For those who can’t imagine their lives without drinking sake, eating Japanese meals and trading in the Asian sessions, smart people invented a “cherry-blossom” strategy that is considered to be very profitable and risk-averse. Let me show you how it works. To use it you should plot the Fibonacci retracement levels to the chart. The “cherry-blossom” is based on the assumption of the continuation of a trend. The trends are usually formed in the course of American and European sessions, whereas in the Asian session the prices are moving sideways trying to consolidate, or the quotes move in the opposite direction of the main trends. According to the “cherry-blossom” strategy, we should enter the market as soon as the daily candlestick closes (at the very beginning of the Asian session) and buy/sell in the direction of the trend established during the previous trading sessions (American and European ones). First of all, you should look at the size of the candle (it should be at least 30 points long). Then, you should plot the Fibonacci levels from the low to the high (in case of the bullish trend) and place orders at 23.6, 38.2, and 50% levels. Stop-loss should be set below the low of the candle, and take-profit – below the high of the candle. If at the end of the day you still have some open positions, you should wait for the next day so that your orders are closed. If after two days, your positions are still open, you should remove your orders from the chart manually. All pending orders that were not activated should be removed at the end of the current session. On Friday we stop trading. Some examples: On the chart below, you can see the bearish candlestick with a long body in 70 points (on our chart this candle is divided into several bars because we use H1 timeframe for clarity). It means that we should trade short. The order should be placed above the high of the daily candle, and take-plot should be plotted a bit higher than the low of the candle. From the picture, we can see that all three orders had been activated. And the position closed at “take-profit” level. For example, you’ve noticed a bullish candlestick with a size in 35 points. What you should do is to place three orders (Buy limit) at the 23.6%, 38.2%, and 50% levels. We can see that only the upper order has been activated.
Whether you’re a scalper, swing trader or investor, the momentum indicator is a highly underrated tool suitable for almost all forex trading strategies, because unlike many other common indicators, it doesn’t repaint. What is the Momentum Oscillator? The momentum indicator is one of MT4’s default indicators. It shows the difference between a candles closing price and the price of a specific period back, by default, 14. The indicator then compares these values with the 100 level. The chart below shows what the momentum indicator looks like on a NZDCAD Daily timeframe. You’ll notice that price crosses the 100 level quite frequently, and whilst you could simply trade every cross, there are far better ways to utilise the momentum indicator in your forex trading system. Instead, let’s consider the 100 level as our bull/bear level and also a method of indicating market volatility. The further away from the 100 level the indicator is, the higher the market volatility is, and the stronger the current trend is. Momentum Trend Strategy One method of trading with the momentum indicator as you’ll notice in the chart below, is as a simple trend trading strategy. As you’re likely aware, a trend can be defined as a series of higher highs and higher lows for bulls, and lower lowers and lower highs for bears. By simply applying these laws of price action to the momentum indicator we can create a very robust strategy. The EURUSD weekly chart above shows an example of how a trader can use price action rules to trade with the momentum indicator. First, we note whether we are above or below the 100 level, thus determining our trend. Then, we start to see a series of lower lowers (red) and higher highs (blue) emerging. As in any trending market, a pullback is healthy, and both the 100 level and the trendlines drawn on the momentum indicator both offer traders a place to enter a trade in the direction of the prevailing trend. Momentum Indicator Divergence Strategy Various oscillators are used to show divergences, or differences between the indicator and price. Divergences typically form around significant tops and bottoms. Higher highs and lower lows also feature prominently in this strategy. You can see that price formed a lower low on the chart, however the momentum indicator failed to do so, instead forming a higher low, which can mean that the current trend is running out of steam. This is where a trader would be looking to initiate a long position. Wrapping up Using the momentum in your trading offers a little bit of everything. It follows price action, keeping you close to where the market is going. Even by just using the 100 level in your trading strategy to determine the current trend, you’ll adding an extra layer of robustness to your existing strategy.
Some traders prefer to trade on the longer-term timeframes. It helps them to check the positions no more than once a day and have more time for making a final decision. However, if you prefer to be a more aggressive trader and earn money within a day, you will probably try trading on the H1 and H4 charts. In this article, we will explain the most popular strategies for this kind of trading. Advantages and disadvantages of trading on the smaller timeframes There are pros and cons of trading on the smaller timeframes. Among the advantages, we can mention lower pressure on the investor’s deposit and the possibility of earning more money due to the increased number of opened positions. At the same time, there are certain disadvantages in trading on H1 and H4. The first one is, of course, the increased amount of time you need to spend in front of the trading platform. Also, take into account that the emotional pressure is higher while trading on the smaller timeframes. Thus, the strategies for intraday trading must be simple in their usage, but effective at the same time. Strategy for trading on the H1 chart You need to apply several moving averages to the chart to implement the following trading strategy. 1. Exponential moving averages of 38 and 48 periods (colored in brown). 2. Linear weighted moving average of 5 and 8 periods (colored in violet). The rule is simple. When the linear weighted MAs cross the exponential MAs upside down, it signals us to open a short position. Alternatively, when the linear weighted moving averages cross the exponential ones from bottom to top, we may open a long position. Signal will be stronger if the distance between two linear weighted moving averages is lower or they cross each other. At the same time, the bar of the candlestick following the crossover should close below the crossover (if it’s a signal for the short position) or above the crossover (if it’s a signal for the long position). You close your position when the exponential MAs cross each other. Let’s consider the example. On the H1 chart of AUDUSD linear weighted MAs crossed exponential MAs from bottom to top on November 1. We waited for the candlestick to close above the moving averages and the levels of the previous consolidation. After that, we waited for the next candlestick and opened a long position at its closing price at 0.7131. Our stop loss is placed below the levels of consolidation at 0.7047. We waited for the exponential MA to cross each other at 0.7242. We earned 111 pips (0.7242-0.7131). Strategy for trading on the H4 chart The strategy described below requires the usage of two indicators: MACD with settings 12,26,2 and Commodity channel index (CCI), which period equals 14. You need to open a long position when: - CCI crosses the upper border of MACD from bottom to top; - When it happens, MACD should be placed higher than the 100 level. We place our stop loss here below the levels of the previous consolidation. Our take profit depends on price action. However, we must close our position if CCI falls below the 100 level. Let’s look at the H4 chart for AUD/USD. On January 11 we saw the CCI rising above the MACD. We waited for the next candlestick and opened the position at 0.7381. Our stop loss is placed below the levels of the previous consolidation at 0.7326. We closed the position when CCI tested the 100 level upside down at 0.7508. As a result, we earned 127 pips. When should you open a short position? CCI crosses the lower border of MACD from top to bottom.When it happens, MACD should be placed lower than the -100 level. Finally, let’s consider the example of the short position on the same H4 chart for AUDUSD. CCI crossed MACD upside down. We opened a short position at 0.7160. Our stop loss is placed above the levels of the previous consolidation at 0.7205. We waited until CCI tested the -100 level and closed the position at 0.7069. We earned 91 pips.
There are a lot of strategies, which require the usage of Fibonacci levels. Traders try to adapt them in the best way so they can be used effectively in a combination with other technical tools. Today we are going to discuss a strategy, which is widely known among traders. It is called MacFibo. Traders recommend implementing this MacFibo strategy while trading the EURUSD pair and Gold on the H1 and H4 timeframes. What do we need for the following MacFibo strategy? At first, we need to apply three moving averages to the chart. - First simple moving average should have the period equals 8; - Second simple moving average with the period equals 20; - The third moving average is the exponential one with the 5th Secondly, we adopt the Fibonacci levels to our trading strategy. You can do it in the settings: Here are the levels that we use: We need to implement the adapted Fibo levels following the special rules. Generally speaking, they depend on the direction of trading. When should we buy? - The exponential MA should break the SMA with the 20 period from bottom to top. - The bullish candlestick closed higher than the crossover. - We apply Fibonacci levels from the high of the candlestick formed after the crossover to the low of the lowest candlestick in the trend. - We open the long position at the opening price of the next candlestick. At the same time, we make sure that the level is not placed at the previous support or resistance zones. - We place take profit at the 161.8 Fibo level. - Our stop loss is placed at the 38.2 or 78.6 Fibo level. The choice depends on the placement of previous support or resistance levels. Let’s consider the example on the H1 chart of EURUSD. On April 12, the exponential moving average (violet) crossed the 20-period SMA (brown) from bottom to top. We opened a long position at 1.1287 after the price broke the previous resistance. We placed our stop loss at 1.1264 (38.2 Fibo level) and take profit at 1.1316 (161.8 Fibo level). As a result, we earned 29 pips. When should we sell? - The exponential MA should cross the 20-period SMA upside down. - The bearish candlestick closed below the crossover. - We apply Fibonacci levels from the low of the candlestick formed after the crossover to the high of the highest candlestick in the trend. - We open the short position at the opening price of the next candlestick. At the same time, we make sure that the level is not placed at the borders of the previous support or resistance zones. - We place take profit at the 161.8 Fibo level. - Our stop loss is placed at the 38.2 or 78.6 Fibo level. The choice depends on the placement of previous support or resistance levels. On the H1 of EURUSD, the 5-period EMA (violet) crossed the 20-period SMA (brown) upside down on January 2. We opened a short position at 1.1420 after the bearish candlestick occurred below the crossover below the support. We place our stop loss at 1.1438 (78.6 Fibo level). Our take profit level is placed at 1.1376 (161.8 Fibo level). We earned 44 pips. This kind of strategy also provides us an opportunity for scaling in. If the price is moving towards the Fibo target at 161.8 and the 5-period exponential MA crosses the 8-period simple MA from bottom to top (for a short position) or from top to bottom (for a long position) and then crosses it back, the open price of the candlestick after the crossover is the additional entry point. In that case, we place our take profit at the 261.8 Fibo level. Also, it is recommended to trail your stop loss after scaling in. For example, on the same chart, we entered the short position at 1.1706. We added more at 1.1678 when the exponential MA (violet) crossed the 8-period SMA (orange). We moved our level of take profit to 1.1614 (261.8 Fibo level). At the same time, we trailed the stop loss to the 78.6 Fibo level at 1.1708. Conclusion Today we’ve considered how small adaptations to Fibonacci levels may be applied to an efficient strategy. We recommend you to practice it on our Demo account before taking the full advantage out of it.
The gold trading is not a very easy topic, as the yellow metal does not move the same way as the other commodities or the currency pairs on the Forex market. However, there are some well-known strategies which can be used to succeed in gold trading. News trading Besides the usual statistics, gold is affected by political and economic factors, global disasters, terrorist attacks, and crises. The reason is that gold has tight connections with different markets: equity or raw materials. The dynamics of gold prices do not follow the usual logic. Trading on the news can be successful only after the major releases or events. It is highly recommended not to open the position immediately after the event, because you do not know where the price will go. For example, the sharp fall in the equity market results in the rise of the gold price. As a result, you can make long positions. Fundamental gold trading strategy: correlations It’s not a secret gold has a strong negative correlation with the US dollar. That means, gold and the US dollar move in the opposite direction. The buy signal for gold means the sell signal for the USD and vice versa. A good thing to know is that one of the forms ahead of the other one and you can take a chance to make a profit. Here is the strategy to trade the Gold using its correlation with the USD. - At first, open gold’s price chart and the USD cross currency pair (for example, USD/JPY) on your platform at the same time. Both of the charts are needed to be set at the same timeframe (for example, H1). - Secondly, determine the key support and resistance levels on both of the charts and wait for the breakouts. In addition, take a look at the forms of the candlestick to find out the potential further direction of the price. Take a note, that sometimes you can find a resistance line on the USD/JPY chart, but cannot determine any visible support on the gold chart. However, the breakout of the resistance on USD/JPY chart will be followed by a sell signal on the Gold chart. Therefore, if the USD is strong on USD/JPY, it will signal to sell the gold. On the H1 chart of USD/JPY, a bearish candlestick was formed. It gave a strong signal to buy gold. If a trader takes this opportunity, he can make a good profit on the rising price of gold. On the other hand, gold has a positive correlation with AUD/USD. Australia is known as one of the largest gold producers in the world. That is why the Reserve bank of Australia should keep its gold reserves in balance. The gold reacts to Australian fundamental data or monetary policy changes made by the Reserve bank of Australia. On the picture below, the interest rate cuts made in 2016 resulted in the selling of the gold. Seasonal gold trading strategy The price movements of gold are correlated with its seasonal pattern. Gold can be stronger during certain times of the year and weaker during the other times. Moreover, these periods repeat themselves during the same parts of the year. Gold tends to go up in the first quarter of the year as well as during the last months of the year. - The first step is to buy gold in the months when Gold price tends to increase. It tends to happen at the beginning of the year (in January and February). - Wait for the other confirmations, based on technical figures, oscillators (MACD, RSI) and forms of candlesticks for the potential reversal. - If the gold is following its seasonal pattern in January, make a long position. - Take profits before the end of February. Remember, if gold has followed its seasonal pattern in first months, the seasonal cycle will likely to continue. According to the seasonal pattern, March is the worst month for trading gold, so it is better to close your position before it. Tip: the spot price for gold displayed in the charts is set around 10:30 and 15:00 GMT after different auctions made by the major players in the gold industry. Most of the traders open or close their position during this period. That is why it is recommended to trade gold within these time limits. Conclusion: The specific nature of gold asks for the special trading techniques to be used. You can use either the correlation strategy or the strategy of seasonal changes. But remember to take into account all of the factors, which can potentially influence gold. This will prevent you from risks and make your trading more profitable.
There are many ways to approach or attack the market, different types of trading strategies and different ways of implementing such strategies. Some traders do breakouts of supports and resistances, others prefer to trade bounces off trendlines, others trade trend following strategies, others trade mean reversals. Whatever approach you take, as long as you’ve mastered your craft, you could use it to make money off the market. With this strategy however, we will be looking into taking trades based on bounces off of a dynamic support and resistance using a variation of the Bollinger Band. Bands and Channel Based Indicators Bollinger Bands are probably one of the most popular indicators that makes use of channels or bands although there are also other different band-based indicators. They may differ with the way the bands are computed and plotted, but they do work given the right parameters. Band based indicators are great because for many reasons, but what I find most interesting is that because of the outer bands that these indicators have, they tend to have dynamic supports and resistances that move along with the average price. These outer bands could be used in different ways but the most basic way of using the outer bands is as an area where we could consider price to be overextended and could therefore reverse to the mean or totally reverse the trend. Trading Strategy Concept Many traders are familiar with the Bollinger Bands and how to use it. With this strategy however, we will be making use of a variation of the Bollinger Band, the toptahlil_bollinger_and_atr_band custom indicator. This indicator has the regular Bollinger Band, but it also has a second set of outer bands, which is based on the Average True Range (ATR). This gives this indicator two outer band sets which we could use as an area of dynamic support or resistance. We will be trading bounces off this area whenever we spot a decent candlestick with wicks signifying a rejection of these areas. We will only be taking trades with long wicks because these candles signify a quick shift of market sentiment, a shift that takes place in just one period or candle. However, we will not be taking the trade immediately whenever a pin bar candle appears. We will be waiting for price to crossover the average price. The toptahlil_bollinger_and_atr_band doesn’t have a midline. For this reason, we will be using a different indicator as a basis for our average price, the TMA custom indicator. This indicator is a type of moving average which could be characterized as a smooth moving indicator. Although we are taking notice of a possible trade whenever price bounces off the outer bands of the toptahlil_bollinger_and_atr_band, if we take the trade too early, we could still be trading against the trend. Instead of trading right away as soon as price bounces off the outer bands, we will be taking the trade when the change of trend is confirmed by waiting for price to cross and close beyond the TMA custom indicator. Indicators - toptahlil_bollinger_and_atr_band: default parameters - TMA: default parameters Timeframe: 1-hour or 4-hour chart Currency Pair: any Buy (Long) Trade Setup Rules Entry - Price should be bouncing off the area of the lower toptahlil_bollinger_and_atr_bands - There should be a bullish pin bar candle or a candlestick with long wicks at the bottom, signifying price rejection - Wait for price to cross and close above the TMA custom indicator - Enter a buy market order at the close of the candle Stop Loss - Set the stop loss below the entry candle Take Profit - Set the take profit target price at 2x the risk on the stop loss Sell (Short) Trade Setup Rules Entry - Price should be bouncing off the area of the upper toptahlil_bollinger_and_atr_bands - There should be a bearish pin bar candle or a candlestick with long wicks at the top, signifying price rejection - Wait for price to cross and close below the TMA custom indicator - Enter a sell market order at the close of the candle Stop Loss - Set the stop loss above the entry candle Take Profit - Set the take profit target price at 2x the risk on the stop loss Conclusion Strategies that take bounces off the outer bands of a regular Bollinger Bands is a common strategy and many traders have been profitable doing that. However, there are many cases wherein the bounce off the outer bands isn’t just strong enough to reverse the trend. This could work if you are trading a simple mean reversion strategy which aims for just the middle of the Bolling Band or the average price. If you’d like to take trades with a bit more juice in it, you should be taking trades which actually results in the reversal of the trend. This strategy allows you to do this by having an entry after the cross of the TMA custom indicator, which is our average price. There will be many instances wherein price could start a strong trend and if you’d let the profits run, you could be earning more than twice your risk. If you feel a bit more aggressive and opt to aim for higher returns, instead of using a fixed take profit target, you could instead make use of a for trailing stop loss, or close the trade based on signs of a reversing price action. However, this would be a more aggressive route to take as price could also reverse on you or start to form a range, instead of totally reversing the trend. Happy trading!!!
Many successful strategies for trading forex exist, but not all of them are suitable for every trader. Select a strategy that best suits your particular situation, including your available time, personality type and risk tolerance. These are covered below based on the typical time involved, ranging from short to long term. 1. Scalping Scalping is a very short-term trading strategy that involves taking multiple small profits on trading positions with a very short duration. Scalpers need ultra quick reaction times because they usually enter and exit trades in just seconds or minutes. This very fast paced and a rather stressful activity that may not suit everyone. Scalpers also closely monitor price charts for patterns that can help them predict future exchange rate movements. They tend to use very short-term tick charts similar to that shown below for EUR/USD for analysis. Scalpers generally do best using a broker with tight spreads, quick guaranteed order executions and minimal or 0 order slippage. EUR/USD tick chart and trade entry box 2. Day Trading Day trading is another short-term trading strategy that is followed only during a particular trading session. Day traders generally do not take overnight positions, so they close out all trades each day. This helps reduce exposure to market movements when the trader is inattentive to the market. Most day traders use trading plans based on technical analysis on short-term charts that show intraday price action. Many day trading strategies exist, but a popular one, is known as breakout trading. Trades get triggered when the exchange rate moves beyond a given level on the chart for a currency pair and are confirmed when accompanied by an increase in volume. The 30-minute candlestick chart of GBP/USD shows a breakout below the level of the lower of the 2 converging trend lines of a triangle pattern drawn in red. Note that trading volume also increased when the breakout occurred, thereby confirming it. Triangle pattern breakout in GBP/USD 3. News Trading Some forex traders with deep pockets and a decent appetite for risk might use news trading strategies, although they are probably not ideal for forex beginners. These strategies can be based on fundamental and technical analysis and they generally benefit from the notable volatility often seen in the forex market immediately after key news releases. News traders typically need to monitor economic calendars for key data releases. They then watch the market closely before the event to determine key support and resistance levels so that they can react quickly after the event based on the results. News traders need to maintain strict discipline when managing their currency positions during such fast markets and often place stop-loss and take profit orders in the market. An example of an economic calendar and a data release event that a news trader might use is U.S. unemployment claims. This data was especially volatile during the COVID-19 shutdown in the U.S. and created considerable fluctuations in the forex market after its release. Although those jobs numbers were dismal, what mattered most to the market is how the result differed from the market’s consensus. In the situation below, the previous unemployment claims number was 3,176K, the expected number was 2,500K, and the result was worse than expected at 2,981K. This should have put pressure on the U.S. dollar after its release versus other currencies. Forex calendar showing a massive rise in U.S. Unemployment Claims data during the COVID-19 shutdown 4. Swing or Momentum Trading Swing trading, sometimes also known as momentum trading, consists of a medium-term trading strategy that aims to capture more market moves. Swing traders do this by trading both with major trends and also against them when the market is correcting, so they should be willing to hold overnight positions. Swing traders tend to focus on entering and existing positions based on momentum indicators that provide buy and sell signals. Traders use them to find overbought or oversold markets they can sell or buy. Swing traders might also buy ahead of support or sell before resistance levels that develop on the charts of the exchange rate for a currency pair. Some commonly used momentum indicators include the Moving Average Convergence Divergence (MACD) histogram and the relative strength index (RSI). The daily candlestick chart shown below for the GBP/USD exchange rate also displays the MACD and RSI in indicator boxes. Daily chart for GBP/USD with MACD and RSI indicators shown below 5. Trend Trading Trend trading is a popular longer-term forex trading strategy that involves following the prevailing trend or directional movement in the market for a particular currency pair. This strategy often involves buying on pullbacks in up trends or selling on rallies in down trends. After a trend trader has taken a position in the direction of the trend, you will probably hold onto it until the market reaches their objective or the trend starts reversing. Trend traders often use trailing stop loss orders to guard their profits if a significant reversal materializes. Many trend traders use technical analysis indicators like the Average Directional Movement Indicator (ADX) and/or moving averages that smooth out the price action so they can better identify trends. They might also use longer and shorter term moving averages and watch for crossovers to signal a potential reversal. The 4-hour candlestick chart for EUR/JPY below shows an upward trend in progress after a significant decline with a 10-day moving average shown in red and the ADX in the indicator box underneath. 4-hour chart for EUR/JPY showing a down trend followed by an up trend
Want to learn how to trade the spinning top and doji candlestick pattern? In this article, I will show you how to identify the spinning top and doji candlestick pattern, and how to trade them successfully. This article will be the first in a series of price action posts in which I will reveal to you guys everything that I’ve learned about trading price action candlestick patterns and other chart patterns. Doji candlesticks are those who’s opening and closing price is the same. They usually have relatively small upper and lower shadows, although there are exceptions. In the picture below, you can see some doji patterns. In the same picture, you will also notice some spinning tops. Spinning tops are similar to dojis, and in Forex they can be traded the same way. Spinning top candlesticks are those who’s opening and closing prices differ by only a few pips. They, like doji candles, also usually have relatively small upper and lower shadows. How to Trade the Spinning Top and Doji Candlestick Pattern Many misinformed traders treat the spinning top or doji as a reversal pattern. The fact is that, although a doji or spinning top may often be followed by a reversal in price, the only thing it tells us for sure is that the market is unsure about what direction price should be going. In the example above, price did reverse each time; however, often a doji or spinning top candlestick pattern signifies that price is simply slowing down at a level of support or resistance. Price could always continue in the direction it was heading. The most important thing you should take from the lesson is that dojis and spinning tops signify neutrality in the market – not a reversal in price. Dojis and spinning tops can be used to prepare for a possible entry, and you can use them to note areas of support and resistance; however, you should never make a trade decision based on a doji formation or spinning top candlestick alone. As with a few other price action techniques that will be taught in this series, multiple occurrences of these two candlestick formations increase the odds of a reversal in price. Keep in mind that the market can do anything at any time. The majority of my knowledge in price action and candlestick patterns came from Steve. He is credited with introducing the western world to candlestick charts. He is THE expert on price action. I’ve also studied Nial Fuller’s price action course and a few others, but I highly recommend Steve Nison’s courses. I hope you see how trading the spinning top and doji candlestick pattern can be useful to you. Learning these price action techniques is a great way to profit in the Forex market, especially when combined with another profitable trading system.
Interested in trading the hammer candlestick pattern? Pin bars, like the shooting star and hammer, are great for price action trading. Many traders use them incorrectly, so I’d like to show you how to profitably use these candlestick formations in your own trading. We’ve already gone over how to trade the shooting star candlestick formation earlier in my free price action course. The hammer is basically the opposite of the shooting star. Rather than go over the same material, we’ll quickly go over identifying a true hammer candlestick formation, and then add some depth to our understanding of how to trade these two pin bar formations. What is a Hammer Candlestick Pattern? The hammer formation is a Japanese candlestick that consists of a long lower shadow with a relatively small real body at or near the top of the range of the candlestick. The lower shadow must be at least 2x the length of the real body of the candlestick. The color of the real body (bullish or bearish) does not matter, and it should have a small upper shadow. Like the shooting star, this candlestick is a reversal formation. A hammer candlestick must be traded within the context of the market or trend, i.e., a true hammer formation only occurs after downward trending candles. Trying to trade the hammer or shooting star from a neutral/ranging market is a good way to lose your money. Trading the Hammer Candlestick Pattern In the picture below, you can see a good example of how trading the hammer candlestick formation can be very profitable. This hammer signal was followed by a nice rally in price. It formed on the Aussie (AUDUSD) market on the Daily time frame. As you can see, price reversed aggressively after this hammer formation. If you would have gotten into this trade at the 50% entry, you would have been risking about 80 pips. This swing in price has already moved about 828 pips from the 50% entry of that hammer, and could possibly go further. So, far this trade would have given you more than a 1:10 risk to reward ratio. I took this trade, but my take profit was set to a 1:2 risk to reward ratio, which was hit within three days. In retrospect, I would have done much better to close only half of my position when price reached 2x what I was risking. I could have let the remaining half ride up to 3x my original risk, and then closed half of that position, leaving the remaining half (one quarter of my original position) to ride the swing to the top. After moving the stop loss to break even, this becomes a free trade. The only risk in this trade, at that point, is risk to potential profit. Each time the upward trend made a new higher low, I could have moved my stop loss to just below the latest higher low – effectively capturing the majority of this swing in price (see the image below). Another piece of advice that you might consider is that these price action formations are more meaningful on longer time frames. I typically do not take any trades based on the price action of a chart less than 15 minutes; however, the 1 Hour chart is more meaningful, the 4 Hour chart is better, the Daily chart is even better, etc…. That being said, you will not see as many of these price action formations as you move up to higher time frames. That should be pretty obvious, because there are simply less candlesticks for any given amount of time on a higher time frame chart. This is true, not only for price action trading, but for any style of trading. There will always be a delicate balance of trying to get enough trading setups, while also trying to choose the most meaningful trade setups.
In the last addition to my free price action trading course, we went over the bearish engulfing pattern. In this article, we will go over trading the bullish engulfing candlestick pattern. The bearish and bullish engulfing patterns are considered fairly strong candlestick reversal signals. The bullish engulfing pattern is essentially the opposite of the bearish engulfing pattern. Like I previously stated, in my article, Trading the Bearish Engulfing Candlestick Pattern, these engulfing patterns are often misused. Rather than revisiting all the same points again, I’ll simply define the bullish engulfing pattern, and then we’ll try to expand upon our knowledge of trading these useful candlestick signals. What is a Bullish Engulfing Candlestick Pattern? The bullish engulfing pattern consists of a candlestick that opens at or below the close of the previous candle (almost guaranteed in Forex), and then closes above the open of the same [previous] candle. As I stated before, the most effective way of trading these signals is based on the price action of the real bodies (open to close) of the candles – not the total range (high to low). I’m defining a bullish engulfing candlestick pattern as one in which the bullish real body of a candle engulfs the bearish real body of the previous candle. In some frequently gaping markets, you may encounter cases in which a bullish candle engulfs another bullish candle. I don’t have experience with these, as I am purely a Forex trader. Effective candlestick patterns must be traded within the context of the market. Since this pattern is considered a bullish reversal signal, a true bullish engulfing pattern will only come after a bearish movement in price (consecutive lower lows). Note: Occasionally, you may find engulfing patterns occurring during periods of market consolidation that would have been effective, but we are only interested in what usually happens – not what occasionally happens. In the long term, you will lose more often than you win by taking these signals during consolidation periods. Trading the Bullish Engulfing Candlestick Pattern In the image above, you will see a small bearish movement in price, followed by a bullish engulfing candlestick pattern. You could have made a nice profit by entering a buy position at the open of the candle following the bullish engulfing pattern. Placing your stop loss at the bottom of the bullish engulfing candlestick, this trade would have been worth nearly 2x your risk. Like many of these candlestick reversal signals, trading the bullish engulfing candlestick pattern is usually more effective, or at least a higher probability trade, when it follows a sharp decline in price. The reason for this is pretty simple; market prices are driven by psychology. After a sharp incline or decline in price, traders lose faith that the market can sustain such a sharp incline or decline for long. While amateurs may try to chase price, the big players will start taking their profits or entering trades against a quick, volatile price movement (see the image below). Sharp price movements are not, however, a necessary precursor for trading these patterns. Many times all that is required is a small consecutive movement in price in one direction or the other, as you can see in the first image. As I stated in my last price action article, the relative sizes of the candles involved in these patterns are important. Some traders, for instance, will not trade an engulfing pattern unless the engulfing candle is much larger than the previous candle. I have not personally found that to be any better or worse in indicating how strong the potential reversal that follows will be. In fact, if the engulfing candle is too large, it can sometimes swallow up much of the price movement, and leave you with a poor potential risk to reward ratio. Final Thoughts The context in which these patterns occur is very important. You should never trade reversal signals from periods of market consolidation. That being said, these engulfing patterns, as well as other candlestick reversal signals, can be very effective after just a few candles have made consecutive higher highs or lower lows. Occasionally, the engulfing candle in one of these patterns will be very large. Many traders would say that a relatively large engulfing candle signifies a strong reversal ahead. However, a larger engulfing candle requires a larger stop loss in pips (obviously), and may lower your potential risk to reward ratio. Enter such trades with discretion. Typically, an engulfing candle that engulfs more than just the previous candle is an even stronger signal. The more candlesticks that are engulfed, the stronger the signal. Again, keep in mind that the larger the engulfing candle, the less likely it is that you will be left with a favorable risk to reward scenario. Since candlestick signals are only reliable in the short term, there is no guarantee that price will continue to move in the direction that is indicated by the signal. Lastly, any good trader will incorporate good support and resistance levels into their trading signals. Engulfing patterns that are bouncing off of relevant support or resistance levels are more likely to reverse. Previous swing points, obvious supply and demand levels, relevant Fibonacci levels, trend lines, dynamic support and resistance, etc… should be considered when taking these trades. Engulfing patterns can be very profitable, if you know when to take these signals and when to pass on them. Using a good trading system, especially one works well with candlestick signals, like the Top Dog Trading or Infinite Prosperity systems, can help you qualify the best signals to trade. After a little screen time with your demo trading platform, you should be trading the bullish engulfing candlestick pattern just like a pro.
Trading the trend in any market is a great trading strategy and using the Parabolic SAR to find reversal points in the direction of the Forex trend makes it even better. We are going to use the 100 period exponential moving average to show us the trend. This is a longer period moving average than most people are used to considering the 20 period moving average is the most popular. For day traders, you could swap out the 100 EMA for the 20 period moving average or even the 10 period MA. Why Use The Parabolic SAR In A Trading Strategy J. Welles Wilder invented this trading indicator and the Parabolic SAR stands for “stop and reverse”. In an uptrend, dots form under the price until price reaches a certain point when it flips to the top of price giving you a sell signal. This is where the Parabolic SAR gets the “stop and reverse indicator” name from. Seeing as Parabolic SAR is a trend following indicator, the “flip” from bottom to top would indicated that longs should close their trading position and then sell the market they are trading. For Forex traders, that simply means that the quote currency, the second currency in a Forex pair, has gained some strength. Parabolic SAR Buy Signals – Sell Signals Any trading strategy that uses the Parabolic SAR has a built in trailing stop function. As price declines for example, the dots will decline as well and seeing as “stop and reverse” is the main feature, you can use the dots as a stop out location. As with any trading indicator you are using for a strategy, you can make Parabolic SAR move sensitive by adjusting the increment setting. I use the default parameters as over optimizing a trading indicator to make past data look better, is a rookie mistake. We are going to use the Parabolic SAR to give us both buy signals and sell signals but we will not stop and reverse our trading position. Using The Moving Average With Parabolic SAR Using the 100 period exponential moving average will gives us the opportunity to stay inside of the major trend direction while taking only the signals that fall in line with the current trend. If you were to take every flip of the Parabolic SAR as a trading signal, you could find yourself entering and exiting positions quickly for a loss in a whipsaw market condition. Any trend following indicator is prone to fail in a market that is not trending. Since markets only trend about 35% of the time, you can see a filter will help you stay out of low probability trading conditions. 100 EMA For Trend Direction Using the 100 moving average will help keep us in line with the larger trend and prevent over trading. Taking a look at the red box, you can see price action is showing consolidation and the Parabolic SAR is flipping back and forth giving buy and sell signals. It would have been tough trading just taking the buy signals (look closely as some were profitable) even though there was a probability of a larger up move due to the overall trend direction. Taking sell signals as well would have chopped your Forex trading account to pieces. Parabolic SAR Trading System Rules Every trading strategy needs rules and the number one rule we will have for the Parabolic SAR strategy that we will use for swing trading is:trade only in the direction of the 100 EMA. Our rules beyond that are quite simple. Complex trading rules can lead to you not following the trading plan you have written which leads to a failed trading business. All successful traders follow a written trading plan and I suggest you do as well. Buy Signals (just reverse for sell signals) - We need price to trade above the 100 period moving average. If price is whipping around the EMA, we will choose another market - The Parabolic SAR must print a dot beneath a candlestick and that will be our buy signal - Place a buy stop order so momentum on the break of the setup candlestick high will take you into the market - Use a few pips below the printed dot for your initial stop loss location Parabolic SAR Trading Setups Let’s break this chart down to see how the Parabolic SAR signals worked out in relation to the uptrend given by the 100 EMA. 1. Notice price is whipping around and close to the 100 EMA. The two blue lines are the support and resistance levels of a range that has formed due to consolidating price action. We need to wait until price moves from the moving average before considering any Parabolic SAR trading signals. 2. Large momentum move and price action and price structure traders can see price is actually sitting on the former resistance level of the range. The white line is the buy signals with the small arrow indicating where you’d place a pending order. 3. This is where the stop and reverse nature of the Parabolic SAR comes in. We would exit our long position and not take the sell signal due to the trend. 4. Buy signal occurs when the blue dots appear below the candlestick. We don’t get triggered in the trade due to placing a pending order a few pips from the high of the setup candlestick. 5. A sell signal is given which cancels the long setup. 6. Another buy signal is given and price takes off to the upside Stop Loss Location The white arrows are showing where the stop loss would be on these trades when triggered. You can see that it is a fairly large stop which would require a smaller position size. The trades did not trigger at the setup candlestick and as the blue dots climbed upwards while the trade order was still pending, you could alter your stop loss to be in line with the new plotted dots. Traders who understand price action including pullbacks and breakouts, could use the dots as a potential trading setup. Alternative Parabolic SAR Trading Strategy Let’s look at the same chart but with a different trading persepctive Alternate Trading Strategy Using a more price action approach, is there a way we can combine the moving average trend direction with the Parabolic SAR buy and sell signals? Yes. Let’s use the signals to alert us to a potential trading pattern. 1. The buy signal brings us to the chart where we see momentum move and price consolidating at highs. I talk about this type of setup in my weekly Forex setup updates. We can play the breakout and use the corresponding blue dot for our stop. We can also use the candlestick shown by the green arrow. This is a failure test of lows where we can buy inside the range at the high of that candlesticks 2. This sell signal alerts us to watch for a price action pattern. Here we get a pullback in price and without a blue dot switching to the bottom, we are not brought into a long trade when price has the little rally in the middle of the pullback 3. Price breaks out of the trend line with a corresponding buy signal but does not go much further. Price pulls back and the sell signal cancels any trading play 4. Price action shows a retest of the broken trend line (which we see happen a lot!) and then a break of the down trend line with a corresponding buy signal You can see that combining price action trading along with trading in the direction of the trend and with the proper SAR signal, we can get some great trades in this Parabolic SAR strategy!
Using the Awesome Oscillator developed by Bill Williams with the RSI (relative strength index) combines the power of measuring momentum with the Awesome Oscillator Indicator and overbought or oversold conditions with the RSI. The Awesome Oscillator (AO) may be new to some traders so here is a brief outline of this trading indicator. What Is The Awesome Oscillator Bill Williams usage was to measure the momentum in the Forex market (or any market) by using a combination of: - 34 period simple moving average of the median of the previous 34 candlesticks - 5 period simple moving average of the median of the previous 5 candlesticks - Zero line plus histogram Awesome Oscillator 1. When the AO is below the zero line, we can determine that the short term moving average, 5 period SMA of median price, is lower than the 34 period moving average. This is a down trend 2. When the AO is above the zero line, we can determine the trend is now an uptrend 3. When the histogram is rising green, we can determine that the AO value of this candlestick if higher than the previous 4. When the histogram is falling red, the value of the AO is less than the previous candlestick While some traders may present these are buying or selling signals, they more accurately present an opportunity and not a signal to buy or sell at that moment. We can also use an AO term called a “twin peak” which can show divergence in the Forex pair you are trading. AO TWIN PEAK You can see this currency pair make a lower low on the right but the awesome oscillator is making a higher peak. The key is that the area between the two peaks remains above or below the zero line depending on location of the peaks. In this case of this chart, we need the histogram between the peaks to remain below the zero line. Awesome Oscillator + RSI Forex Trading Strategy We are going to combine the awesome oscillators ability to help determine momentum with the RSI overbought/oversold condition to produce a trading strategy. This is a form of technical analysis and we will use price action to trigger us into a trade. We can day trade, swing trade, and even position trade these setups. Your time frame will depend on how much time you can devote to trading. Regardless of your approach, ensure a stop loss is used and that risk management is considered before taking any trading signal. Now that you’ve understood the background, lets got straight in to actual rules of how to trade the RSI with awesome oscillator. For the buying and selling rules that you are going to read below, refer to this chart where you can see examples of a sell and buy setup: AWESOME OSCILLATOR RSI – BUY SELL SETUPS On the left, we are looking at a trading setup to go short 1. Has the 14 period RSI been above the 70 level? If yes, has it turned below that level? 2. If the RSI is now less than 70, is the Awesome Oscillator showing us a red histogram bar? 3. If the AO is showing red, we look to sell 2-5 pips below the current candlestick to allow price action to take us into the trade On the right, we are looking at a trading setup to go long 1. Has the RSI been below the 30 level? If yes, has it turned above that level? 2. If the RSI is now above 30, is the Awesome Oscillator showing us a green bar? 3. If the AO is showing green, we look to buy 2-5 pips above the current candlestick to allow price action to take us into the trade There may be times where the cross of the RSI is followed 1-2 candlesticks later with a turn of the awesome oscillator color. A trader may consider that still valid however a trading plan may have a limit on the number of candlesticks that it takes to turn the AO. Also note that we are not concerned with the zero line cross although you may wish to use the histogram crossing zero as a time to add to your position. If you recall, a zero line cross indicates a trend change and it is possible that by using the RSI, you are picking up an oversold/overbought Forex pair and catching a trend reversal. Stop Loss And Profit Targets Stop loss is essential to your longevity as a Forex trader. There are many ways to set a stop loss and you may consider using the swing high/low that precedes the trading setup as one. Just ensure you are not setting your stop right below swing lows or above swing highs. Those are places of liquidity and I personally use those zones as failure test trades. You will be getting taken out of your position at the time you should be entering. Another stop loss plan is to use a multiple of an ATR such as 1.5 X ATR and that uses the actual volatility of the currency pair you are trading. Profit targets can be set as a multiple of your risk or for a more trend following approach, hold your position until the zero line of the awesome oscillator is crossed in the opposite direction of your trade. Picking tops and bottoms is rare but it can be done at times. Catching the start of a trend run can make your year! Perhaps even consider getting out with an oversold/overbought condition however the markets can stay in that condition for quite a while. It does NOT mean the trend is reversing. Simple Market Analysis I think this is a decent approach to the market especially for those beginning market analysis. Knowing when momentum is in the market combined with a market that is “overdone” can teach a new trader a lot about price action and market tendencies. Are there drawbacks? Sure. Getting chopped in price consolidations can be tough on a trader and that can certainly happen with this strategy. Using price action as a technical analysis way of seeing consolidations form (that includes chart patterns such as triangles), can save a trader a ton of grief. Once a market stops makes higher highs/ higher lows or lower highs and lows, then you run into some issues with forming ranges. Just be aware. Overall, fire up your chart and add these indicators to see if you can find a trading edge with them.
In the last couple of articles of this price action course, we began learning about multi-candlestick patterns. In this article, we will learn about trading the morning star candlestick pattern – our first three-candle pattern. The morning star candlestick pattern is considered to be a fairly strong price action reversal signal. Many traders find this pattern reliable enough to consider it their favorite trading setup. At the same time, many price action courses leave this candlestick pattern out altogether, because it can be tricky to qualify. I trade this pattern, and have found it to be pretty useful. If you learn how to trade it correctly, you might find that this price action pattern is pretty useful to you as well. What is a Morning Star Candlestick Pattern? A true morning star candlestick pattern is a bullish reversal signal, and therefore, only occurs after an established downtrend in price. Traders vary on what they consider to be a downtrend. Some require lower highs and lower lows, while others require only a short streak of consecutive lower candlesticks. A morning star pattern, in Forex, is basically a variation of the bullish engulfing pattern. However, the second candlestick in this three-candle formation must be a low range candle, like a spinning top or doji (not required in a regular engulfing pattern). This pattern consists of a relatively large bearish candle, followed by a small real-bodied second candle that is either slightly bearish or a doji (since there are rarely gaps in Forex), and then a third candle who’s real body pulls into and closes past, at least, the halfway point of the first candle’s real body (see the image above). A non-Forex morning star is similar. The only difference is that, since most other markets gap quite often, the second candle needs to be isolated outside of the other two candles in the pattern. The second candle can have a small bullish or bearish real body, or it can be a doji. The second candle must not be an inside bar (or harami). The third candle, in a non-Forex morning star, should open at or below the first candle in the pattern. However, it should not engulf the second candle, but leave it isolated (see the image on the right). Note: Occasionally, in Forex, you will see a morning star that looks like a non-Forex morning star (except it will most likely have a slightly bearish second candle). If the third candle gaps up, and leaves the second candle isolated, this is a strong bullish signal. These cases are rare, but they can be very high probability signals. Trading the Morning Star Candlestick Pattern In the images above, the candlesticks of the morning star patterns did not have very long lower shadows (or wicks). The risk to reward ratio is best with this pattern when all the lower shadows are short, and the third candle in this formation closes just above the 50% mark of the first candle of the formation. Remember: Your stop should be placed one pip below the lowest low of the cycle. In a buy position, you do not have to include the spread cost into your stop loss positioning. The spread is added to your entry level. However, the morning star doesn’t always form with those ideal conditions, and that type of formation is not necessarily the highest probability signal that this pattern provides, either. In the image above, you will see a strong bearish price movement, followed by a morning star candlestick pattern. As I mentioned earlier, in Forex, the morning star usually looks like a variation of the bullish engulfing pattern. In the pattern above, the last candle of the pattern engulfs the previous three candles (nearly four). This is a strong bullish signal, but the length of the third candle has diluted the risk to reward potential on this trade (assuming you were planning on entering at the open of the next candle). To make things worse, the second candle in the morning star pattern was a dragonfly doji. The long lower wick of this doji means an even lower risk to reward scenario, yet it is a slightly bullish signal. This pattern would have actually worked out nicely any way you decided to trade it. They don’t always work out like this. If you would have entered at the open of the candlestick immediately following the morning star pattern, and placed your stop loss one pip below the lowest low, you could have still made a profit of about 2x your risk. However, there is another way to trade this pattern. The guy that first taught me how to trade the morning star would have waited for a pullback on this one. Occasionally, when the third candle of this pattern is relatively large, price will pull back into that candle. Like the pinbars, 50% of the total range of the third candle is a good target, or even 50% of the real body of that candle works well. If you would have entered the trade after price pulled back near the 50% mark of the outside (third) candle, you could have made more than 3x your risk. Note: The pullback does not happen every time a large third candle forms when trading the morning star candlestick pattern, or even most of the time. This is simply a technique to raise your risk to reward potential on a trade that you would have otherwise not taken. Watch for a rejection of price at the 50% area. Final Thoughts I’ve said many times before than context is everything when it comes to candlestick signals. When taken after an established downtrend, trading the morning star candlestick pattern can be very profitable. Some traders use this pattern as their main trading setup. In Forex, the market doesn’t gap very often, especially when trading the major pairs. Consequently, the second candlestick in a Forex morning star pattern should be slightly bearish or a doji. The alternative leads to an inside bar, and a third candle with no relevance to the pattern. The third candlestick in this pattern needs to pull into and close, at least, in the top half of the first candlestick. However, the third candlestick can be larger, and it often engulfs the previous two candlesticks or more. When that happens, it is a strong bullish signal, although it necessarily lowers your risk to reward potential. As I’ve said before, I don’t usually take these candlestick patterns as trading signals by themselves, although many traders do so successfully. I prefer to combine these signals with a profitable trading system to qualify the best candlestick signals to take. Remember to demo trade, before trading the morning star candlestick pattern with your hard earned money. Happy trading!
With the right mindset and preparation, Forex trading can be truly rewarding. Yes, learning to make money and having financial freedom is something many desire. However, there is an additional reward when you learn a strategy, and work to perfect the consistent execution time and again, watching a trade move from entrance to exit just as smoothly as you planned. Although this is a great reward in and of itself, the fun part is being profitable. This, however, is difficult to do over an extended period of time – unless you master a proven trading strategy that can provide consistency in your trading. The Cornflower Blue strategy is one way you can find fairly low stress, consistently successful trades in the erratic market of foreign exchange. The Cornflower Blue trading strategy has been around for a number of years now and is a proven method of intraday trading for Forex. The strategy is based in following the trend and trading using EMA’s (Exponential Moving Average) that represent various time frames. The job of the EMA is to reflect an overall directional average of a specified time frame. These EMA’s can be helpful in trend trading because they can help you to identify a trend, how strong it may be, and the direction it has been consistently moving over a period of time. This information can be very useful to a trader. Example: If you know there has been a strong and consistent bullish trend, and you have an indicator telling you that it will likely continue trending up for the next day or two, then you should probably opt to trade buy positions. Trading with the overall trend, your trades are less likely to be stopped out. The trend is your friend – until it ends! Direction is important, but it is only one part of a successful trading equation. A solid trading strategy has a few common components to it. Direction will be one, entrance and exit will be another. Of course, position size and profit targets vary from strategy to strategy. For instance, if you are using a scalping strategy, then your pip expectation should be smaller than if you were using a swing strategy. You must adjust your position size and stop losses accordingly. The Cornflower Blue method is an intraday strategy and on average will yield about 20 pips, sometimes more if the trend is strong. This trading strategy is great for beginners because it helps you identify and trade with the trend. Trading the Cornflower Blue Strategy Below is an example of what a trade with the Cornflower Blue strategy may look like. The blue checkmark shows where you could place a trade (the candle beneath the checkmark). You see early on there is an initial breakout, then the candles consolidate, but the EMA’s show a continuation of an upward trend. There is a pullback and a bounce off of the 12 EMA (violet line). See the full entry and exit rules below. In this trade, that one candle yielded 45 pips and you can see candles continued on for many more pips over the course of a few hours. (This would have been a good place to set a trailing stop and let your profits run.) The basic template setup for the Cornflower Blue Strategy is: 8 EMA – Using a yellow dotted line12 EMA – Using a violet solid line24 EMA – Using a cornflower blue solid line72 EMA – Using a khaki solid line Each EMA represents a different time frame and tells you what the market is doing in the short term, as well as in the long term, and everything in between. The 8 EMA is the most immediate or shorter term moving average, staggered all the way up to the 72 EMA which reveals the most prevailing and long term trend for the market at that time.The 12 EMA will be the place where there is the most support when the trend is strong. This setup should be done on the 1H chart which is where you will want to watch and typically place your trade. To establish the trend all EMA’s should be lined up in order, and heading in the same direction (up or down). Entry: Once there has been a breakout, or the establishment of a new trend, wait until the market slows down a little, and watch for a pullback to the 12 or 24 EMA. (If it is a strong trend it will likely just bounce off of the 12 EMA.) When there is a pullback, place a trade on the next new candle. Exit: A typical Cornflower Blue trade will run around 20 pips, but if there has been news, or it seems particularly strong, you can set your take profit for a higher pip value and just use a trailing stop to get as many pips as you can. (Or if want to be conservative, place a TP for 20 pips and watch for another pullback later in the trading day.) Stop Loss: A good stop loss would be between 5-10 pips. When you start with the Cornflower Blue trading strategy, you may want to give yourself a little more room (in other words, widen your stop loss) initially, but as you learn to streamline your entrance timing, a smaller stop loss will be sufficient. A few additional tips when trading with the Cornflower Blue Strategy: 1. Even though you want the 1H to be your main chart, if you flip up to the 4H, and down to the 30M and 15M, you can see if the 8, 12, and 24 EMA’s are all on the same side of the 72 EMA. This will help to confirm the trend direction and its possible strength. 2. Wait for the first 5-10 minutes for a new candle to indicate its possible direction, and then place your trade if it’s heading in the direction of the trend. 3. If your candle slows down, and your price pauses or stalls, you may want to consider exiting the trade (or at least lightening up on your position). Contrary to what you may have heard, you don’t always need a large amount of pips from each trade to be a successful Forex trader. Risking a small amount per trade and gaining a small amount of pips consistently over time can make you rich quicker than you may realize. Consistency is the key, though, and to be consistently profitable you must know at least one profitable trading strategy and become an expert at it. All it takes to be a successful trader is a good money management strategy, psychological discipline, and proficiency in at least one profitable trading strategy. The great thing about the Cornflower Blue strategy is that is an extremely simple, yet reliable method of trading Forex on any major pair. It is great for beginners because of the simplicity, and because teaches you to identify trends, which will be helpful with other methods of trading as well. You won’t have to risk much, but you can potentially gain a lot of pips, without a lot of stress and worry, using this trading method.
With following of balanced system Strategy and using multiple Indicators you have a grater chance to enter into a winning trade. - TimeFrame: 1 hour recommended works on others as well - Symbol: EURUSD preferred but it works on any currency - Risk: MAX 1% of account equity per order - Indicators: - Moving Average (200 EMA) - Relative Strength Index (RSI 14) - Stochastic Oscillator (14, 3, 3) - MMA Colored_v3 (Fast: 5, Mode_Fast: 1, Slow: 10, Mode_Slow: 1) Balanced System Strategy Overview: Make sure you have your chart setup right as above for the Balanced system strategy to work. You can download all indicators below. For better results make sure you do NOT trade at least 30-60 minutes before major news releases. Also make sure if you still have open order when major news is about to hit make sure you set your BE and SL appropriately. We will be entering BUY orders only if PA is above EMA 200 or SELLing orders only if PA is below EMA 200. First sign to enter the order is when EMA 5 crosses EMA 10. If it crosses above then BUY orders should be considered. If it crosses below then SELL orders should be considered. For confirmation you should always check RSI that for BUY orders RSI is above 50 and for SELL orders RSI is below 50. Second confirmation is Stochastic that its moving up and should be below 80 for BUY order or Stochastic is moving down and it should be above 20 for SELL order. Balanced System Strategy Entry Rules: - if PA is above EMA 200 then consider only BUY orders if its below EMA 200 then consider only SELL orders (if EMA 5 and EMA 10 and EMa 200 are really close together consider skipping the signal even if all other signals are good to go. - if EMA 5 (green) crosses above EMA 10 (orange) after candle close this is our first confirmation signal for BUY order if EMA 5 (green) crosses below EMA 10 (orange) you should consider SELL signal - for BUY order RSI is ABOVE 50 and for SELL order RSI is BELOW 50 - for BUY order Stochastic needs to be going up (raising) and needs to be below 80. For SELL order Stochastic needs to be going down (dropping) and needs to be above 20. If all above conditions are meet you can enter either BUY or SELL order based on your signals Balanced System Strategy will work only if you follow all of the above steps. SL should be set below previous swing low or swing high. Second option is to set SL below 200 EMA. Please note: - DO NOT Trade at least 30 minutes before major NEWS is scheduled! - If EMA 5, EMA 10 and EMA 200 are close together wait for a better signal - DO NOT trade if EMA 5 does NOT cross EMA 10 so that its clear that it crossed! Balanced System Strategy Exit Rules: - Exit BUY trade if EMA 5 crosses below EMA 10 and exit SELL order if EMA 5 crosses above EMA 10. - Exit any trade if you think PA will move against you due to a Support & Resistance levels. Better take some profits then no profits.
Symphonie Matrix Strategy is easy strategy for beginners where Trend, Emotion, Sentiment and Extreme work together to form musical winning strategy. When you put that on screen you get a very powerful system for beginners and intermediate. This strategy goes well with support & resistance lines to time and predict exit out of market. First in order to be able to play with the strategy you need to get the Symphonie Matrix Indicator for MT4 and install it on your MT4 / MetaTrader 4 Platform. - TimeFrame: 5 minutes (preferred) works on all other TFs - Symbol: any currency / best on EURUSD - Risk: MAX 2% of account equity per order - Indicators: Symphonie Matrix Indicator for MT4 Symphonie Matrix Strategy Overview: This Symphonie Matrix strategy is best used on 5 min timeframe but was successfully tested on all timeframes. First thing after you install the indicator is to fine tune the settings for the timeframe you want to use it on. Indicator supports multi-timeframe options and you can drag and drop multiple indicators on the same chart to get MTF indicator (you only need to set the ForceTimeFrame option). There are other options in Symphonie Matrix Strategy for Trend, Emotion, Sentiment and Extreme. Fine tuning that based on your trading and based on each timeframe is unique. For me the default options which are already set work great. Symphonie Matrix Strategy Entry Rules: We will be entering the PENDING BUY / SELL order when all four colors turn same color. Blue for BUY and RED for SELL as shown in the picture above. When Symphonie Matrix Indicator turns for example all RED on candle close we will place pending SELL order 5 pips below the candle wick which is in straight line with all four colors. Then we will wait for Price Action to come get the order. If any of the Symphonie Matrix Indicators changes color and Pending order is NOT hit we delete the order and we wait for the next same color rack. It is recommended that you delete the order even if it did not hit the Pending Order in the next 3-5 candles even if Symphonie matrix color is still the same and wait for the next change of major colors. SL should be placed 20 or 30 pips away from the Pending order or previous swing high. Please note that if your Pending order is hit you should place BE (Brake Even) to +1 or +2 pips as soon as Price Action gets 10 pips in profit! This will protect your investment if PA reverses and takes you out in negative. Symphonie Matrix Strategy Exit Rules: - There are couple of options to exit the trade. The most recommended one is to use Support & Resistance lines and exit the trade on them. - Second option is to set TP (Take Profit) with win/loss ratio of 1:1 with SL (Stop Loss). So if you set SL to 20 pips your TP should be set to 20 pips. - Third option is to trust Symphonie Matrix system and wait for Trend bar to change color and close the order.
Introduced by Martin Pring, Pin bar strategy for Forex offers an excellent way of understanding and practicing the mechanics of Forex trade. In his assertion, the trading patterns are modeled based on a specific pattern of appearance. This is compared to a candlestick with the strategy being highly applicable on major pairs and longer timeframes. The use of 1H, 4H or daily Forex charts is advised as this helps you identify the prevailing patterns before making your move within the Forex trading framework When to enter trade under pin bar strategy Under Forex pin bar strategy, a trader can enter trade early or wait for the breaking of the pin bar. Early entry to trade gets you better prices. However, there are only minimal chances of the trade working out. In this case, the entry times in the pin bar strategy are mainly either at the close of the pin or waiting for the pin bar to be retraced. In the case of making an early entry, the risk of losses is high. Consequently, the returns attached to the debut entry are also commensurately high. With the possibility of your entry coinciding with the retracement being low, the only other reliable entry is at a later date at time on retracement. However, this comes with a considerable high risk of waiting for the pin to break. Moreover, waiting exposes you to the danger of the prices not making it to the chosen retracement level. If this happens, you lose out on good trade leading to opportunity and actual losses. Profitability of a particular method in this case depends on the position at which the pin bar closes. Even at riskier conditions, aggressive initial setting of the stop loss would lead to good trade setups leading to more deterministic conditions. To try luck on both ends, some traders opt to enter at both times with more money being invested in the more predictable entry point. How and When to exit trade, take-profits and stop loss level settings: When planning your exit, you should consider the prevailing market conditions at the time of exit. This leads to you being classified as either an aggressive or conservation trader. In such a case, conservative and aggressive traders use different exit strategies. The below discussion illustrates how and when to exit for aggressive and conservative traders. Aggressive trading with ping bar strategy Here, you enter a position when the right eye price repeats after the left eye close level. In addition to this, a commensurate take-profit level is placed farther. Setting it close to the next strong level offers the most prudent decision. This leads to automatic resistance to bullish positions. In such a case, you should set the stop-loss behind the nose-bar point. However, your reward-risk ratio may be affected in the event that your speculation fails to materialize. Conservative trading with pin bar strategy Conservative traders often set their entry point below the nose bar. However, this is in most cases above the nose bar in case of a bullish setup. In addition to this, the stop-loss is set behind the nearest support or resistance level below the eyes. As a consequence, a conservative take-profit can as well be set immediately above the left eye’s lowest point. For bullish trading, the take-profit level is set above the left eye’s highest level. Spotting pin bar: You can either use some indicators that detect pin bar or you can just keep an eye open to detect the pin bar. Remember strategy is only good in high timeframes so spotting the Pin Bar should be easy and you should have enough time to plan your entries.
Scalping on 15min is very popular trading Strategy and with Towers Scalping Strategy you can have positive return in trades. It is traded with great success! - TimeFrame: 15 minutes (preferred) or 5 min - Symbol: any currency - Risk: MAX 1% of account equity per order - Indicators: - Rainbow MMA Indicator Towers Scalping Strategy Overview: With Rainbow MMA Indicator the Towers Scalping Strategy works great on 15min timeframe. If Price is above Rainbow MMA Indicator then trend is bullish. If Price is below Rainbow MMA Indicator then trend is Bearish. For the Towers Scalping Strategy to work you need to watch for Price to move towards Rainbow MMA Indicator. When Price reaches the Rainbow (wich or full candle) you check LAST 3 candles and if they are one after another rising or going down that is your Entry Point on the opposite of the last third candle. I know its confusing but you can check picture below for the explanation: Towers Scalping Strategy Entry Rules: BUY Order Example: - For BUY order price NEEDs to be ABOVE Rainbow and going towards rainbow - When Price touches Rainbow you check LAST 3 candles (including candle that touches Rainbow MMA Indicator we label it CANDLE 1) - Last 3 candles NEED to be going lower and lower with making lower highs (marked with BLACK line on below Image) - When candle closes you set PENDING order just ABOVE last CANDLE 1 wick (marked with BLUE line on below Image) - you wait MAX 2-3 next candles if Pending order is HIT take the ride to profit but if its not, delete the pending order and wait for new opportunity. - you should set SL on the opposite side of the BUY Order Candle 1 - TP is 1 times of SL so the risk / reward ratios is 1:1 Towers Scalping Strategy Exit Rules: - When TP is hit which should be 1 times of SL with risk / reward ratio of 1:1 - Second Option is to take out half order on TP and set BE to +2 pips and then let it run and exit on support / resistance levels
Learning to trade the Forex market can be an overwhelming venture. Just like any other career or trade a person needs to learn, it takes time. There are many parts to trading including reading charts, candlesticks, and timing. Regardless of all of that, the first thing a new trader needs to decide is what type of trader they are. There are three general types of active trading; scalping, intraday, and swing trading. Factors that help determine the trading style are: how much time an open trade position is maintained, trade size (or position size), and the type of money management strategy that is used. Comparing the pros and cons of all three approaches may help you decide which trading style suits you best. The Pros and Cons of Scalping, Intraday, and Swing Trading Scalping Scalping is typically the shortest term style of trading in the markets, as scalpers seek to lower risk exposure by lowering their time in the market. Scalping usually yields the smallest gains per successful trade of the three styles that we will discuss. Pros: - Positions are typically only held for short periods of time, allowing less chance for reversals to knock out your trading position. This also means less need for patience and having to wait for a trade to close. - Scalpers typically take profits at 1:1 risk to reward or less, allowing their strategies to achieve a higher strike rate, rather than a high reward rate. - Because the position is typically held for a short period of time, there is also less knowledge of the Forex market, and trading strategies needed, as long-term analysis not as useful. Trends, pivot point, Fibonacci, and the like are fairly irrelevant. Cons: - Not all brokers allow for scalping on their platforms. - Since good trades typically yield only 1:1 risk to reward or less, one loss can deplete the gains of several successful trades. - Since the pip yields are often 5 pips or less, you may have to make many trades, even dozens in one day to accomplish your financial goals. - As I mentioned before, scalpers are in a world of their own. Long term analysis from your favorite fundamental resources or indicators is generally useless in scalping. This can be a blessing or a curse. Intraday Trading The next trading styles, intraday trading, is more common among Forex traders. Intraday trading is also simply known as day trading and refers to holding a position for a day or less. It’s common for a day trader to actually make more than one trade in a day, and have the positions only hold for an hour to a few hours. Pros: - The amount of pips per day trade can range from 15-45 easily. And with a couple of good day trades in a 24-hour market, it can be easy to walk away with 100 pips in a day. - With the time an intraday trade takes, an individual can choose from a number of strategies like price action, the Cornflower Blue, pivot points, or basic trend following to help them have consistency and intentionality when trading. - Intraday is also a fairly low-risk trading. To open a position of this size may only require a small amount of capital and a stop loss of less than 10 pips, even smaller depending on the strategy used within the trade. Cons: - An intraday trade will need more time to move than a scalp trade, and there is less margin for error than in swing trading. Even with a good trading strategy reversals and whipsaws can quickly take out a stop loss. - Intraday traders subject themselves to more market volatility than swing traders and stay exposed (with open positions) longer than scalpers. - Even though some days will contain multiple trades, some days won’t offer any. A person trading an intraday strategy follows a strict set of rules, and may not always have a set up in the market. Swing Trading The last major form of active trading in the Forex market is swing trading. This is really a form of trading that really takes patience. Positions are held longer, but gains are massively larger. Pros: - The gains on a trade can be 100-250+ pips. - Signals on the daily charts are generally more meaningful. - Because trades are taken on daily charts, stop losses are bigger. This allows for more movement within the trade, and positions are less vulnerable to whipsaws. - Due to the trade being kept for a longer period of time, a trader doesn’t have to sit in front of a computer all the time or check it constantly throughout the day. Swing traders typically check the market once a day, as the new candle or bar begins, each day the market is open. Cons: - Although swing traders have the freedom to be away from their computers while their trades are in play, the market can be very unpredictable. One forgotten or unexpected news release, and the market can turn and take your money with it. - For swing traders, there is only one new candle or bar each day, meaning there will be fewer trades made over any given time, compared to the other two trading styles. This means you have to use a profitable trading strategy and follow your rules religiously. With as little as one trade a week or less, you cannot afford to be wrong very often. Each style of active trading has its pros and cons. Each trading style lends itself to different levels of risk and potential reward. Choosing which style suits you best depends on a number of things, including your personal skill level, commitment, and attention span. Successful traders must know themselves well, along with their financial, time, and personal restraints, in order to choose the trading style that best suits them. A trader may find it useful to paper trade (or demo trade) different strategies, within each different active trading style, i.e. scalping, intraday, and swing trading, to see what really fits them the best.
Really easy strategy which you can master with just the basic knowledge. It provides really good risk / reward output and Keltner Channel Strategy gets really high winning rate. - TimeFrame: 5 min - Symbol: any major currency preferred EURUSD, GBPUSD - Risk: MAX 2% of account equity per order - Indicators: - Keltner Channels Indicator set to 40 Periods - Exponential Moving Average set to 8 periods Keltner Channel Strategy Overview: When you have the chart setup with Keltner Channel Indicator and Exponential Moving Average you are all set to go. You should use this strategy only on 5min timeframe. As well as you should have a good Broker with really small spreads like HotForex. Once you are all set you watch the market and wait for the EMA to be inside the Keltner Channel. Now you wait for the PA (Price Action) to move outside the Channel and then wait for EMA to break the Keltner Channel which should happen right after PA. Once EMA has broken the channel you should SELL (if channel is broken downside) and you should BUY (if channel has broken to upside). Keltner Channel Strategy entry and exit rules: - BUY order should be placed when EMA crosses upper Keltner channel - SELL order should be placed when EMA crosses bottom Keltner channel - SL (Stop Loss) should be set right on the middle of Keltner Channel Indicator - TP (Take Profit) Option 1: should be fixed at 10 PIPs. (remember you are on 5min chart) - TP (Take Profit) Option 2: you can set BE (Brake Even) when you reach 10pips profit and let the profits run. Exit the trade when Price Action hits back the Keltner channel or you can use Support & Resistance lines for your exit. Usually this will get you 1:1 or 1:2 risk / reward return which is good. How to install Keltner Channel Strategy Template in MetaTrader 4 / MT4: 1. Download/Copy/Save the TPL file into your C:\Program Files\MetaTrader 4\templates folder (or change the folder to your installation sometimes forex broker name) 2. Restart your MetaTrader 4 application (assuming it’s currently open) … or Launch your MetaTrader 4 application 3. Open the Template with Charts/Template 4. Locate the Template which you have just downloaded into the folder stated in Step 1 5. TADA and your done!