The Kangaroo Tail Strategy Explained with Examples
The Kangaroo Tail is one of the most iconic and effective reversal setups in the Naked Forex trading playbook. Developed by Walter Peters and detailed in the book Naked Forex, this pattern helps traders catch precise turning points in the market—using only raw price action.
In this guide, you’ll learn how to identify, trade, and master the Kangaroo Tail setup with real-world examples and practical tips.
What Is a Kangaroo Tail?
A Kangaroo Tail is a single candlestick pattern that signals a potential market reversal. It features a long tail (wick) and a small body, usually forming at key support or resistance zones.
Key Characteristics:
- Long tail (wick) sticking out from recent price action
- Small real body near the candle’s opposite end
- The tail must poke beyond recent bars (stand out clearly)
- Appears at support or resistance (not randomly)
Think of it like a pin bar, but with stricter rules and specific context.
Bullish vs Bearish Kangaroo Tails
Bullish Kangaroo Tail
- Long lower wick
- Small body near the top of the candle
- Forms at support
- Suggests rejection of lower prices and potential upside
Bearish Kangaroo Tail
- Long upper wick
- Small body near the bottom of the candle
- Forms at resistance
- Suggests rejection of higher prices and potential downside
Kangaroo Tail Entry Rules (Step-by-Step)
1. Location Is Everything
The pattern must form at support or resistance. Look for:
- Previous swing highs or lows
- Round numbers
- Supply/demand zones
If it forms in the middle of nowhere—skip it.
2. Tail Must Stick Out
The tail should extend beyond the highs or lows of the past 5–10 candles. This makes it a clear rejection.
3. Place Your Entry
- Entry: Set a pending order just above the high (for bullish) or below the low (for bearish) of the Kangaroo Tail
- Stop-loss: Just below the tail (bullish) or above it (bearish)
- Take-profit: 1:2 or 1:3 risk-reward ratio, or target next S/R zone
4. Filter with Time of Day
For better accuracy, trade Kangaroo Tails formed during active sessions (e.g., London or New York).
Avoid patterns formed during quiet hours or low-volume sessions.
Example: Bearish Kangaroo Tail Trade
Let’s say price is rising toward a well-known resistance at 1.0950 on EUR/USD (Daily chart).
- A strong bearish candle prints with a long upper wick and small body near the low.
- The wick pierces the past 7 candles, rejecting the resistance level.
- You place a sell stop just below the low of the candle.
- Your stop-loss goes just above the wick.
- Target set at next support level for a 1:3 R:R ratio.
Advantages of the Kangaroo Tail Strategy
✅ No indicators required
✅ Clear risk-to-reward setups
✅ Works on major pairs and higher timeframes
✅ Easy to identify once trained
Common Mistakes to Avoid
🚫 Trading tails that don’t stick out clearly
🚫 Ignoring the importance of key levels
🚫 Entering early before candle closes
🚫 Using it during consolidation or random price zones
Conclusion
The Kangaroo Tail is a simple yet powerful price action strategy that fits perfectly with the Naked Forex philosophy—clean charts, clear setups, disciplined execution.
With practice, this pattern can become a core weapon in your trading arsenal, offering low-risk, high-reward opportunities across forex markets.
FAQs
Q1: Is the Kangaroo Tail the same as a pin bar?
They’re similar, but Kangaroo Tails have stricter requirements, especially regarding wick length and location.
Q2: Which timeframe works best?
H4 and Daily charts offer the clearest and most reliable Kangaroo Tail patterns.
Q3: Do I always need to wait for the candle to close?
Yes. Confirmation comes from the closed candle. Don’t enter while the candle is still forming.
Q4: Can Kangaroo Tails be traded in trending markets?
Yes, but they work best at clear reversal zones or key swing points.
Q5: How can I get better at spotting these setups?
Backtest historical charts and mark every valid Kangaroo Tail at support/resistance zones. This will train your eyes to recognize them instantly.
