The Big Shadow Strategy: How to Trade It Naked
One of the most powerful reversal setups in Naked Forex is the Big Shadow pattern. Featured in the book Naked Forex by Alex Nekritin and Walter Peters, this strategy captures key turning points in the market using only raw price action—no indicators involved.
In this guide, we’ll explain what the Big Shadow pattern is, how to identify it, and how to trade it effectively using a naked chart approach.
What Is the Big Shadow Pattern?
The Big Shadow is a two-candle reversal pattern that signals a potential shift in market direction. It often forms at major support or resistance levels.
Key Features:
- A large engulfing candle that completely engulfs the previous candle
- The engulfing candle should have a long body and small wicks
- Ideally appears after a clear trend or exhaustion move
This strong engulfing action shows a sudden shift in trader sentiment—buyers overtaking sellers (bullish Big Shadow) or sellers overwhelming buyers (bearish Big Shadow).
Where Does the Big Shadow Work Best?
This pattern is most effective when:
- It appears at key support or resistance
- It forms after a strong move in one direction (overextension)
- The engulfing candle closes near its high or low
Using the Big Shadow in isolation is risky—it works best with confluence like:
- Previous swing highs/lows
- Round numbers
- Trendlines or zones
Types of Big Shadows
1. Bullish Big Shadow
- Appears at support or after a downtrend
- The bullish candle engulfs the prior bearish candle
- Signals a possible upward reversal
2. Bearish Big Shadow
- Appears at resistance or after an uptrend
- The bearish candle engulfs the prior bullish candle
- Signals a possible downward reversal
How to Trade the Big Shadow: Step-by-Step
Step 1: Spot the Setup
Look for:
- An engulfing candle at a significant level
- The engulfing candle is larger than the previous 5–10 candles
- The engulfing candle’s close is near its extreme (high or low)
Step 2: Confirm Market Context
Ask:
- Is this happening at a key level?
- Is price extended or showing signs of exhaustion?
- Are buyers/sellers losing control?
Only take trades where the market context supports the reversal.
Step 3: Place Entry, Stop Loss, and Target
- Entry: Set a pending order just above the high (for bullish) or below the low (for bearish) of the Big Shadow candle
- Stop-loss: A few pips beyond the opposite end of the candle
- Take-profit: Use 1:2 or 1:3 risk-reward ratio, or target nearby zones
Step 4: Manage the Trade
- If price moves favorably, consider trailing your stop to lock in profits
- Avoid trading Big Shadows during news releases or low-volume hours
- Don’t chase if price moves before entry—wait for the next setup
Example Setup (For Practice)
Using TradingView:
- Mark a strong resistance level on the H4 or Daily chart
- Watch for a bearish Big Shadow
- Place a sell stop below the candle
- Monitor for a clean move downward as confirmation
Common Mistakes to Avoid
- Trading Big Shadows that form in the middle of consolidation (no context)
- Engulfing candles that are not significantly larger than the prior candle
- Ignoring market structure and trend
Conclusion
The Big Shadow strategy is a powerful, high-probability tool in the Naked Forex playbook. When used with price context and disciplined trade management, it can help traders spot major reversals early—with no indicators at all.
Master this setup by spotting it on historical charts and journaling each live trade. The more you practice, the sharper your entry timing becomes.
FAQs
Q1: What timeframe works best for Big Shadow patterns?
The H4 and Daily charts offer the clearest and most reliable Big Shadow setups.
Q2: Can the Big Shadow be used with trend continuation?
Yes, but it is primarily a reversal pattern. It’s best used at swing highs or lows.
Q3: What makes a Big Shadow valid?
A large engulfing candle that fully swallows the previous bar and appears at a key level with momentum.
Q4: Should I wait for confirmation after the Big Shadow forms?
You can wait for a retest or simply enter using a pending order at the candle’s extreme.
Q5: Does this pattern work on all currency pairs?
Yes, but it performs best on major pairs with stable price action and low spreads.
