How to Trade CRT with Top-Down Analysis? Easy Entry Strategy
In this article, I will show you how to trade Candle Range Theory with Top-Down Analysis.
You will learn how to identify the best candle for CRT trading and how to spot an accurate lower time frame confirmation on Forex.
What is CRT Trading
Let's start with a definition of Candle Range Theory.
CRT is a trading style that treats the high and low of a single, high-momentum candle as a base for trading entries.
The boundaries of a significant higher time frame candlestick serve as a range for a consecutive price action.
A daily time frame is one of the best time frames for the identification of such candles.
Base Candle Example
On a EURGBP pair, we see a huge high-momentum bearish candle.
It is a way stronger than the average candle.
The range of this candle will provide a perfect base for CRT trading.
Manipulation
According to CRT principles, if one of the boundaries of the range of a high-momentum candle is violated due to market manipulation, an opposite price movement will be expected.
On a EURGBP pair, we see a liquidity sweep below the low of our base candle.
The consecutive candle with a long lower wick is likely a manipulation.
While the low of that candle went way below the low of a base candle, it closed without violating its low. It is a very important condition.
If that candle closed below the low of a base candle, it would invalidate CRT model.
Entry Signal with Top-Down Analysis
The final step of the analysis is a strong entry confirmation signal.
Lower time frame analysis will help us to spot a good entry.
Spotting a base candle on a daily time frame, I will use a 4H time frame for confirmation.
On a 4H time frame, the price started to respect a strong intraday horizontal resistance.
On the price chart above, we can see a strong concentration of selling orders within that area.
A bullish breakout of that resistance and a 4H candle close above that will provide a final confirmation for our strategy.
Trade Execution
We can buy after a breakout, expecting a bullish movement.
Here is a complete trading plan.
After a 4H candle closes above the underlined blue resistance, a buy limit order will be set on its retest.
Stop loss should be below the closest strong intraday support.
Take profit is based on the closest daily resistance.
That is how we trade Candle Range Theory with top-down analysis.
A daily time frame base-candle and a 4H time frame entry confirmation provide very accurate signals in CRT trading forex.
Just make sure that you spot a strong momentum candle on a daily time frame and a valid manipulation.
