Trigger, session and exitsThe final rules before you enter.
Price at the edge of the range is still not an entry. You need a candle that rejects a key level, in the London or New York session, and a stop and target set by the ATR, which keeps every trade at 1:2.
The trigger: a candle that rejects a key level
Once price reaches the edge of the range, you still need a trigger before you enter. In this system, the trigger is a candle that rejects a key level, a price where buyers or sellers stepped in before. The momentum system lessons cover key levels in detail.
For a long, you want a bullish candle bouncing off the level near the bottom of the range. For a short, a bearish candle turning down from the level near the top. Unlike the momentum trigger, which needs a body of at least half the ATR, the size of the candle does not matter here, and neither does a perfect textbook shape: the candle only has to show that buyers, or sellers, reacted where you already wanted to enter.
Only in London or New York
Timing is the next filter. You only take triggers that form during the London or the New York session, the same rule as in the momentum system. The lesson on timing showed why: these are the busiest hours, when liquidity is highest and price has the energy to reach a target.
Without movement, there is no trade. Even with a good level, a good range and a good divergence, a market that is too quiet may simply drift and stall. So any trigger outside these 2 sessions is ignored: a rejection candle or an RSI divergence during the Asian session does not count, even if everything else looks perfect.
Drag the time in the tool below to see which hours belong to London and New York. The Tokyo row stands for the Asian session.
London and New York are both open. This overlap is usually the busiest part of the day.
The optional filter: RSI divergence
There is also an optional filter, and it is strongly recommended: RSI divergence. The RSI, the relative strength index, measures momentum. The system uses a 14-period RSI on the 1-hour chart.
Divergence means price makes a new high or a new low, but the RSI does not. Price pushes further in one direction while momentum is already fading in the background. Near the edge of a range, that is a sign the move is stretched and the setup is happening in the right part of the range.
Like the EMA cross, divergence is not a signal on its own. Indicators are weak in isolation and more useful in the right context, so here it is an extra layer inside the full system, with your macro read still the most important part.
Exits set by the ATR
The exits use the same 14-period ATR on the 6-hour chart as the momentum system. The stop loss is 1 ATR and the take profit is 2 ATR. So if the ATR is 30 pips, your stop is 30 pips and your target is 60.
Every trade is 1:2 risk to reward, adjusted to how much the market is moving right now, and you never set the stop or the target by how you feel about the trade.
The entry rules in a single table
Put together, these are the rules for a choppy market entry, in the order you check them. All of them have to be met, except RSI divergence, which is optional. The macro filter comes on top of all of them and has its own lesson, and so does managing the trade once you are in.
| Step | Rule |
|---|---|
| 1. Eye test | Price moves sideways, without clean higher highs or lower lows. |
| 2. EMAs | 1-hour 21 and 100 EMA: 2 or more clear crosses in the last 250 bars, inside the range. |
| 3. Location | Outside the value area near an edge, or above 70% for shorts, below 30% for longs. |
| 4. Trigger | A candle of any size rejecting a key level: bullish for longs, bearish for shorts. |
| 5. RSI divergence | Optional, strongly recommended: 14-period RSI, 1-hour chart. |
| 6. Session | London or New York only. Asian session triggers are ignored. |
| 7. Exits | 14-period ATR, 6-hour chart: stop 1 ATR, target 2 ATR. |
Situations you will meet
It formed in the Asian session, so it does not count. Note the level and see whether London gives you a new trigger.
The setup can still be valid. Note in your journal whether divergence was there, so you can see later how much it matters.
In short
- The trigger is a candle that rejects a key level: bullish for a long, bearish for a short, of any size.
- Only triggers in the London or New York session count. Divergence on a 14-period RSI on the 1-hour chart is an optional but strongly recommended filter.
- A 14-period ATR on the 6-hour chart sets the exits: stop 1 ATR, target 2 ATR, so every trade is 1:2.
Key terms
- Rejection candle
- A candle that pushes into a level and gets pushed back, leaving a long wick. It shows the level is holding.
- Trading sessions
- The Asian, London and New York trading hours. Most volume, and most clean moves, come in London and New York.
- Liquidity
- How easily you can buy or sell without moving the price. FX is most liquid when London and New York are open.
- Divergence (momentum)
- When price makes a new high or low but an indicator such as RSI does not. A warning that the move is losing strength.
- RSI (relative strength index)
- A momentum indicator between 0 and 100. Readings above 70 are often called overbought, below 30 oversold.
- ATR (average true range)
- The average size of a price bar over a period, usually 14 bars. A simple way to measure how much a market normally moves.