work and they are a different, harder trade — leave them until the with-trend version is consistently profitable.
Entry and stop
Either a limit order at the near edge of the zone, or a rejection candle inside it. The limit gets the better price and takes every zone that fails; the confirmation gives up some pips and skips several of those. Both are defensible; pick one and record which, so the journal can eventually tell you which one suits you. The stop goes just beyond the far edge of the zone, because price through the whole zone means the orders that made it are gone.
Target, and when the zone is spent
Target the next opposing zone or the recent structure high. If price closes through your zone rather than wicking into it, the idea is finished — and the flipped zone becomes a level on the other side, which is often the next trade rather than a reason to re-enter the last one.
In short
| Qualifies | Quiet base, then a sharp departure |
|---|---|
| Width | Body extreme to wick extreme, no wider |
| Best trade | First touch, with the higher timeframe |
| Stop | Just beyond the far edge |
| Spent when | Price closes through it |
Common questions
Limit order or wait for a candle?
Both work and they fail differently. Record which one you used in the journal for thirty trades and let your own numbers decide rather than an argument on the internet.
How far back can a zone be?
Older zones are weaker in practice, because the market that made them has moved on. A zone from the current week on your timeframe is worth more than one from three months ago.
What if two zones overlap?
Treat the combined area as one zone and put the stop beyond the whole of it. Two overlapping zones is one area of interest, not two trades.
Trading forex and CFDs on margin carries a high level of risk. Most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade.