Attached are 2 charts of EURGBP. Lets see how we can construct a great trade using control bar analysis. First, have a look at the hourly EURGBP chart. I have marked off 2 bars which serve as the control bars. These are very easy to identify as they are the biggest bars in the current chart. So i simply mark them off as A and B and i have also marked off the high and low of each bar using red lines.
Now switch to the lower timeframe i.e. 15M. This is show in the next chart. You can see the price action clearly. Concentrate on the price action between the 2
red lines in the region marked C. You can see a great battle going on . On one side, you can see price trying to push into the region of the control bars but 8820 acting as support and on the other hand, you can see price trying to push out of the control bars but 8828 acts as good resistance. So, for the trade, you wait for price to move into 8828 and then you realise that 8828 could act as a resistance. You wait and watch to see if 8828 is indeed acting as resistance.
Remember that you should not jump into a short immediately when price drops below 8828. You need to wait and see whether 8828 is indeed acting as resistance. Wait for retrace to 8828 and see if it breaks back above 8828 or stays below. Here you can clearly see that it stays below 8828. So, you take a short below 8828. Have the SL just above 8828 (6-7 pip SL) and you have a great trade. TP1 is the point which gives you 1:1 risk reward ratio and TP2 is the close or the low of the control bar (this gives a 4;1 or 5:1 trade).
