Day Trading Reference Guide

What it measures: The average closing price over N bars. SMA weights all bars equally; EMA weights recent bars more, so it turns faster. Both smooth noise so you can see direction and use the line itself as dynamic support/resistance.

Day-trading settings: 9 EMA (fast trigger), 20 EMA (pullback line), 50 EMA (intraday trend), 200 EMA (the "big picture" line even on 5m). A common stack: 9/20/50 EMA on the 5m, 20/50 on the 15m.

How to read it:

• Slope + side: price above a rising 20 EMA = uptrend bias. Flat, braided EMAs = chop, stand aside.
• Pullback touch: in a trend, the first and second touches of the 20 EMA are the highest-quality entries.
• Crossovers: 9 crossing 20 is a momentum-shift alert, not an entry by itself.

What it measures: The distance between a fast and slow EMA (momentum), plus a signal line and histogram showing whether that momentum is expanding or fading.

Day-trading settings: Standard 12/26/9 works on 5m and 15m. Some scalpers use 3/10/16 (a faster variant) on 5m — more signals, more noise. Start with standard.

How to read it:

• Signal cross: MACD crossing above signal = bullish momentum shift (strongest when it happens below zero and the higher timeframe trend is up).
• Zero line: MACD above zero = bull regime, below = bear regime. Crosses of zero confirm regime change, late but reliable.
• Histogram divergence: price makes a new high, histogram peak is lower = momentum fading, tighten stops.

What it measures: The ratio of average up-closes to average down-closes over N bars, scaled 0–100. High = buyers dominating recently; low = sellers dominating.

Day-trading settings: RSI(14) on 5m/15m is standard. RSI(7) or RSI(9) for scalping — faster but noisier. Levels: 70/30 classic; in trends use 60/40 as the working range.

How to read it:

• Regime read: in an uptrend RSI oscillates roughly 40–80 and 40–50 acts as support. In a downtrend it runs 20–60. Where RSI "lives" tells you the regime.
• Divergence: price makes a lower low but RSI makes a higher low at a support level = bullish divergence, the highest-value RSI signal for reversal trades.
• Extreme + level: RSI below 30 at a mapped support is meaningful. RSI below 30 in free-fall mid-air is not.

What it measures: Where the current close sits inside the high–low range of the last N bars. Close near the top of the range = 100, near the bottom = 0. It answers: "are we closing strong or weak relative to recent range?"

Day-trading settings: 14,3,3 (slow stochastic) on 5m/15m. 5,3,3 for aggressive scalp timing. Zones: below 20 = oversold, above 80 = overbought.

How to read it:

• Cross out of a zone: %K crossing above %D while both are under 20 = mean-reversion buy trigger (best at a range edge or support).
• In trends: use only signals in the trend direction — in an uptrend, oversold crosses are entries; overbought means nothing.
• Divergence: works like RSI divergence but fires earlier (and fails more often).

What it measures: A 20-period SMA with bands ±2 standard deviations of price. Band width = current volatility; band position = how statistically stretched price is.

Day-trading settings: 20, 2.0 standard. Scalpers sometimes run 20, 1.5 for earlier touches — more signals, more failures. Keep 20/2 and change your rules, not the bands.

How to read it:

• The squeeze: bands pinch to their narrowest in ~100 bars = volatility coiling; a decisive close outside the bands often starts a directional move.
• Band tags in ranges: with flat middle band, a tag of the outer band is a fade candidate back to the middle.
• Walking the band: consecutive closes hugging the upper band = strong trend. That is a continuation pattern, not overbought.

What it measures: The average size of a bar including gaps — how far this market actually moves per bar right now. It says nothing about direction; it defines the "unit of movement" for everything else.

Day-trading settings: ATR(14) on your execution timeframe (5m) plus a glance at the daily ATR to know what a "full day" of movement is.

How to read it:

• Stop sizing: stop = beyond structure by ~1× the 5m ATR, so normal noise can't tag you. If the structure stop is tighter than 1 ATR, it's probably too tight.
• Target realism: if the index has already moved 90% of its daily ATR, continuation targets are low-probability — favour reversion setups.
• Regime filter: ATR ramping up = breakout/trend conditions. ATR bleeding down all morning = range conditions.

What it measures: Trend strength regardless of direction, 0–100, derived from how consistently price pushes new highs vs new lows (+DI and −DI measure the direction).

Day-trading settings: ADX(14) on 5m and 15m. Thresholds: below 20 = no trend; 20–25 = developing; above 25 and rising = tradeable trend; above 40 = strong, possibly late.

How to read it:

• Strategy selector: its main job. ADX < 20 → run range/mean-reversion playbook. ADX > 25 rising → run trend/pullback playbook. This one filter removes most whipsaw losses.
• DI cross: +DI crossing above −DI with ADX rising = fresh uptrend impulse.
• ADX rolling over from 40+: trend maturing — take profits faster, stop adding.

What it measures: Ratio-based levels of the last impulse leg — 23.6%, 38.2%, 50%, 61.8%, 78.6% — used to anticipate where a pullback finds buyers/sellers. Extensions (127.2%, 161.8%) project targets beyond the leg.

Day-trading settings: anchor on obvious 5m/15m swings — the leg a non-trader could see. Shallow pullback (38.2%) = strong trend; 50–61.8% = standard; 78.6% = mostly relevant as a harmonic (Bat) entry zone, otherwise the trend is in question.

How to read it:

• Zone, not line: treat 50–61.8% as a band. Look for reaction there: rejection wicks, slowing momentum, a reversal candle.
• Confluence is the point: a 61.8% that lands on VWAP, a pivot, or an old high is worth triple a naked fib.
• Extensions for exits: after entry, 127.2%/161.8% of the retraced move give structure-free profit targets.

What it measures: The session's average traded price weighted by volume — the day's institutional "fair value" benchmark. Funds are judged against it, so real order flow reacts to it.

Day-trading settings: session-anchored VWAP with ±1σ/±2σ bands on 1m–5m. On CFDs, your feed's volume is broker ticks, not exchange volume — VWAP is still usable on index CFDs because tick and real volume correlate well, but treat bands as approximate.

How to read it:

• Bias line: price holding above VWAP = buyers in control today; below = sellers. Chopping across it = balanced day, fade the extremes.
• Pullback magnet: in a trend day, the first pullback to VWAP is one of the best entries in intraday trading.
• ±2σ stretch: price at the 2σ band without trend backing tends to revert toward VWAP.

What it measures: A complete trend system in one overlay: equilibrium lines (Tenkan, Kijun), a forward-projected support/resistance zone (the cloud/Kumo), and a lagging confirmation line (Chikou).

Day-trading settings: classic 9/26/52 works on 15m. Some intraday traders use doubled 18/52/104 on 5m to reduce noise; start classic on 15m and use 5m only for entries.

How to read it:

• Cloud filter (the 90% use case): price above cloud = longs only; below = shorts only; inside = no trend trades. Thick cloud = strong S/R; thin cloud = easily pierced.
• TK cross: Tenkan crossing Kijun on the trend side of the cloud = entry-grade momentum signal.
• Kijun pullback: in a trend, pullbacks to the Kijun behave like a strong 20 EMA touch.

What it measures: A running total of volume signed by close direction — up-close adds the bar's volume, down-close subtracts it. The line's shape shows whether volume is backing the move.

Day-trading settings: no parameters. Run it on 5m; optionally overlay a 20 SMA of OBV to read its trend at a glance. On CFDs it uses tick volume — acceptable on major indices.

How to read it:

• Confirmation: price breaks a high and OBV breaks its own corresponding high = volume agrees, breakout credible.
• Divergence: price new high, OBV lower high = the push is thin — breakout suspect, reversal risk.
• OBV leading: OBV breaking out while price still sits under resistance = accumulation; watch for the price break.

What it measures: "Stop and Reverse" — a trailing dot that accelerates toward price as a trend extends. Dots below price = uptrend; dots above = downtrend; price touching the dot flips the state.

Day-trading settings: default 0.02/0.20 on 5m. If it flips too often, 0.01/0.10 slows it down. Its honest job intraday: trailing-stop management, not signal generation.

How to read it:

• Trail: once in a winning trend trade, the dot gives a mechanical trailing stop that tightens as the move accelerates.
• Flip = alert: a flip means the trend leg is over by this metric — take profit or reassess; don't auto-reverse.
• Dot distance: dots far from price = early trend, room to run; dots hugging price = mature move.

What it measures: Pre-computed support/resistance levels from yesterday's high, low, and close. Because thousands of traders load the same formula, the levels become self-fulfilling reaction zones.

Day-trading settings: Classic daily pivots on 5m/15m. Camarilla (tighter levels, good for range days) is a popular alternative for index CFDs. Mark P, R1/S1, R2/S2 before the open — that's the map for the day.

How to read it:

• Open location: open above P = mild bullish bias, below = bearish. Trading between P and R1 all morning = normal rotation.
• Fade at extremes: first touch of R1/S1 on a non-trending day usually gets a reaction — pair with a rejection candle to fade.
• Break-and-retest: a close beyond R1 that then holds R1 from above = continuation entry toward R2.

What it measures: A three-point channel: from pivot A, a median line is drawn through the midpoint of swing B–C, with parallel upper/lower forks. Theory: price gravitates to the median line (~80% of the time it returns to it) and reacts at the forks.

Day-trading settings: draw on 15m using the three most recent obvious pivots after a trend change; refresh when a new major pivot forms. Add the "Schiff" variant when the standard fork is too steep to be touched.

How to read it:

• Median line = magnet: price away from the median tends back toward it; trades toward the median have the odds.
• Lower fork in an uptrend: a pullback that holds the lower fork with a reversal candle = trend entry, stop below the fork.
• Failure to reach the median: if a bounce can't get back to the median line, the trend is weakening — expect the lower fork to break.

What it measures: Volume traded at each price (horizontal histogram) rather than per bar. Reveals where the market did business: high-volume nodes (HVN) = acceptance/S&R, low-volume nodes (LVN) = rejection zones price crosses fast.

Day-trading settings: two profiles: yesterday's session profile (for today's map: prior POC/VAH/VAL) and a developing profile for today. On CFDs this is tick-volume-based — fine for indices, directionally reliable.

How to read it:

• Open vs value: open inside yesterday's value area = rotation likely (fade VAH/VAL); open outside value = imbalance, possible trend day.
• HVN = brakes, LVN = air: expect stalls/reactions at HVNs; expect fast traversal through LVNs — set targets on the far side of an LVN.
• Naked POC: a prior-day POC never revisited acts as a magnet on later sessions.

What it measures: An ATR-based trailing line plotted above or below price. Below price (green) = uptrend state; above price (red) = downtrend state. Essentially a volatility-adjusted, self-flipping stop line.

Day-trading settings: 10/3 on 5m is standard; 10/2 gives earlier flips for scalping (with more whipsaw). A robust intraday pattern: Supertrend 10/3 on 15m for bias, execute on 5m.

How to read it:

• State filter: only long while the line is below price, only short while above. That single rule keeps you off the wrong side of trend days.
• Line = trailing stop: the line itself is a ready-made stop that widens in volatility and ratchets with the trend.
• Flip: exit signal for the old position; treat as an entry only with separate confirmation (level, volume, HTF trend).

What it measures: How far price has deviated from its statistical average, scaled so ~75% of readings fall between −100 and +100. Beyond ±100 = an unusually strong move — which can mean either exhaustion or the start of an impulse.

Day-trading settings: CCI(20) standard on 5m/15m; CCI(14) faster. Two distinct playbooks — pick one per session: reversion (fade ±100 exits in ranges) or breakout (trade ±100 crosses with the trend).

How to read it:

• Reversion read: CCI pokes above +100 then crosses back below it at a resistance level = short trigger back to the mean.
• Impulse read (Zero-line/100 breakout): in a confirmed trend, CCI thrusting up through +100 marks momentum ignition — continuation, not exhaustion.
• Divergence: like RSI but earlier/noisier; best at mapped levels only.

What it measures: Where the close sits relative to the highest high of the last N bars, on a 0 to −100 scale. It's the stochastic %K inverted — same information, faster feel, no smoothing line by default.

Day-trading settings: %R(14) on 5m; %R(10) for scalp timing. Because it's jumpy, it's a timing tool layered on a setup you already like — not a setup-finder.

How to read it:

• Zone exit: %R dropping below −20 after being overbought (or rising above −80 after oversold) = the momentum turn has started.
• Trend use: in an uptrend, dips below −80 that snap back above it within a few bars = pullback finished, high-quality timing.
• Failure swing: %R can't reach −20 on a bounce = weak buyers; the next leg down is favoured.

What it measures: An EMA with bands offset by a multiple of ATR — a volatility envelope like Bollinger, but based on average range rather than standard deviation, so it's smoother and less reactive to single spike bars.

Day-trading settings: 20 EMA, 2×ATR(10) standard on 5m/15m. 1.5×ATR gives tighter bands for scalping. Famous pairing: Bollinger inside Keltner = the "TTM squeeze" (see traps below and Combo section).

How to read it:

• Trend pullbacks: in an uptrend, pullbacks to the midline (or lower band in deeper pullbacks) are entry zones — cleaner than Bollinger for this because Keltner doesn't balloon on one big candle.
• Band break = strength: a close outside the Keltner band signals genuine momentum (it takes more to escape an ATR band) — with ADX rising, that's continuation, don't fade it.
• Squeeze context: when Bollinger Bands contract inside the Keltner channel, volatility is coiled; the BB re-expansion outside Keltner marks the release.

What it measures: A moving average shifted up and down by a fixed percentage — the simplest overextension gauge: how far is price from its mean, in plain percent terms.

Day-trading settings: on index 5m charts the right envelope is small — typically 0.2%–0.5% around a 20 EMA. Calibrate: pick the % so that roughly 90–95% of the last two weeks' bars stay inside; touches then mean something.

How to read it:

• Range fades: flat MA + price at an envelope edge = stretched; fade back toward the MA with a rejection candle.
• Trend check: price walking outside the envelope = strong impulse; treat as breakout/trend conditions and stop fading.
• Mean-reversion target: whatever the entry logic, the MA line is the natural target for envelope fades.

Setup conditions

A clear intraday trend on the 15m: higher highs and higher lows (for longs), price above a rising 20 EMA and above VWAP, ADX > 25. Then a pullback of 2–5 candles on the 5m into a value zone — the 20 EMA, VWAP, or the 38.2–61.8% fib of the last impulse leg. Pullback should look corrective: small bodies, declining volume, overlapping candles. Steep, high-volume pullbacks are reversals, not pullbacks.

Entry trigger

A reversal candle in the zone: bullish engulfing, hammer, or a close back above the 9 EMA. Enter on that candle's close or the break of its high. No candle, no trade — a limit order sitting blind at the EMA gets run over on trend failure.

Stop & target

Stop below the pullback swing low, padded by ~1× 5m ATR. Target 1: the prior impulse high (take partial, move stop to entry). Target 2: 127.2–161.8% fib extension of the pullback, or trail behind each new 5m higher low / Supertrend line.

Best / worst conditions

Best: trend days — one-sided opens, price holding one side of VWAP, ADX climbing. First and second pullbacks of a fresh trend are the money trades. Worst: rotational/range days where every "trend" is three candles long, and late-day exhausted trends (fourth+ pullback, daily ATR spent).

Worked example

Walk-through
GER40: 15m shows higher lows all morning, price above VWAP since the open. 5m impulse 18,340 → 18,392, then four small red candles drift to 18,368 — the 50% fib (18,366), the rising 20 EMA (18,367), and VWAP (18,364) all cluster within a few points. Volume dries up on the pullback. A bullish engulfing closes 18,374. Entry 18,375; ATR is 10, swing low 18,363, so stop 18,353 (22 pts). Target 1 = 18,392 (partial, stop to entry); target 2 = 161.8% extension at 18,414. Price makes 18,418 within the hour. Risk 22, banked ~30 average across the position.

Setup conditions

Mark the high and low of the first 15 or 30 minutes of the cash session (pick one and stay consistent). Best when the range is narrow relative to daily ATR (a wide opening range has spent the move) and when there's a catalyst or gap creating directional pressure. Note where the range sits vs. yesterday's value: an open above yesterday's VAH breaking higher is the strongest variant.

Entry trigger

A 5m close beyond the range boundary on expanding volume — not the first tick through it. Aggressive: enter on that close. Conservative (higher win rate): wait for the break-and-retest — price returns to the boundary, holds it, and prints a rejection candle.

Stop & target

Stop: midpoint of the opening range (aggressive) or below the retest low (conservative). Target 1: opening-range height projected from the breakout point. Target 2: yesterday's high/low, or 1× daily ATR from today's open. Trail the rest behind 5m swing points if a trend day develops.

Best / worst conditions

Best: news-driven opens, gap opens that don't fill in the first 15 minutes, narrow overnight ranges — anything with imbalance. Worst: quiet no-catalyst days opening mid-value — those break out, fail, and break out the other way (the dreaded double fake). Fridays and pre-holiday sessions are notorious.

Worked example

Walk-through
US100, 15-minute opening range 18,410–18,442 (32 pts; daily ATR 180 — nicely narrow) after a gap up that held. At 15:52 a 5m candle closes 18,449 on double average volume. Price dips to retest 18,442, prints a hammer at 18,443. Entry 18,448, stop 18,431 (below retest low, ~1 ATR pad), 17 pts risk. Target 1: range height → 18,442 + 32 = 18,474 (partial). Target 2: yesterday's high 18,495. Price tags 18,481 by 17:00; trailed remainder stopped 18,470. The retest entry halved the risk vs. chasing the initial break.

Setup conditions

A balanced, two-sided day: price has crossed VWAP multiple times, ADX < 20, no dominant trend. Price then stretches to the ±2σ VWAP band (or beyond) on a move that's fading — shrinking candle bodies, momentum divergence on RSI, volume tailing off. You are betting the rubber band snaps back to fair value.

Entry trigger

At the 2σ band: a rejection candle (pin bar / engulfing) plus RSI turning back from an extreme. Enter on the candle close. Skip if the stretch was caused by a news headline — that's repricing, not stretching.

Stop & target

Stop beyond the extreme wick plus ~1 ATR — reversion trades need room to breathe, and the thesis is dead if a new extreme prints anyway. Target 1: the 1σ band (partial). Target 2: VWAP itself. Do not hold reversion trades past VWAP hoping for the opposite band — take the base hit.

Best / worst conditions

Best: midday sessions, low-news days, markets opening inside yesterday's value area. Lunchtime index chop is this strategy's home. Worst: trend days — the single most expensive mistake in this playbook is fading the 2σ band on a day that opened out of balance and never looked back. If VWAP is visibly sloping, stand down.

Worked example

Walk-through
US500, 18:30, VWAP flat at 5,236 all afternoon, price crossed it six times. A drift-down move tags the −2σ band at 5,222; the last three candles have progressively smaller bodies and RSI(14) prints 27 with a higher low vs price's lower low. A bullish pin bar closes 5,225. Entry 5,226, stop 5,216 (below wick − ATR 4), 10 pts. Target 1: −1σ at 5,230 (partial, stop to entry). Target 2: VWAP 5,236. Filled both within 40 minutes. Small, repeatable, boring — which is the point.

Setup conditions

A defined horizontal range: at least two clean touches of both boundary zones on the 5m/15m, ADX < 20, flat moving averages braided in the middle. The boundaries should align with something real — pivots, yesterday's high/low, an HVN edge. Know the range height; it must be worth trading (≥ 2× your typical stop).

Entry trigger

At a boundary: a failed poke (price wicks through the level and closes back inside) or a rejection candle, plus stochastic/%R crossing out of its extreme zone. The failed break variant is the strongest — trapped breakout traders fuel the reversion.

Stop & target

Stop beyond the boundary extreme plus ~1 ATR. Target 1: mid-range (take partial — mid-range is where ranges hold you hostage). Target 2: the opposite boundary. Hard rule: if a 5m candle closes decisively outside the range after entry, exit immediately — the range is over.

Best / worst conditions

Best: low-volatility sessions, pre-news coiling (exit before the release), markets rotating inside yesterday's value. Worst: the first two touches after a big directional move (those "ranges" are often flags that break with the trend), and any range still forming — you need the two-touch proof before fading touch three.

Worked example

Walk-through
UK100 5m: 7,932–7,964 range established over two hours (two touches each side), S1 pivot at 7,930 reinforcing the floor. Touch three: price wicks to 7,928 — through the boundary — and closes back at 7,937. Stochastic crosses up from 9. That's a failed break: shorts below 7,932 are trapped. Entry 7,939, stop 7,922 (below the failure wick + ATR), 17 pts. Target 1: mid-range 7,948 (partial). Target 2: 7,960, front-running the upper boundary. Both hit. Two hours later the range finally broke down — after a 5m close below 7,930, which by rule would have exited any open long instantly.

Setup conditions

A compression pattern into a meaningful level: Bollinger squeeze, triangle, or tight flag sitting just under resistance (prior day high, R1, VAH, round number). The longer the compression and the more times the level was tested, the more stops and orders are stacked behind it. Pre-conditions: level must be visible on the 15m, and daily ATR must have room left (< ~70% spent).

Entry trigger

5m close through the level with (a) volume ≥ ~1.5–2× the 20-bar average and (b) OBV breaking its own high with price. Enter the close, or the first micro-pause (1m flag) after it. Volume is non-negotiable here — a breakout candle on average volume is a coin flip.

Stop & target

Stop below the breakout candle's low or back inside the compression (whichever is nearer structure), padded by ATR. Target 1: measured move — the height of the compression projected from the break. Target 2: next HTF level (yesterday's high → next round number / R2). Trail behind 5m swing lows if it turns into a trend leg.

Best / worst conditions

Best: post-consolidation moves aligned with the higher-timeframe trend, breakouts during high-participation hours (US/EU overlap), news-backed breaks. Worst: low-volume hours (breakouts die in thin liquidity), breaks against the 15m trend, and the third+ test of a level that has already faked twice — those become everyone's trap.

Worked example

Walk-through
GER40: 45-minute triangle compressing 18,470–18,486 directly under yesterday's high 18,488. Bollinger bands at their tightest since the open. At 15:40 a 5m candle closes 18,494 on 2.3× average volume; OBV pops to a fresh session high. Entry 18,495, stop 18,479 (inside the triangle), 16 pts. Target 1: triangle height (16) projected → 18,510 (partial). Target 2: R2 at 18,532. Price stalls at 18,528, trail stops out 18,519. The two-condition entry (close through + volume) is what separated this from the two intrabar pokes that failed earlier in the pattern.

Setup conditions

An impulsive move in progress: wide-range candles, price pinned to the upper Keltner/Bollinger band, 9 EMA > 20 EMA with visible separation, on the 1m–5m. You are not predicting anything — you're hitching onto momentum that already exists and exiting before it cools. Requires spread ≤ ~1/5 of your target and full attention; this is the highest-frequency, highest-discipline playbook here.

Entry trigger

The first micro-pause after an impulse: a 1m flag of 2–4 small candles or a touch of the 9 EMA, entering on the break of the pause high. Never chase mid-candle into a vertical move — the pause is the entry; no pause, no trade.

Stop & target

Stop below the micro-flag low — scalp stops are tight by construction (often 0.5× 5m ATR). Target: fixed 1.5–2R or the last impulse's projection, taken in full — scalps are not runners. Time stop: if it hasn't moved your way within ~5 bars, kill it; momentum that pauses too long is finished.

Best / worst conditions

Best: the first 60–90 minutes of the cash open and the 30 minutes after major data — when range-per-minute is highest. Worst: lunch chop and late afternoon drift, where spreads eat the tiny edges, and news moments themselves (spreads blow out on CFDs precisely when the candles look juiciest). Commission/spread load makes this strategy unviable if your win rate slips even slightly — track it separately.

Worked example

Walk-through
US100, 15:35: impulse candle rips 18,300 → 18,326. Three 1m candles flag between 18,318–18,323 (holding above the 1m 9 EMA). Buy stop 18,324 triggers; stop 18,316 below the flag (8 pts). Target 2R fixed = 18,340. Filled 4 minutes later as the next impulse leg runs to 18,344. Flat, done, next setup. Six of these a session at 55–60% win rate is the business model; any single trade means nothing.

Setup conditions

A completed XABCD structure into a Potential Reversal Zone (PRZ). The two workhorses:

• Gartley: B = 61.8% of XA; D completes at 78.6% of XA, with CD typically 127.2–161.8% of BC.
• Bat: B = 38.2–50% of XA; D completes at 88.6% of XA — a deeper, sharper PRZ.

The PRZ is a zone where the XA ratio, the BC extension, and ideally an external level (pivot, prior day high/low, HVN) overlap within a few points. Tighter overlap = better pattern. On indices, draw on 15m; execute on 5m.

Entry trigger

Never the naked limit at D. Wait for price to enter the PRZ and reject it: a 5m reversal candle (engulfing/pin) or an RSI divergence forming as D completes. Enter on the confirmation close. If price slices through the full PRZ on momentum, the pattern is invalid — no trade, and often a continuation signal the other way.

Stop & target

Stop beyond X (structural invalidation) — or for tighter risk, beyond the PRZ's far edge + 1 ATR. Targets are fib retracements of the AD leg: T1 = 38.2% AD (take partial, stop to entry), T2 = 61.8% AD. Runner can aim for C. If T1 is hit and price stalls hard at the 38.2%, that's normal — the partial is what makes the math work.

Best / worst conditions

Best: rotational and mildly trending markets where swings are clean and measurable; PRZs that coincide with session structure (yesterday's low + 88.6% Bat = prime). Worst: strong trend days — harmonics are counter-trend trades at completion, and catching D against a freight train fails no matter how perfect the ratios. Also avoid patterns whose legs span a news release; the geometry is contaminated.

Worked example

Walk-through
US500 15m bullish Bat: X = 5,210 low → A = 5,270 high, XA = 60 pts up. B pulls back to 5,242 (46.7% of XA — valid Bat B). C bounces to 5,258, then the CD leg sells off toward the 88.6% retracement of XA: D = 5,270 − 0.886 × 60 ≈ 5,216.8. PRZ 5,215–5,218 (88.6% XA overlapping the 161.8% BC extension), reinforced by the S1 pivot at 5,216. Price drops into 5,216, prints a 5m hammer, and RSI(14) makes a higher low versus its reading at an equivalent price earlier — momentum divergence inside the PRZ. Entry 5,220, stop 5,208 (below PRZ − 1 ATR; below X 5,210 too, so both invalidations covered). Targets off the CD leg (5,258 → 5,216): T1 = 38.2% back = 5,232 (partial, stop to entry), T2 = 61.8% = 5,242. Both fill over the next 90 minutes as the rotation completes. Full harmonic combos with checklists in C5 and C6.

The stack & why it fits: 20 EMA gives regime and location (trend direction + the pullback line). RSI(14) gives internal state (is this pullback a healthy reset or a breakdown?). The candle gives timing. Three different questions, three different tools — nothing overlaps.

1. First — regime: 15m: price above a visibly rising 20 EMA with higher highs/higher lows. If the EMA is flat or braided with price, stop here.
2. Second — location: 5m: pullback touches the 20 EMA zone. Check RSI: it should hold above 40 (healthy uptrend reset). RSI below 35 = the "pullback" has real selling in it — skip.
3. Third — timing: reversal candle at the EMA (engulfing/hammer/close back over the 9 EMA). Enter on its close.
4. Risk: stop below the pullback low − 1 ATR; T1 = prior high (partial), T2 = 161.8% extension or trail.

The stack & why it fits: VWAP defines the day type and the magnet (flat VWAP = balanced day, and it's the target). Bollinger's outer band defines statistical stretch (location). RSI extreme + turn provides timing. All three must agree the move is exhausted, not starting.

1. First — regime: VWAP flat, price has crossed it ≥ 2 times today, ADX < 20. Any slope in VWAP → this playbook is off.
2. Second — location: price tags/exceeds the Bollinger 2σ band and is ≥ ~1.5σ VWAP band away from VWAP. Candle bodies shrinking into the extreme.
3. Third — timing: RSI beyond 70/30 turns back through it, plus a rejection candle at the band. Enter the close.
4. Risk: stop beyond the extreme wick + 1 ATR. T1 = Bollinger midline (partial), T2 = VWAP. Never hold past VWAP.

The stack & why it fits: the opening range gives location (a level everyone watches). Volume + OBV give validation (is real participation behind the break?). ATR gives feasibility (is there enough daily range left to pay for the trade?). This combo exists to solve the ORB's one weakness: false breaks.

1. First — location: mark the 15-min opening range. Range height should be < ~25% of daily ATR. Note alignment: breaking toward a gap continuation or out of yesterday's value = A-grade.
2. Second — validation: on the breakout candle: volume ≥ 1.5× 20-bar average and OBV printing a new session extreme with price. Volume without OBV agreement = churn — skip.
3. Third — feasibility: daily ATR check: if > 60% of the day's typical range is already used, demand the conservative retest entry or pass.
4. Entry & risk: 5m close beyond the range (or its retest). Stop = range midpoint (aggressive) / retest low (conservative). T1 = range height projected, T2 = prior day high/low.

The stack & why it fits: ADX answers "is there a trend worth trading?" (regime). Supertrend on 15m answers "which side am I allowed on?" (bias, and later the trailing stop). The 5m 20 EMA pullback provides location and timing. Each layer strictly narrows the previous one.

1. First — regime: 15m ADX > 25 and rising. Below 20: this entire playbook is closed for the day.
2. Second — bias: 15m Supertrend state — green = longs only, red = shorts only. No counter-state trades, ever, while this combo is running.
3. Third — location/timing: 5m pullback to the 20 EMA in the bias direction, then a trigger candle. Bonus confluence: pullback holds above the 15m Supertrend line.
4. Risk: stop below pullback low − 1 ATR (not the far Supertrend line — too wide). Trail the runner on the 5m Supertrend; hard exit if the 15m state flips.

The stack & why it fits: the Bat's 88.6% PRZ gives a precise location in advance — its unique strength. RSI divergence supplies independent evidence that momentum is dying exactly where the geometry says it should. A session structure level (pivot, prior day low, HVN) adds non-fib confluence so the zone isn't purely self-referential. Location from geometry, confirmation from momentum, weight from structure.

1. First — pattern validity (draw on 15m): B retraces 38.2–50% of XA (if B is at 61.8%, it's a Gartley — different D). Project D = 88.6% of XA; check the 161.8–261.8% BC extension lands within a few points of it. PRZ = that overlap.
2. Second — confluence: does the PRZ sit on independent structure (S1/R1, yesterday's high/low, HVN edge, round number)? No external level = B-grade, halve size or skip.
3. Third — regime sanity: not a runaway trend day against the pattern (ADX < ~30 against you; daily ATR mostly spent helps a reversal).
4. Fourth — timing: price trades into the PRZ; RSI(14) on 5m makes a higher low (bullish) / lower high (bearish) versus the prior extreme while price presses the zone; then a 5m reversal candle. Enter its close.
5. Risk: stop beyond X or PRZ far edge − 1 ATR, whichever is tighter but still structural. T1 = 38.2% of CD back (partial + breakeven), T2 = 61.8% of CD, runner toward C.

The stack & why it fits: a Gartley D at 78.6% of XA is one fib; the edge appears when independent fib measurements — the 161.8% BC extension, and a retracement of a larger/higher-timeframe leg — cluster at the same price. Three fibs from three different swings agreeing is no longer self-referential; it's a genuine cluster. The candle trigger then converts the zone into a trade with defined timing.

1. First — pattern validity (15m): B at 61.8% of XA (the Gartley signature; B much deeper → think Bat/other). D = 78.6% of XA. CD typically 127.2–161.8% of BC.
2. Second — build the cluster: overlay (a) the 78.6% XA, (b) the BC extension, (c) the 38.2–50% retracement of the larger 1h leg that contains the pattern. Grade: 3 fibs within ~0.1× ATR of each other = A; 2 = B; scattered = pass.
3. Third — timing: price enters the cluster and prints a 5m pin bar/engulfing, ideally with stochastic or RSI exiting an extreme. No close beyond the cluster's far edge is allowed pre-entry.
4. Risk: stop beyond X (or cluster far edge − 1 ATR). T1 = 38.2% of AD (partial), T2 = 61.8% of AD, runner toward C, trailing on 5m swing points.

The stack & why it fits: Ichimoku is a state machine — cloud side gives unambiguous bias and the Kijun gives the pullback line. MACD adds what Ichimoku lacks: a momentum cycle read, showing when a pullback within the trend has reset and re-fired. Cloud = permission, Kijun = location, MACD re-cross = timing.

1. First — bias (15m): price clearly above the cloud (longs) or below (shorts). Inside the cloud = flat, full stop. Prefer a bullish future cloud twist for longs.
2. Second — location (15m/5m): pullback to the Kijun (or Tenkan in fast trends) that does not close into the cloud.
3. Third — timing (5m): MACD dipped below its signal during the pullback and now re-crosses above it while MACD stays above zero. Below-zero re-crosses are weaker — halve size or wait.
4. Risk: stop below the Kijun/cloud top − 1 ATR. T1 = prior swing high (partial), T2 = trail on Tenkan or exit on a 5m close below Kijun.

The stack & why it fits: pivots supply pre-known locations (everyone's levels, printed before the open). The Keltner channel confirms the tag is also a volatility stretch (price at/outside the band at the pivot). Stochastic times the turn. Three independent "yes" votes: level, stretch, momentum-turn.

1. First — day type: rotation evidence — open inside yesterday's value, ADX < 20, flat Keltner midline. Trend day → switch to pivot break-retests instead (this fade playbook off).
2. Second — location: price reaches R1/S1 (or P from the far side) and simultaneously tags/exceeds the outer Keltner band. Pivot without stretch = weak; stretch without pivot = weak. Need both.
3. Third — timing: stochastic (14,3,3) crosses out of its extreme zone (>80 down, or <20 up) with a rejection candle at the level. Enter the close.
4. Risk: stop beyond the pivot + 1 ATR. T1 = Keltner midline (partial), T2 = the central pivot P (or mid-range). Hard exit on a 5m close beyond the pivot.

The stack & why it fits: yesterday's profile (POC/VAH/VAL, LVNs) maps where business was done; VWAP shows today's live consensus and bias; market structure (higher highs/lower lows on 5m) tells you whether a level test is being accepted or rejected. This is less a single setup than a decision framework — it generates both fade and continuation trades from one map.

1. First — build the map pre-open: mark yesterday's VAH/VAL/POC, any naked POCs, and LVN air-pockets. Note where today's open lands: inside value → rotation bias; outside → imbalance bias.
2. Second — live bias: which side of VWAP is price holding, and is VWAP sloping? Structure agreeing (e.g. above VWAP + higher lows) = continuation lens; disagreeing = wait.
3. Third — the trade decision at a level: price at VAH/VAL/POC — is it rejecting (fast wicks away, structure holds the other way → fade back through value) or accepting (closes stacking beyond it, VWAP following → continuation through the next LVN)?
4. Risk: fade: stop beyond the level + ATR, target POC/VWAP. Continuation: stop back inside value, target the far side of the LVN (the next HVN).