The ‘Crack and Snap’ and ‘Falling off the Roof’

Filed under: Learn Forex Trading |

In today’s forex trade example, I mentioned a setup popularized by the father of candlesticks to the West, Steve Nison, called the ‘crack and snap’. The ‘crack and snap’ and its opposite the ‘falling off the roof’ setups can be used in both the forex and equities markets, and despite the creative names, the idea is actually a very simple one. Figure 1 shows the ‘crack and snap’.

 

Figure 1.

Figure 1.

What you can see in Figure 1 is that a support/resistance zone has been broken (it has been ‘cracked’ through!), only for these new lows not to hold, and for it to snap back in the opposite direction. This is one of Nison’s favourite setups, because what happens is that once the support/resistance level is broken, lots of traders enter short trades and put stop losses just beyond the previous support/resistance area. Institutional traders then gun for these stops, and the market bounces back up.

 

The opposite scenario to this called the ‘falling off the roof. This time, the exact opposite would be happening to what is going on in figure 1. The support/resistance area would be at the top of the chart, and the area would be cracked through to the upside, before falling back down, ‘off the roof’ as it were. This could happen in the form of a pin bar, or a close above the support/resistance, followed by a bullish engulfing pattern in the case of the crack and snap, and a bearish engulfing pattern in the case of the falling off the roof. Steve Nison calls these his ‘favourite setups’, and as such, they are setups worth noting. Nial fuller, another forex price action trader, also calls these kind of setups a ‘fakey’, as the market tries to fake you out. Whatever you choose to call them, they are setups that should very much be on your trading radar.

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