23# Big Eating Small Pattern Strategy

Submit by joy22

Identify the Big Eating Small setup

What we are looking for on the chart is a specific pattern called - “Big eating small”! (Well actually it is my given name :))

What I mean by that is a combination of 2 candles where the 1st is bigger than the next candle, but the 2nd candle's wicks and body are completely within high and low of 1st candle.

Take a look below for example -

This is how “big eating small” looks like. As you notice, in both the cases shown, the blue candle is completely within high and low of previous Red Candle.

Once you spot such pattern, next what you must do is check the length of the bigger candlestick. It should be atleast 20 pips long (Difference between high and low)!

This is crucial as otherwise it would mean that there are not enough players in the market and so the volatility is low.

So, if the length of candle is less than 20 pips, ignore this setup and wait for next setup.

If the length is 20 pips or more, which will be the most likely case, then move to step 3!

Influence of 100 EMA

Once you spot such a pattern that also has length of Candle 1 being 20 pips or more, look for 100 EMA. If the candles are below 100 EMA, you are going to take only short trades.

On the other hand, if the candles are above 100 EMA, you'll take only long trades (Incase you don't know, Long trades mean BUY trades and similarly short trades mean the same as SELL trades)

For example -

The below chart shows setup for Long trades since both the candles in the setup are above 100 EMA (The yellow line is the 100 EMA)

ENTRY Rules

A. In case of long trades, place the trades once the price reaches 3 pips above the high of smaller candlestick

So, let us say in EUR/USD if the high of small candle in “big eating small” pattern is 1.3100, place the trade once price reaches 1.3103!

B. Likewise, incase of short trade, open trade when the price reaches 3 pips below the low of 2nd candle.

So, if the low of short candle is 1.3100, then open the trade once price reaches 1.3097

HIGHLY HIGHLY IMPORTANT: Remember, the entry condition should exist withinnext 4 candles from the smaller candle.

So, if in “Big eating small” pattern, your bigger candle is Candle 1, smaller candle is Candle 2, then your entry condition should be met in any of Candle number 3 or 4 or 5 or 6th.

If the entry condition doesn't occur within next 4 candles, ignore this setup and wait for next setup to happen.

Comments: 2

#2
fibotrader (Friday, 28 April 2017 05:58)

such patterns aka "engulfing bullish" or "engulfing bearish" and both work best on higher tf such H4, D or W
#1
sergio bentes (Saturday, 07 February 2015 04:34)

Please, is it possible to specify the period of yhe chart? 15m, 30 min. 1h?
Thanks.