Introduction

Previous Day High (PDH) and Previous Day Low (PDL) are simple, powerful reference points. This plan explains how to mark them, how to wait for a quality approach, how to distinguish a sweep from a genuine breakout, where to place safe invalidation points, and how to act in two typical candlestick scenarios.

1. Pre-market marking

• Before the session starts, mark the PDH and PDL on your chart. Use your preferred daily timeframe (daily or 4H with clear session boundaries).
• Also mark the prior day’s open. That three-line framework (PDH, PDL, open) gives context: direction bias, potential magnet levels, and opinion on control.
• Note recent structure around those levels: any swing high/low, consolidation, or gaps close to PDH/PDL matters for trade bias.

2. Waiting for the approach

• Be patient. Do not pre-commit as price approaches PDH/PDL. Observe the behaviour within the final few candles before the level.
• Look for reduced momentum into the level (smaller candles, wicks) for a likely rejection, or strong single candles for a possible breakout.
• Pay attention to session context (London open, New York overlap). Volume/time can affect conviction.
• Plan two possible trades: rejection (fade) or breakout (trend continuation). Only take the one that meets your entry rules when price interacts with the level.

3. Sweep vs breakout scenarios

These are the two main outcomes when price reaches PDH/PDL:

• Sweep (false breakout / liquidity grab)
  • Price briefly pushes beyond PDH/PDL with a thin, quick wick (often on lower volume or on a single sharp candle) then returns inside the previous range.
  • Interpretation: professional players grabbed stops above/below the level and then pushed price back. A sweep often leads to a strong move opposite the sweep direction.
  • Trade: wait for the pullback back inside the range and enter on a clear rejection candle (e.g., bearish engulfing after a PDH sweep). Place stop just beyond the sweep extreme.
• Breakout (real follow-through)
  • Price closes beyond PDH/PDL with a strong body and follows with continuation candles or a clean retest that holds the level as support/resistance.
  • Interpretation: buyers/sellers have conviction to take price beyond the prior day extreme.
  • Trade: prefer to wait for a retest and a clear confirmation candle in the direction of the breakout. Stop goes below/above the retest low/high.

4. Safe invalidation points

• For a rejection trade: invalidate the setup if price closes beyond the sweep extreme and continues with follow-through—move stop to the sweep extreme or just beyond it.
• For a breakout trade: invalidate if the retest fails and price returns inside the prior day range with conviction. Place stops beyond the breakout candle’s opposite wick or the retest extreme.
• If price decisively engulfs both PDH and PDL within a short period, treat the structure as broken and avoid new directional trades until a new range forms.

Example narrative 1 — PDH sweep then short

Price drifts up toward PDH. A quick long wick pushes 10–15 pips above PDH on one impulsive candle, then the next two candles close back below PDH. A strong bearish candle follows, showing rejection. Entry: short on the close of the bearish confirmation candle. Stop: just above the sweep wick. Target: next structure/support level or a predefined risk-reward.

Example narrative 2 — PDH breakout then retest-long

Price approaches PDH with a clean bullish candle that closes above PDH. Instead of immediate continuation, price pulls back to the PDH level and forms a small bullish pin or inside candle that holds above PDH. Entry: long on the bullish confirmation close. Stop: below the retest low. Target: first measured resistance or use trailing stops as momentum continues.

Checklist

• Pre-market: mark PDH, PDL, and prior open.
• Assess context: session, nearby structure, momentum.
• Decide plan for rejection and breakout before entry.
• On approach: wait for clear candle behaviour—sweep or sustained close.
• Entry: use confirmation candle after sweep or retest after breakout.
• Stop: place beyond the sweep extreme or retest extreme (safe invalidation point).
• Manage trade: scale targets or trail stops; invalidate if structure flips.