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Naked Forex: High-Probability Techniques for Trading without Indicators by Walter Peters, Alex Nekritin

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CHAPTER 6

The Big Shadow

Never fear shadows. They simply mean there's a light shining somewhere nearby.

—Ruth E. Renkel

The big shadow is a two-candlestick, reversal formation and an important catalyst for the naked trader. The big shadow appears on support and resistance zones, precisely where the naked trader looks for high probability trade set-ups. Once the big shadow prints on a zone, we have a valuable hint that the market may soon turn around.

Two candlesticks make up the big shadow formation. As with most naked trading catalysts, they must print on zones to be valid trade set-ups. Big shadows are only valid when they appear on zones. A big shadow may print on top of the zone (the market is finding support on the zone, a bullish big shadow), or the market may print below the zone (the market is finding resistance on the zone, a bearish big shadow). The important thing is this: The big shadow must print on a zone.

WHAT DOES IT LOOK LIKE?

Some traders may refer to the big shadow as an engulfing candlestick, but it is more than that, as there are specific rules associated with the big shadow, including how to trade it, and specific optimizers for the trading set-up. The big shadow is essentially a two-candlestick formation in which the second candle completely dwarfs the first candlestick. This second candlestick is known as the big-shadow candlestick. The defining characteristics of the big-shadow candlestick are as follows: The big-shadow candlestick is much larger than ...

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