Rocket: a pattern for finding a big player’s trace
There’s money behind every movement of a currency pair in Forex, and there’s big money behind a large movement. Technical analysis provides many methods for identifying a big player’s traces. There even exists the whole area of technical analysis called “VSA” where Volumes and Spreads are studied to understand what market professionals want or plan to do. At the same time, such an important parameter as time shouldn’t be ignored.
A big player’s actions will be rationally aimed at checking if there are strong competitors in the market. Many traders start a new trading day with a ready-made investment idea at hand. Pending orders placed, they only have to find how big they are. To do so, a serious fluctuation is required - a wide ranging bar. If a bar with a big shadow forms after a wide ranging bar, the check is over. A big player may proceed with his/her intentions. Two important things need to be observed here:
- Trading session
- Currency pair
Unsurprisingly, the Australian dollar, the New Zealand dollar and the Japanese yen are most actively traded at the beginning of the Asian session; the euro, the pound and the Swiss franc - at the beginning of the European session, while the loonie and the greenback - at the beginning of the American session. First, the world doesn’t wake up at the same time. Second, important macroeconomic statistics are usually published at the beginning of sessions.
The Rocket pattern may help determine a big player’s preferences and build a trading strategy based on them. The pattern consists of two bars and occurs at the beginning of a Forex trading session:
- a wide ranging bar closed in the direction of the existing trend on the daily chart
- a bar with a long shadow and tight spread.
The Rocket pattern in the USD/JPY’s H1 chart
In the conditions of a clear uptrend in USD/JPY, a trader needs to detect wide-spread bars at the opening. They are used by big players for checking if serious competitors are present. They found them in the first case and they didn’t in the second case. Note that a Rocket formed not only at the beginning of the Asian session, but also at the borderline of the European and American sessions. A pair always contains 2 currencies. There are both those who want to sell the yen in Japan and those who want to buy the USD in the USA.
As there was powerful resistance on March 17, long positions were opened later than usual. The same approach was used:
- a pending order is placed at the level of the second bar, the one with a long shadow;
- a stop order is placed at the minimum of the fluctuation.
As for take profit, I recommend placing it based on where a position is opened: use a 3-1 or 4-1 profit factor at the beginning of a trend and lower it to 2-1 or 3-1 as the trend develops. An important moment: if the target isn’t reached, it’s better to exit “at market”. It means the prevailing trend is likely to reverse in the nearest future.
Strategy based on the Rocket pattern in the USD/JPY’s chart
The same works in the bearish market too. We need to determine both a currency pair and a convenient time period. Once a wide-ranging bar appears on the H1 time frame in the direction of the trend identified on the daily time frame, a trader needs to watch carefully the behaviour of a big player’s competitors.
The Rocket pattern in the AUD/USD’s H1 chart
Strategy based on the Rocket pattern in the AUD/USD’s chart
If wide-ranging bars and bars with long shadows attract so much attention, then their combinations are even more promising. Understanding what they are based on will help a trader improve his/her own strategy.
P.S. Did you like my article? Share it in social networks: it will be the best "thank you" :)
Useful links:
- I recommend trying to trade with a reliable broker here. The system allows you to trade by yourself or copy successful traders from all across the globe.
- Use my promo code BLOG to get a 50% deposit bonus on the LiteFinance platform. Simply enter this code in the appropriate field when funding your trading account.
- Telegram chat for traders: https://t.me/litefinancebrokerchat. We are sharing the signals and trading experience.
- Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders https://t.me/litefinance
Price chart of USDJPY in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance broker. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2014/65/EU.
According to copyright law, this article is considered intellectual property, which includes a prohibition on copying and distributing it without consent.
