NETLESS TEENY DAYS
Some days the market makes large moves (i.e. well over 100 pips, often
hundreds of pips), but there are also days when the amplitude of the candle is
relatively small. Generally a day that has moved much less than 100 pips (on
EUR/USD, different for other pairs), for example an 80 pip, or even nicer, a
60 pip tall day candle is what I would consider a small “Teeny Day”. If you
find a 50 pip or smaller day (on EUR/USD; may be different for different
pairs) then certainly go for it. (FYI, in my mind I’ve been calling it a “Doji
Day”, but since this is an inaccurate description that might lead you to
confusion I’ve simply renamed it to “Teeny”).
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Simply call up your daily charts of whatever currency pairs you like. Looking
at the candles you’ll see that some are rather large, bigger than average
(usually part of a shooting trend), and there are some candles that are rather
small, smaller than average. Pick out a few of the smaller ones to measure
their height so you can get a sense for how small a candle needs to be for that
currency pair for it to be considered a “Teeny Day”. Another way to see what
are some of the small days is to look up the 1 period daily ATR (explained
earlier in this eBook) and look along the bottom of the ATR chart to see
roughly what the average small day is.
Often you’ll see a “Teeny Day” at or near the apex of a peak/valley before the
market reverses (hence why I’ve called them “Doji Days” in the past), but
they often occur in the middle of a trend (a stagnant day or series of
days). When you get a tight consolidation you’ll see a bunch of “Teeny”
candles there, but it is best to avoid trading in those situations.
Ok, so what do you do with “Teeny Days”? You simply straddle the candle
and hope for the best! Because the stop requirement is so small (since the
candle is small) you stand a much better chance at having a great risk-toreward
ration, as (hopefully) you’ll have a larger day(s) following your
entry. Once you’ve gotten in on a Teeny candle then simply continue the
trade as described above for Netless Candles.
There is a greater chance with smaller candles that both directions could get
breached, however I am quite surprised how infrequently that actually
occurs. Teeny candles, when they occur are excellent opportunities to trade.
Here is a “big tip” for this technique: Look for times when the market has
made a wave to roughly a key Fibonacci level, most notably the 62%
level. Often you’ll see a teeny day candle around that point where the market
reverses (often a morning/evening star doji). These are good places to attempt
this technique because if it works you can ride the profits (trailing with a stop
to lock in profits of course) for potentially hundreds of pips. Conversely,
when you project the Fibonacci extension sometimes you’ll see a similar setup
at the peak of the extension, though I would use these far less often (but if you
see a teeny candle there then why not try it). Here is a chart shot showing
what I mean. I’ve indicated where some opportunities were, but there were
more opportunities than shown. (For a clearer view go to your EUR/USD daily charts)
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a very nice run (of hundreds of pips) but I didn’t point them out.
Teeny candles offer excellent risk-to-reward ratios. If doing this you don’t
want to do a “Roulette” trade as you have high potential for significantly
better returns. At the very least, if I wanted to restrict myself to a “Roulette”
type of trade then I’d at least use the “Average Daily Movement” (learned in
the section on ATR) as the limit (say 112 pips). Better yet, I’d use such a
modified “Roulette” trade in conjunction with a Split Exit (explained later in
the eBook).
Look for these “Teeny Candles” and when the occasionally occur on your
Daily charts (and the rare times a suitable one happens on Weekly charts) then
try to catch a fun and profitable ride on them.
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