Beware The Trendy Kangaroo Traps

Once you get the hang of the trendy kangaroo, you may want to trade them all the time. These trades do not occur frequently simply because the market does not trend that frequently. Be careful. There are many trendykangaroo- looking set-ups that are not ideal.

Here are a few of the common mistakes naked traders make when looking for trendy kangaroo set-ups. Trendy kangaroos must stick out from the consolidation range. If the trendy kangaroo candlestick does not have a tail that sticks out from the market pause, it is not an ideal trendy kangaroo (see Figure 10.9).

FIGURE 10.9 Trendy kangaroos should stick out from recent price action. Trendy kangaroos among other candlesticks are not high probability trades. This candlestick on the AUD/JPY daily chart does not stick out beyond the consolidation range, so it is not an ideal trendy-kangaroo trade.
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The best trendy kangaroos will print during a pause in the market trend. If a trendy kangaroo prints after a large correction, it may be a sign that the trend is over. Beware of trendy kangaroos that print after a large correction, they may not be ideal trendy kangaroo trades (see Figures 10.9 and 10.10).

FIGURE 10.10 The one-hour USD/CHF chart has a bullish trendy kangaroo tail. However, the market has fallen too far. The best trendy kangaroo tails print after a pause, this trendy kangaroo tail is not ideal because it has printed after a severe market correction.
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Trendy kangaroos are a great way to jump on a strong trend. Here are some things to keep in mind when looking at trendy kangaroos.
Characteristics of the bearish trendy kangaroo:

• The market is moving in a downtrend.
  
• The market pauses and several candlesticks print in a small consolidation range.
  
• A trendy kangaroo prints above the consolidation range.
  
• The stop loss is placed above the candlestick high.
  
• The sell stop is placed below the candlestick low.
  
• The market trades lower than the low of the bearish trendy kangaroo.
  
• The closest zone is the profit target.
  

Characteristics of the bullish trendy kangaroo:

• The market is moving in an uptrend.
  
• The market pauses and several candlesticks print in a small consolidation range.
  
• A trendy kangaroo prints below the consolidation range.
  
• The stop loss is placed below the candlestick low.
  
• The sell stop is placed above the candlestick high.
  
• The market trades higher than the low of the bearish trendy kangaroo.
  
• The closest zone is the profit target.
  

Optimal trendy kangaroos have these characteristics:

• The tail of the trendy kangaroo sticks out from the consolidation range.
  
• The trendy kangaroo prints on a major zone.
  
• The market does not make a large correction before printing the trendy kangaroo.
  

After some testing, you may become comfortable with the trendy kangaroo.
Remember that the goal for the trendy kangaroo is to capture a market trend after the market decides to pause. If you keep this goal in mind you will find that the trendy kangaroo is an excellent method for jumping on a strong trend.
By:Alex Nekritin