Here’s how many traders would normally trade a daily pin bar: as soon as the high of the daily pin bar is broken, a buy order is initiated and stop loss is placed below the low of the pin bar. But I believe this is not the best way of trading the pin bar and I will list the reasons why here: if you know, the daily pin bars are unusually long candlesticks which creates a problem because it means your stop loss would be huge which means at the place where you enter a trade may not necessarily be a good one. So is there a better option? A low Risk Entry Method? You bet there is! In here, I will show you a better way to trade the daily Pin Bar. Here’s the Daily Pin Bar Low Risk Entry Method: After the daily candlestick has formed, you need to identify it to see whether its a pin bar or not. Once you’ve identified that it is a pin bar, you then need to switch to either the 4hr or 1 hr timeframe (which ever you prefer). Once you are in the smaller timeframes like the 1hr or the 4hr, you have to watch and wait for price to go down. The buy entry candlestick is the candlestick that takes out the high of the previous candlestick. This is your signal to place a buy stop order above the high of that candlestick and place your stop loss a few pips below the low of that candlestick. If you get stopped out, keep looking for the next buy entry candlestick. It is preferable that the buy entry candlestick be happening within the high and low range of the pin bar. With this trading method, you will have a low risk entry in anticipation of a breakout of the high of the daily pin bar. So you want to get into a low risk entry trade before the breakout happens. Advantages of of Trading The Daily Pin Bar With The Low Risk Entry Method: Switching to 1hr or 4hr timeframes to look for the buy entry candlestick allows you to enter early before a breakout happens when the daily pin bar high is broken to the upside. Which also means low risk entry, instead of a 100 pips stop loss on the daily timeframe pin bar, you could be entering a trade with 25 pips stop loss using 1hr or 4hr timeframes as shown by the charts. if a valid and nice breakout happens, you make a lot of profitable pips easily. know also that when a pin bar forms in the daily timeframe, it gets the attention of many breakout traders who would be stacking their buy orders just above the high of pin bar in anticipation of a breakout so once price hits these orders, the markets tends to shoot upwards quickly. Daily Pin Bars forming around strong areas of Support worth paying attention to because as mentioned above, many traders would be watching it. Any Disadvantages of this Forex Trading System? Not all daily pin bars may have strong breakouts when their highs are broken. Pin bars can form anywhere but not all of them would be good to trade. Pin bars forming on support levels or major fib levels and pivot points are the ones you should be focused on trading. Did you enjoy this? It would mean the world to me if you shared it:
This Is A Simple Breakout Forex Trading Strategy based on the GBPUSD forex pair. This breakout strategy is designed to capture an early move of price when it is starting to establish its trend or market direction for the day. TIMEFRAMES Here’s what you need to do about trading timeframes: The Frakfurt Market Opens at 2:00 AM Eastern Standard Time (if 7:AM Gross Median Time) Then the London Market (the giant forex mover) opens an Hour later (8AM GMT). This is the European forex session and forex market starts its day in Europe first. CURRENCY PAIR Ideally, you’d want to trade only the GBPUSD pair in this one as this tends to have more volume when the London session opens. Others may include EURGBP or any pairs that has a GBP in it. FOREX INDICATORS You don’t need any forex indicators for this breakout system. HOW TO TRADE SIMPLE FOREX BREAKOUT TRADING STRATEGY Here’s how you trade this forex breakout trading strategy: Start with 1hr timeframe You need to find out the “price range” from 1:00 EST to 2:PM EST (This is the 1hr candlestick you should be looking for) Look for the highest high (peak) and the lowest low (bottom) of the price in that range. Then Draw parallel horizontal lines through those two price extremes-this will create a tunnel. Now switch to a 5minute chart and wait and watch to see if a 5min candlestick closes outside of the tunnel. If it closes above the highest high, you initiate a buy order If it closes below the lowest low, you initiate a a sell order. Buy order can be at market order or buy stop order. A sell order can be a market order or sell stop order. Place your stop loss at least 5 pips outside the tunnel (should not be exactly on the tunnel lines). This chart below is the 1hr forex chart where you begin your trading analysis following the steps given above: This 5 minute chart below is where you wait patiently to see any 5 minute candlestick breaks out of the tunnel and and if it closes above/below it, that’s when you enter a trade. Pretty simple forex breakout trading strategy really. You just have to have the ability to use multi-time frame analysis and you’d be fine. TAKE PROFIT TARGETS: As usual, I would give you a couple of options: 3 times what you risked. if buy trade, set your Take Profit targets within the previous swing high (peak) or if sell then use a previous swing low point (bottom). TRADE MANAGEMENT. move initial stop loss to break even when market moves by the amount risked and continue to trail stop it behind each new low peaks that form (for sell order) and higher bottoms that form (for buy order) So there you have it…a simple forex breakout trading strategy. It’s pretty easy, isn’t it?
This forex trading strategy is very simple and easy to understand and execute. What you are looking for are two candlesticks with the almost the same lengths. They look like parallel railway tracks. (See forex chart below with the 2 candlesticks highlighted in blue) If the first candlestick is bearish (red) then the 2nd candlestick must be green or vice versa. A bullish Railroad Track Pattern has a red candlestick in front and a green candlestick after it. A bearish Railroad Track Pattern has a green candlestick in front and a red candlestick after it. PSYCHOLOGY BEHIND THE RAILWAY TRACKS CANDLESTICK PATTERN If you are in a downtrend, you will see the forming of a long bearish candle and immediately a long bullish candle will be formed. Why do you think caused this to happen? Here’s why… What happen here was that those traders who enter SHORT forming the long bearish candle realized that they are in the wrong side of the market and they immediately exit their trades and then get into the opposite side of the market causing the formation of the long bullish candle. If you are in an uptrend, the situation will be opposite to what you is happening above. HOW TO TRADE THE RAILWAY TRACKS PATTERN Here are few important tips on trading the railway tracks pattern: The railway track is only applicable when you are in a trend as it is a reversal pattern. If you see this formation when the market is moving sideways, you should ignore it as it does not have any value. Timeframes: 1hr and larger Forex Indicators: Nil TRADING RULES (Refer to the chart above). For buying: After a bullish railroad track pattern forms, place a buy stop anywhere from 2-5 pips above the high of the pattern. Place your stop loss anywhere from 2-5 pips below the low of the pattern. Set your take profit to 3 times what you risked (if you risked 20pips then you should aim for 60pips profit target). Or another option is to trail stop your trades. For Selling: After a bearish railroad track candlestick pattern forms, place a sell stop order anywhere from 2-5 pips below the low of the the pattern. Place your stop loss anywhere from 2-5 pips above the high of the pattern. Set your take profit target to 3 times what you risked or you can also you trailing stop to lock in profits as trades move into profit. Please like, tweet or share this, if you’ve found this useful.
Have you ever noticed that there are there are days when the candlesticks on your charts get very short? Here’s how this can happen: the market may be in a strong uptrend, meaning you will have lots of long green candlesticks showing on your charts. Soon, the market starts to slow down and this is reflected by the length of candlestick becoming very short (Difference between the High and Low becomes small). the opposite but exact same thing happens in a downtrend where you will have lots of bearish candlesticks showing on your charts which a quite long but soon they start to get shorter as the market losses the downward momentum This is what we are looking for, a loss of momentum, a slowing down of the market. It can happen in 1hr timeframe up to the weekly and monthly. So how do you trade this? Well, you do this by looking for the third shortest candlestick. Huh? Yep… third shortest candlestick, you heard me right. HOW DO I KNOW WHAT IS THE THIRD SHORTEST CANDLESTICK? The third shortest candlestick is the third shortest candlestick from the 2 previous candlesticks before it. This means the 2 previous candlestick should be long: The difference in pips between their “highs” and “lows” are big. When I say short, I mean unusually short or extremely short and this depends on the timeframe you are viewing the candlestick in as well. So how do you pick your first candlestick then? Answer: start anywhere. Whatever candlestick that is unusually short in comparison to the the first 2 candlestick is the one you are interested in. Look at the chart on the right. Notice that there is no logic or order in picking where to start your count 1. You can start anywhere. But the important clue is that notice that the 3rd candlestick is extremely short in comparison to the previous two candlesticks. This shortest 3rd candlestick is your trade entry signal candlestick. THE RULES OF THE 3RD SHORTEST CANDLESTICK FOREX TRADING STRATEGY Start your candlestick count. Any third candlestick that is extremely short is your signal candlestick. Place pending stop orders on both sides of the shortest candlestick. This is to capture the breakout in any direction price moves. Place your stop loss anywhere from 3-5 pips on above the high (for a sell stop order) or below the low (for a buy stop order) When a breakout happens on one side, cancel the other side’s pending order that was not activated. How do you place take profit target? Couple of options: take profit when price reaches 3 times what you risked. For example, if you risked 20 pips than set your take profit target at 60 pips price level. Or you tail stop your trades, locking profit, placing it under the low (for a buy trade) or under high (for a sell trade). Or you can exit after the 3rd candlestick after entry. Here’s an example of a buy trade setup: And here’s an example of a sell trade setup: Note also how the trailing stop is use on this trade. You are trailing it behind the high of each candlestick that continues to make lower highs. As soon as a candlestick high shoots up and breaks the previous candlesticks high than you are out of a trade. ADDITIONAL NOTES This strategy is similar to the inside bar trading strategy but with this one, it also allows you to trade candlesticks that are not inside bars. Remember also that your third candlestick can be an inside bar too. Please “like” or “tweet” by pressing the buttons below if you’ve enjoyed the contents of this website
This Heikin Ashi Forex Trading System is a trading system that allows you to stay in with the trend. How? I will explain shortly… Have you ever closed a trade thinking that the market is going to move in the other direction, only to find out later that it was just a “trick” just to make you panic and you bail out quickly…??? And guess what happens next? The market continues in the original trend or direction for another 150 pips! You are now left scratching your head saying “what the heck did I get out…I should have stayed in that freaking trade!” This is so frustrating and it happens to all traders. So how do you solve this or have something tell you not to get out but stay in that trade? Well…? Heikin Ashi Candlestick to the rescue! WHAT ARE HEIKEN ASHI CANDLESTICKS? The Heiken Ashi candlestick chart looks like the real candlestick chart but there’s a difference: in a candlestick chart, each candlestick has four different prices which are: open, high, low & close. Each candlestick that is formed after has not relationship with the one the formed previously. But with heikin ashi candlestick, each candlestick is calculated using some information from the previous candlestick: If you wan’t to know more here is a brief detail of how the heikin ashi candlesticks calculated and plotted: Open price average of the open and close of the previous candlestick High price is chosen from the one of the high, open and close price of which has the highest value. Low price=is chosen from the one of the high, open and close price which has the lowest value Close price=is the average of the open, close, high and low prices. Which means each candlestick that is formed on the heikin ashi chart is related to the previous one before it-therefore it causes the heikin ashi to delay-just like a moving average indicator. TRADING USE OF HEIKIN ASHI Heikin Ashi candlestick charts are used in the same manner as a normal candlesticks. However there is an additional feature of heikin ashi that makes them different from standard candlestick charts and it is this: the colour of the heikin ashi candlestick is supposed to indicate the overall trend direction of the market which means it ignores the intermediate trend direction which is happening. In other words, it avoids the noise. In summary: heikin ashi candlestick chart patterns allow you to stay with the overall trend by allowing you to avoid the noise or the minor fluctuations of price that is prevalent in a standard candlestick chart! That’s all there is for you to know about Heikin Ashi Candlestick Charts THE HEIKIN ASHI FOREX TRADING SYSTEM Timeframes: 30m and upwards Forex Indicators: 9&18 Exponential moving averages (or you can use this combination of ema’s: 7ema & 14ema , 10 ema & 20ema or 10ema & 25ema Buy Trading Rules: When 9ema crosses 18ema to the upside wait for the price to rally away from the ema lines. After a while, you will see bearish heikin ashi candlestick form and they will come down to touch the 9ema and 18ema lines. The buy signal entry candlestick is the first bullish heikin ashi candlestick that forms after those bearish candlesticks in step2. you can buy immediately at market order. place your stop loss below the low of the entry signal candlestick. Sell Trading Rules Its just the exact opposite for buying: when 9ema crosses 18ema to the downside, wait for price to fall down and completely away from the ema lines. after a while you will see bullish heikin ashi candlesticks form and will try to go back up to touch the ema lines. Once this happens, you know a sell trading signal may be just around the corner. The buy sell signal is given by the first bearish heikin ashi candlestick that forms after that those bullish candlesticks in step 2. sell at market order place your stop loss above the high of the entry signal candlesticks. TAKE PROFIT TARGETS 3 times what you risked initially or look for a previous high or swing lows point using the standard candlestick chart and place your profit target within them. TRADE MANAGEMENT The best trade management practice for extracting maximum pips out of a trendy move is to use those “tops” and “bottoms” to trail stop your trades. Here’s what I mean: In a sell (short) trade, you want to place your trailing stop a few pips behind those consecutively decreasing tops as the price moves lower. Those tops are the price peaks that form as market moves lower. In a buy (long) trade, you place your trailing a few pips below the bottoms as price continues to make its way higher. Why do this? Simple: so that you don’t get stopped out prematurely. Note: you have to be using the standard candlestick chart and NOT the heikin ashsi to do this.
The RSI trading indicator is a price momentum measure that also uses overbought and oversold zones to show when markets may be overextended. It makes up many trading methods and we are going to use it with our 5×5 RSI Trading System. RSI = Relative Strength Index The RSI, although referred to as “index” is not really an index so the name is a little misleading. Just think of the RSI indicator as an oscillator that measures momentum over a set period (look back period) and will indicate when the momentum has pushed price to far in one direction (oversold/overbought). Oversold And Overbought Oversold is a term that is used when price is deemed to have fallen a certain distance away from the average price. This is a condition that is measured by the RSI dipping below level 30 on the indicator and is used in conjunction with a trading setup, usually a buy signal. Overbought is the opposite of oversold. When price has risen a distance from the average price, it can be deemed to be overbought and the RSI will be above the 70 level. Depending on the trading system, when the RSI is above the 70 level, the strength of price is considered to have been strong and a reversion is expected. This will set up a sell signal for most RSI trading systems. What Does “5X5” Stand For? Quite simply, it makes up the settings for the two trading indicators that will be used in the strategy: 5 period lookback setting for RSI – We will use levels 30,50,70. 5 period simple moving average (SMA) Other initial details about the trading strategy: Time Period – Any time frame can be used including short term for day trading or longer term charts for a swing trading approach with the 5X5 RSI trading system. Currency Pairs – You can use any Forex pair you like however keep spread costs in mind if considering trading the exotic currencies. How To Trade The 5X5 RSI Trading System – Forex Example Here are a few notes before you get to the rules of the Forex trading system: the 5 SMA Indicator is for determining trend direction if the price is is above the 5 sma, it is deemed an uptrend or downtrend if price is below the 5sma. the RSI is used as a confirmation Here is a sample buy signal RSI TRADING SYSTEM – BUY SIGNAL SETUP Buying Rules: Price closes above the 5 period SMA and is an obvious bullish candlestick RSI is above the 50 level. If this is the first cross over after a downtrend, that’s even better. Place a buy stop above the bull candle Place your stop loss about 5 pips below the low of the candlestick depending how your risk parameters. You can set profit targets, trail stop once price moves in your favor. Many ways to take profits. The sell signal is opposite that of the buy set up just discussed. RSI trading method short trades Sell Signal Rules: Price closes below the 5 period SMA and is an obvious bearish candlestick RSI is below the 50 level. If this is the first cross over after an uptrend, that’s even better. Place a sell stop below the bear candle Place your stop loss about 5 pips above the high of the candlestick depending how your risk parameters. You can set profit targets, trail stop once price moves in your favor. Many ways to take profits. Using RSI To Trade – Important Points About This System Remember that the RSI is a trading indicator, will lag price, and although objective, price action trading can help improve this system. Using price movement, especially how strong the candlestick closes, can bump up the edge you can have. You want to see strong closes or, as shown in the sell signal at #1, using price patterns such as inside bars and break from compression can help improve the system. If you chose to take more trades after the original trend change trade, you may want to see that the RSI indicator has dipped into oversold or overbought territory. This often times will set up a pullback in the price that can aid in triggering another trade depending on how deep price moves. Use stop orders for your entries as this will show that at least in the short term, momentum is in your favor. There may be times that the candlestick that gives the buy or sell signal is quite large. Either reduce position size or wait until there is a pause or retrace in price. There will be times that the RSI flips back and forth over the 50 line. This indicates choppy price action and you may want to highlight that price action with lines to show a pattern break. RSI AND CHOPPY PRICE ACTION Regardless of the time period you trade, you will run into issues such as price action that indicates chop. You do not want to implement this strategy during those times. Use standard price patterns to contain price movement and wait for the break of the price pattern to occur. Once the break occurs, return back to the rules for the RSI trading system
Never be misled by the terms “simple Forex trading strategy” thinking that it means easy. There is nothing easy about trading but that does not mean you can’t have a simple trading strategy for Forex, Futures, Stocks, or any market and one that works if you follow the rules. Many things work in trading. There are many trading strategies that you can try right on this website. In the end, finding something that: Makes sense to you You are able to trade consistently Has risk management built into the trading strategy Technical analysis is a complex subject because there are so many thing that you can learn. Too much information is not always good (although traders love to learn about the next big thing) and this Forex trading strategy keeps it simple by not including too many moving parts. Price action is always something you want to include in a trading strategy – even a moving average trading strategy – because indicators are simply derived from price. They lag. Go to price and let that decide your course of action. The trading strategy we are going to look at can be used as a: Day trading strategy Swing trading strategy Position trading (there are many advantage to long term trading) Scalping is not something I would do with technical indicators but you can test this strategy and see if it works for you. If you are looking for a Forex scalping strategy, you can search this website for one. Time frames that you can use range from the daily chart, weekly chart, and down into the lower time frames for intra-day trading Technical Indicators Used For This Strategy We want to keep things as simple as we can when trading and that includes limiting the amount of technical indicators we are using. For this trading strategy, we are using: 5 EMA 12 EMA RSI set to the non-standard 21 periods The exponential moving averages (EMA) are going to be used to determine the trend direction as well as the first buy signal or sell signal for trading The RSI (Relative Strength Index) will be used to determine the strength of the trend by using the level of “50” as our line in the sand. You can use other technical indicators such as the MACD or Stochastic Oscillator but that is assuming you understand how to use them. What Is A Buy Setup? We are looking for two things to show up when looking at a buy signal. The fast EMA (5 EMA) must cross over the 12 EMA to the upside The Relative Strength Index must cross or be crossing the 50 level to the upside Place an order to go long over the candlestick that turned the indicators To refine your trade entry, you can use a candlestick pattern, break of short-term resistance, or some other trigger that shows the market has the potential to move in your direction. Sell Signals Are Opposite Of Buy Signals You want to see two things occur in order to short the market. The fast EMA (5 EMA) must cross over the 12 EMA to the downside The Relative Strength Index must cross or be crossing the 50 level to the downside Place an order to go short under the candlestick that turned the indicators This chart highlights the trades that took place on this chart. You can see at a glance whether or not you have a signal or setup occuring. There is no need for trend lines, multiple time frame analysis, or any other trading indicators. The yellow highlighted area brings up an interesting thing. Sometimes you will have the moving averages cross but the RSI is lagging. You MUST wait until the RSI crosses the 50 level. It is a simple thing but remember, simple is not always easy. Some traders will see large momentum moves and want to jump in the trading in fear of “missing out”. Do not do that. Wait until all the variables line up to take your trade. Stop Loss Areas There are multiple ways to place your stop loss. Many Forex websites talk about stop “2-3 pips above candlestick extremes” and that is incorrect. That does not take into account any aspect of price movement. You can use an ATR stop loss which is usually 2 X the Average True Range of price. You can also use above swing points giving some buffer to allow for the usual ebb and flow of price Take Profits Using what gets you in the trade to get you out is not a bad play. If you are short and you either lose the cross or the 50 level, exit your trade. This will allow you to stay in the move as long as it’s valid without an arbitrary price target. If you need targets, think of using support or resistance levels and then monitor price action at those levels I am not a fan of using profit targets in relation to your stop loss size. That does not allow you to bank the big winners when price decides to run. Converging Averages Give Opportunity For Trading The moving averages in this trading strategy also give you another trade setup when the averages converge. What that means is that there is no separation between the moving averages which means the market is in consolidation. In these cases, do not trade the crosses but look to take the breakout in the direction the RSI is hinting – under 50 look for shorts, over 50 are longs Above all, ensure you are using proper risk protocols in your trades. It does not matter what trading strategy you are using – even simple trading strategies demand that you keep an eye on your risk so you can avoid blowing your trading account when the losing streaks in trading come.
The Bollinger band indicator is a great way to measure the volatility of any trading instrument. Using an upper band and lower band set X standard deviations (generally 2) away from the center moving average ( generally the 20 period), we can see when an instrument is at an extreme price as well as when the volatility has increased or decreased. The breakout strategy will use the Bollinger Band “squeeze” together to alert traders to a market that is compressing. From compression, we eventually see a breakout trading opportunity. That is exactly what we want to capitalize on as a means of entry into a swing trade. The Bollinger band squeeze swing trading system is a very simple trading system that is easy to implement. This article, Using Bollinger Bands, will give you more insight into this indicator. If you are not familiar with Bollinger Bands, please read that first and then come back. Looking For Bollinger Bands Squeezing Together One of the main characteristics of a Bollinger band is that it becomes narrower as price volatility decreases, with price moving sideways and in a tight range. You can call it the “Bollinger band squeeze.” When the Bollinger Bands are wide, we are looking at a market that is volatile with moves that we can trade. Keep in mind that what goes up must come down and the bands getting wider indicates the potential for the first thing we need to happen for our Bollinger Breakout system. The feature we are looking for is the squeeze portion which is highlighted “squeeze” – when the Bollinger Bands narrow. We don’t know when the squeeze will happen so you do have to continually scan your charts for this portion of the system. Once we see the squeeze happen with the Bollinger Bands, we know that a breakout to the upside or downside will eventually occur. The thing is, we don’t know when it will happen. We also don’t know which direction the break will come. You can monitor price action in order to trade any directional move from the Bollinger Band squeeze or you can choose to simply trade in the direction of the predominant trend. Price Breakout From Bollinger Band Squeeze Since the Bollinger Bands are, in theory, encompassing 90% of normal price action, any break out of the Bollinger Bands is a “that’s different” event. From those events, we can find an opportunity. In the following chart, we have price in a downtrend and the wide Bollinger Bands narrow indicating lower volatility in price – the “squeeze”. You don’t want to trade just “any” price movement as the Bollinger Bands are not a standalone trading system. Using basic technical analysis and price action, we can improve our odds trading the breakout but as always, in trading, nothing is ever perfect. We are using standard technical analysis tools – horizontal support and resistance and trend lines. The Bollinger Bands have begun their squeeze as price starts to range after a move down in price. Price action begins to hug the middle moving average which further indicates ranging price action. After several bounces up and down, we are able to draw our support and resistance lines Price puts in a lower high so we are able to draw a down trend line. Remember, we are looking to trade short as indicated by the previous trend in price. We see a breakout to the downside of the Bollinger Bands and while you could sell the break, it is not a high probability trade As price usually does, we have a breakout and a pullback which coincides with the moving average between the upper and lower bands, hits the trend line and the bottom of the support zone. These setups will look different each time but if you understand support and resistance and how to draw a trend line, you should be able to trade them. Trade Exits: Stop Loss and Take Profit You should never trade without a stop loss. On that note, trading with a tight stop loss is almost just as bad as you will get flushed out of your trade on a false breakout in the opposing direction of your trade and then watch price sail in your direction. There are many ways to place a stop loss and some are more objective than others. You can place your stop loss X number of pips away from the opposing side of the Bollinger Squeeze. Too close and you can get whipsawed out from a breakout that turns, takes your stop and then breaks out again and continues to move. You can use the Average True Range (ATR) and use a multiple such as 2 X ATR for your stop. This should keep it out of the day to day noisy price movement in the market. If your stop starts to get challenged, you may opt to cut the trade short and then look to re-enter because a true breakout, should not challenge a 2 X ATR stop. In the above example, traders may be tempted to use the swing high at #4 but that looks too close and you could get spiked out of your trade in the zone that is the traders action zone. Is This Breakout System Just For Swing Trading? Virtually any trading system or trading strategy can be used for any type of trading. In Forex, I prefer swing trading due to the many news releases that happen every day. I like my trades to be larger in scope with the chance of great returns. That’s not to say you can’t day trade or scalp using the Bollinger Band squeeze breakout, just know that the larger time frames can offer higher returns. If you do want to try this strategy for day trading or a faster time frame, I would suggest using a lower moving average such as a 10 period. This will obviously set your upper and lower bands closer to price action but with any trading indicator, don’t get too caught up in finding the best setting – they don’t exist
Channel trading is simply trading price action within the confines of a trading channel. Trading channels, in theory, encompass the current volatility in price action and anything outside the norm of current volatility may be considered an extreme move. In this swing trading strategy, we are not looking to trade price extremes but are trading the reactions at support and resistance areas of the channel. The horizontal channel trading strategy trades the area of congestion between an upper resistance level and lower support level. This chart has come off an uptrend and the left side of the chart is where a retracement (pullbacks) has terminated. Price rallies and we start to see the formation of a horizontal channel that may provide trading opportunities. This is the original point of the resistance portion of the trading channel. You can see on the whole chart that price is making a horizontal move and that is why we call this trading a horizontal channel. There are also up and down sloping channels we can trade. Price has pulled back into the zone at the left side of the chart. If price holds (which it does), we can confirm support and take a trade. Depending on the size of the horizontal channel, you may decide to look for price action on lower time frames for a swing trading price entry. Resistance holds and we look for a move back down to the support zone We see price drop but not come fully into the support zone. This is a bullish sign especially when supported with price action as we see with the reversal candlestick. If you don’t want to trade every bounce, look for this type of price action to support a trading decision for a possible breakout Price explodes with momentum to the upside break the resistance area of the horizontal channel How The Horizontal Channel Forms You may be wondering why a horizontal trading pattern shows up. The truth is that we are seeing the natural evolution of price. Many people will look at as stages: Accumulation stage where positions are taken in the market The markup stage when profits are made and late comers jump into the market propelling price The distribution stage where profits begin to be taken The markdown stage where unwinding of positions happens. This evolution of price happens in all markets in all time frames. Remember this when you think you are seeing a stage 3 but the market continues going up. A market trends and once the balance of buyers/sellers evens out, forward motion begins to cease. In these stages, profits are taken and positions are taken. We use price action to see what is really happening: Price Leaves Clues. Channel Trading – How To Trade Horizontal Channel Patterns Once we’ve put in a top (1) and confirmed the presence of support (2) we can begin to look for reversal candlestick patterns to get a trade entry. You can look for engulfing patterns, pin bars, inside bars…..there are several ways to enter the trades. For profit targets, the rule of thumb is to trade the opposing side of the horizontal price channel. That simple means Trade from support to resistance Trade from resistance to support Your stop placement is extremely important. When trading horizontal patterns, a break above or below DOES NOT MEAN we have a successful breakout we can trade. You will read on many trading websites to “place your stops just beyond support or resistance”. DO NOT DO THAT. Markets seek order flow and sitting beyond channel extremes are stop…both protective stop orders and buy/sell stops to enter positions. We also have sideline traders looking to trade a breakout. The areas on the chart are very common and are simply tests of zones. If your stop is sitting there, you will be exiting your trade at the precise time you should be entering. You can use stops such as an ATR stop or even structure stops below the horizontal channel extremes. Why Trade Horizontal Channels These are simple price patterns with clearly defined areas of not only entry areas, but also failure areas. You also have your profit target areas on the chart. which is price structure. Horizontal channels are fairly easy to see on a chart, especially higher time frames, which make them great swing trading price patterns. Having a defined area on the chart to pay attention to can keep you out of the “looking for a trade” mentality. You can also pinpoint these zones and then drop to a lower time frame from a strong price action reversal pattern. This will give you a better trade entry and possibly a bigger position size. One other great thing about channel trading especially in line with the dominant trend is you can be in the big moves long before other traders. Other traders, fearful of missing the move, will jump into the trade further propelling your trade into profit. Drawbacks of Trading Channels I don’t see much of a drawback for any trader who accepts the risks of trading. Yes, you could be taking a short at resistance and then an upside breakout occurs. That’s trading. With proper position sizing and a keen eye on risk, there is not a drawback that you should be concerned with.
There is no best moving average crossover strategy for swing trading regardless of what anybody tells you. All we can do as swing traders is put the odds in our favor by using a few technical indicators as well as price action. We need an edge and even a small edge can build your trading account if you trade it consistently. This swing trading strategy will use a few technical analysis tools that are designed to show us if we are in an environment that supports a trade. We are going to use 2 moving averages to determine the direction of the trend. For this strategy, we are going to use the 5 SMA and 10 SMA (simple moving average) The stochastic indicator will be used with the settings 14,3,3 and the levels 80 and 20. We will use these levels to indicator an oversold/overbought market condition The RSI (relative strength index) will be set to 14 and we will use the 50 level to help confirm a strong trending environment. Consult your trading platform user manual to show you how to apply these technical indicators onto your chart. What A Moving Average Crossover Means There is nothing magical about any moving average crossover. Even the so called “golden cross” doesn’t pan out in extensive testing as having any deep meaning. Moving averages, like all technical analysis indicators, are derivatives of price. Moving averages simply calculate the average of X number of price points in the past. Obviously when a trend is slowing down the price range decreases and you start getting closing prices closer to the one previous. What may appear to be a moving average supporting price is simply an artifact of slowing price action which allows the average to catch up to price. When we use it for trend direction in the crossover, all we are seeing the average of the previous 5 closes and the average of the previous 10 closes are getting smaller. You eventually see the crossover occur. We will use the cross as the first indicator for a sell signal or a buy signal. This is the daily chart of the EURUSD. Since we are looking at swing trading strategies, I much prefer longer term time frames for trading so swings can actually develop that have the potential to run. Choose the time period you want to trade and be consistent. If you are trading a daily chart, avoid the temptation to zoom in or out to a different time period to convince yourself of a trade. You also want to monitor any current positions on the time period you entered the trade on. A few key points: The 5 and 10 SMA are a fast and slow moving average which we will use for the first signal in our trade setup. They will help us define the new trend direction. The stochastic will be used for oversold and overbought. We won’t ignore the cross of the lines if they take place around the 50 level. We only care about this indicator if the moving averages have crossed. The RSI will be one more tool to see if price is either breaking down for shorts or is gaining strength for a buy signal. This is the last variable in a buy or sell signal. We will not ignore price action or support and resistance. Nothing pays but price and you will see an example where price structure would have had you sitting on your hands (although the setup never does confirm). What Is A Sell Signal? These numbers do not represent what we see on the above chart. That will be discussed after you learn the setups. Wait until 5 sma crosses 10 sma to the downside Wait for the candlestick that forced the crossover to close. Look down and see if the Stochastic indicator either above the 80 level or has started to head down below the 80 level. Check to see if the RSI indicator is breaking through the 50 level If both 3 and 4 are true, then place a sell stop order 3-5 pips below the low of the candlestick Your stop loss can be above the high of the last candlestick or a 2 bar high. What About Profit Taking? You can trail your stop loss above each lower high to really get some home run trades. You could also exit on the next crossover or if there is signs of exhaustion coming into the market. I will say it again…whatever you choose to do, be consistent in your approach. This is where using a trading plan and logging all your trades will be important. You can’t fix what you don’t track. What Is A Buy Signal? Your signal to buy is the exact opposite as a sell signal. Upside cross of 5 and 10 SMA Wait for close candlestick Stochastic is below the 20 level and rising ( or recently crossed) RSI is breaking 50 level If 3 and 4 are true, place a buy stop order 3-5 pips above the high Your stop loss can be below low of previous candlestick or 2 bar low. Swing Trading Example Of Crossover Strategy You can open the chart above in a new window so you can follow along. Everything sets up nice for this sell signal. The crossover occurs to the downside. The stochastic has recently turned to the downside and RSI has broken 50. We don’t get a lot of price movement here but we also have just come from a period of price movement that made up an ascending triangle. You could exit the previous trade here. This is a beautiful buy signal as the crossover occurs, Stochastic is rising and RSI has just broken 50 No sell signal so no trade exit. RSI doesn’t touch 50, Stochastic crosses back up around the 50 level. No sell signal as Stochastic still bullish, RSI still strong. No sell signal. Stochastic has turned and so has the 5 and 10 SMA but RSI is still bullish. Also notice that when RSI bottoms at 50, the black line on price is showing support structure. We can also see the Stochastic is heading toward oversold and that combined with our support equals no trade and no long trade exit. If you missed the original long or like to add to positions, you can get on-board here. I won’t describe it…..what do you see? That initial long trade is up 796 pips as of this chart! In Summary This is a great swing trading strategy that harnesses the power of common technical indicators: Moving averages Relative strength index Stochastic oscillator We also included common price structure (support and resistance) and we need price action to get us into the trade via stop orders. As will all swing trading strategies on this site, test them, tweak them and prove to yourself they can work.
Using Bollinger Bands with Stochastics as a swing trading strategy is a smart play considering how powerful these two trading indicators can be. With Bollinger Bands, we are able to judge the volatility of the market and know when the instrument is too far extended or when the market is in consolidation. When price travels too far away from the middle band, usually a 20 period moving average, we should be on the lookout for the possibility of either a quick counter-trend trade or even a full scale price reversal. Adding in the Stochastic Oscillator, we are able to have an objective view if a market is overbought or oversold. This could indicate a possible reversal but trading oversold/overbought as a standalone trading strategy is not advised. While using indicators as part of your technical analysis approach to trading, one thing every trader should understand is price action. You don’t need to be an expert price action trader but letting price dictate your actions for a trade setup while technical indicators give you information, is a smart play. How Does This Trading Strategy Work? Every trading strategy should be simple enough that a 5 year old could explain it. While that is a bit of a joke, the takeway is to keep things as simple as possible…..but as complex as they need to be. Let’s take a high level look at using the Bollinger Bands along with the Stochastic as a viable trading edge. When price is touching the outer lines of the Bollinger band, it maybe due for a reversal, so you look for a reversal candlestick pattern to trade. The middle Bollinger band line can be used as a reference line to move a profitable trade to break even or also can be used as a profit target or as a scale out area. The stochastic indicator is used as a filter for the trades so we are adding some confirmation to the potential trading setup Keep in mind that with any trading strategy the key is money management. Ensure your position size reflects not only your stop but also a percent amount of your account that can withstand a string of losing trades. Here are some more important details: What currency pairs can you trade this system with? Virtually any Forex pair can be traded with this trading strategy. It is also not instrument dependent What is the suitable time frame for this trading system? For swing trading, stick to 4 hours and above. Forex Indicators Required Bollinger Band (settings:period 20, standard deviation 2) & stochastic indicator (13,5,5) Is understanding price action important? Yes, ability to spot reversal candlesticks – dojis inside bars, bearish and bullish harami, shooting star, hammer etc. ( If you cannot see this chart clearly, click to enlarge) Trading Rules To Buy: Price must be touching the lower Bollinger band line (and may close below it ) Stochastic indicator is to be below 20 or just leaving that zone (oversold condition). Closing candlestick – is it a good bullish reversal candlestick? What you need to look for a bullish reversal candlesticks like, hammer, inside bar(or bullish harami formation). Once you see a suitable bullish reversal candlestick pattern, play a pending buy stop order 2-5pips above the high of that bullish reversal candlestick pattern. Place your stop lossin relation to some type of price structure or using the Average True Range indicator to set you stop For take profit target options, here are couple of options you can use: Middle Bollinger band line can be used are you take profit target, once price reaches it, you exit your profitable trade. Middle Bollinger band line can also be used as a “Take Profit Target Level 1” meaning can close half (or whatever amount) of your trade when price reaches this and you keep the rest running until price reaches the “Take Profit Target Level 2” which would be the Upper Bollinger Band Line. You can aim to exit your trade when price reaching the upper Bollinger band line so when price touches(reaches) this line, you exit immediately. Trade Management: Move stop loss to break-even when price touches the middle bollinger band line. But you need to be aware this may not be suitable on certain times because the price may be too close and this may cause you to get stopped out only to find out later the price moves as expected. So keep 15-30 pips distance when move your stop loss to break-even. To find setups for selling, simply reverse the conditions for a buy It’s Not A Bullet Proof Trading Strategy While using Bollinger Bands and Stochastic is a fine trading strategy, there are some things you should know: In a strong trending market, prices will be hugging the upper/lower Bollinger band lines and you may find out you will get stopped out frequently if you are looking for reversals of that trend. When price is hugging the upper band, the market is extremely strong but that type of move will come to an end. Often times strong markets end strongly as well. If price is hugging the lower band, this is extreme weakness and attempting to buy a market like this can lead to consistent losing trades. Do not enter using market orders. It is preferable to use sell stop or buy stop orders based on reversal candlestick patterns you see. Market orders are filled at “best price” and there will be times where you will encounter slippage especially during high volatility moments such as during a news release. Use Price Action For All Trading Signals Even though the strategy may give you a sell signal with the trading indicators, is price action showing you any confirmation at all? For example, if you are looking for a buy setup due to the indicators, is price action showing strength or signs of reversing from shorts? You must understand some basic level price action trading.
The Inverse Head And Shoulder Pattern Swing Trading System is the complete opposite of the head and shoulder pattern trading system If you know what you are looking for then spotting the inverse head and shoulders pattern is quite easy. Again, the inverse head and shoulder pattern can be used as a swing trading or day trading system. Note that, for this head and shoulders pattern to work, the market has to be going in a downtrend for some time. This simply means when you see an inverse head and shoulder pattern, it should be considered as a bullish pattern. WHAT DOES THE INVERSE HEAD AND SHOULDERS PATTERN LOOK LIKE? This is what it looks like: Now lets look at what each of the number from 1 to 7 on the head and shoulders pattern above mean: Firstly, the market has be in a downtrend for some time: buyers come in at the low (left shoulder) and push the price up (which results in a beginning neckline). What happens next is that sellers soon return to the market and push prices to new lows(the inverted head). However, the new low (head) is not sustained as price rises back up due to buyers pushing price up to create a continuing neckline. Then sellers enter again pushing the price down to a low, but this low does not exceed the previous low (the head). This low is the right shoulder. Buyers get in and push the price up and this time the neckline is intersected to the upside. Seller may get in here and push price down to test the neckline that was intersected which would now act as a support line. Buyers get in push the price up-now an uptrend in “officially’ in progress! HOW TO TRADE THE INVERSE HEAD AND SHOULDERS PATTERN There are two options on how you can trade the inverse head and shoulders pattern: Option 1: Wait for a candlestick to break the neckline to the upside. Then place a buy stop order just a few pips (3-5 pips at least) above the high of the candlestick the intersects the neckline. Place you stop loss 3-5 pips below the low of the right shoulder. Option 2: Once price breaks the neckline, just wait for price to pull back down to touch the neckline which it intersected. This intersected neckline would now act as a support line. Once it touches the neckline, place a buy stop order 3-5 pips above the high of the candlestick that touches the neckline. Place you stop loss anywhere from 10-50 pips(depending on which timeframe you are trading in) just below where your buy stop order is placed. Try to use the bullish reversal candlestick patterns (click the link to check it out) as your short entry confirmation on this option 2 entry style. WHERE TO PLACE YOU TAKE PROFIT TARGET Here are a couple of options: Take profit option 1 is to 3 times the amount you risked in pips. A second option would be see a previous swing high point where price moved down from, and use that level as your take profit target.
The head and shoulder pattern trading system is based on a reversal pattern that is mostly seen in uptrends and in here, you will learn how to trade this pattern. The head and shoulder pattern is easy to spot if you know what you are looking for and it can be found on any timeframe. This pattern can be used as a swing trading and even day trading system. Here is a diagram of what a head and shoulder pattern looks like: WHAT HAPPENS TO CAUSE THE HEAD AND SHOULDER PATTERN TO FORM? Ok, in an uptrend market, eventually the uptrend will slow down (price cannot always keep heading straight for the moon!) and theforces of supply and demand will be in balance. For the numbering below, refer to chart above: Sellers come in at the highs (left shoulder) and what happens is that the downside is probed (which results in a beginning neckline). What happens next is that buyers soon return to the market and push prices to new highs(the head). However, the new high (head) is not sustained as price falls back down due to sellers pushing price down to create a continuing neckline. Buyers enter again pushing the price up to a high, but this high does not exceed the previous high (the head). This high is the right shoulder. Sellers get in and push the price down and this time the neckline is intersected Buyers may get in here and push price up to test the neckline that was intersected which would now act as a resistance. Sellers get in push the price down. HOW TO TRADE THE HEAD AND SHOULDER PATTERN There are two options on how you can trade the head and shoulder pattern: Option 1: Wait for a candlestick to break to break the neckline to the downside. Then place a sell stop order just a few pips (3-5 pips at least) under the low of the candlestick. Place you stop loss 3-5 pips above the high of the right shoulder. Option 2: Once price breaks the neckline, just wait for price to rally back up to touch the neckline which it intersected. This intersected neckline would now act as a resistance line. Once it touches the neckline, place a sell stop order 3-5 pips under the low of the candlestick that touches the neckline. Place you stop loss anywhere from 10-50 pips(depending on which timeframe you are trading in) just above where your sell stop order is placed. Try to use reversal candlestick patterns as your short entry confirmation on this option 2 entry style. WHERE TO PLACE YOU TAKE PROFIT TARGET Here are a couple of options: Take profit option 1 is to 3 times the amount you risked in pips. A second option would be see a previous swing low point where price moved up from and use that level as your take profit target. Did you enjoy this? It would mean the world to me if you shared it:
The forex channel trading system is one swing trading system where its quite easy to implement and you can get really good profits quite easily. But before you can do that, you must be able to draw proper channels. WHAT IS CHANNEL TRADING? Channel trading in simple terms is when the price is running between (in a channel) support and resistance levels. When price is in a channel, it tends to stay in that channel until a channel breakout happens. Here’s what a price in a downward channel looks like: You can click to enlarge if you cant see the charts clearly. So how does an upward channel looks like? Well, it would be the exact opposite of the chart above. Here’s an example of an upward channel: HOW DO YOU DRAW A CHANNEL? Drawing A Channel Is very easy…here’s how (keep referring to the charts above): First you need to identify the points where you want to start drawing your channels from. These are numbered 1 & 2 on the charts above. You need a minimum of 2 points to do this. Next, you connect these points with a trendline. That’s it. HOW DO YOU TRADE A CHANNEL? This is also very easy. Here are the steps: Once you’ve drawn your channel, based on the 2 points on both sides of the channel you wait for price to come to either one of these channel lines. Once price touches the channel lines you open a trade based on what side of the channel line the price touches: if it touches the channel line above, you SELL. If price touches the channel line below, you buy. See the charts above for more clarity. WHAT TYPES OF ORDERS WOULD YOU USE IN TRADING A CHANNEL? You can use instant market orders-which means as soon as price touches one of the lines, you open a buy or a sell order immediately. Or you can use a SELL STOP or BUY stop Orders. WHERE DO YOU PLACE YOUR STOP LOSS AND HOW MUCH STOP LOSS IS REQUIRED? Placing stop loss is easy: Just Place your stops outside of the channel lines. By how many pips? Well, your stop loss should be determined by the timeframe you are trading in. If you are trading on 5 minute charts, place your stop loss 10-15pips outside of the channel line. If you are trading in 1hr or 4 hr charts, you stop loss should be 20-50pips outside of the channel line. If you place you stop loss too close to the channel lines, any false price spike would take you out and then guess what happens? The price goes in the direction you placed your trade originally-but now you are out of the game already-so you don’t make any money. HOW DO YOU SET YOU TAKE PROFIT TARGETS? Here are a couple of options to set take profit targets. Use whatever options that you like. Set your profit target based on the length of the channel in pips. Or you can set your take profit target halfway point in the channel. Or you can take half of your profits off the table when price goes to halfway in the channel. Or set your take profits to 3 times the amount your risked: for example, if you stop loss is 20 pips then set your take profit target to 60pips. HOW DO YOU MANAGE A TRADE IN PROFIT? Here are a couple of options to manage a trade that is in profit: when price moves by the amount your risked, move your stop loss to breakeven. But sometimes, if you stop loss is so small, there will be a danger that you will get stopped out quite frequently as well. when the price moves halfway up or down the channel, move stop loss breakeven. You may consider taking half the profits off the trade and leave the other half running.
Hi fellow swing traders, here is a swing trading system which you can use to trade the GBPUSD currency pair. This swing trading strategy has the potential to average more than 100 pips a month. You just have to manage your risks and it can be a real killer forex swing trading system for you. Ok, enough of trash talk, lets get started with a bit more detail into the GBPUSD forex swing trading strategy. OVERVIEW OF THE 4HR GBPUSD FOREX TRADING STRATEGY (1)With this forex swing trading system, you need to use the 4hr chart as well as the daily chart to make a trading decision. Your trade entries are made in the 4hrs but you need to check the daily timeframe for what the main trend is before you enter a trade on the 4hr timeframe. (2) You also need to have these forex indicators,: slow stochastic with the settings(13,5,5) applied to both charts, EMA 4, EMA14, and EMA 50 on the 4hr chart. TRADING RULES (1) On the 4hr chart, open a trade at market order or with a pending stop order on the new opening candlestick when 4ema first crosses 50Ema followed by 14Ema (2)Your stop loss should be 50 pips. (3)Exit the trade when 4EMA reverses and crossed 14EMA on the next open candle. (5)Last but not the least, you need a good filter to filter out potential bad trade setups with this swing trading system. Here’s what you need:the stochastic indicator on the daily chart: For Valid Long Entry: Slow %K above Slow %D on the Daily Chart For Valid Short Entry: Slow %D above Slow %K on the Daily Chart Note: the %K&%D on the stochastics are the two line on the stochastic indicator chat that cross each other based on where price is going. The reason why you need to use the stochastic on the daily chart is pretty simple:follow the trend. The daily chart has more importance than the 4hr chart. (6) Take profit: there is not take profit option here(dummy!) because you need to refer to rule (3)! Now if you are still confused, these two charts below will make things a bit more easier for you to understand. Click on the charts if you need to see it more clearly. Now as trade filter, swith to daily chart to see if the two stochastics lines have crossed to the downside to confirm the overall direction of the trend(in this case, its a downtrend): ADVANTAGES OF THE 4HR GBPUSD FOREX TRADING STRATEGY allows you to actually get into a trade just after the moving average crossovers happens, which means you are potentially entering a trade just after the trend has started…which is better than entering a trade at the halfway point of a trendy market move. which means if its going to be a nice trending market, you stand to make a lot of profitable pips and the fact that you are only supposed to close the trade when 4ema crosses the 14 and if that’s in a nice trending market on a 4hr chart, that could mean hundreds of pips of profit you can make. the use of daily timeframe withe the stochastic line crossover allows you to enter trade based only in the current prevailing trend direction thus increasing your odds of success. DISADVANTAGES OF THE 4HR GBPUSD FOREX TRADING STRATEGY The biggest problem I see with this trading system is the entry because moving averages are lagging indicators therefore the ideal entry point would have been anywhere from 2-7 candles back. this also means that at the entry where you got into a trade, price may be due for a temporary pullback and if your stop loss is not wide enough, you will get stopped out. This forex strategy is definitely not good for ranging market, expect your stop losses to get hit frequently. CAN YOU USE THIS FOREX TRADING STRATEGY WITH OTHER CURRENCY PAIRS? The short answer is yes. Better for you to stay with currency pairs that have good trending characteristics.
The Descending Triangle Pattern Swing Trading System is another one of the Triangle Pattern Formations: The Symmetrical Triangle Chart Pattern Trading System & The Ascending Triangle Chart Pattern Trading System The Descending Triangle Chart Pattern Formation Trading System Is the exact opposite of the Ascending Triangle formation and it is considered a bearish pattern. Here is a comparison between the descending and ascending triangle chart patterns: HOW TO SPOT THE DESCENDING TRIANGLE CHART PATTERN It is quite simple, really: here’s how: First, the market has to be in a downtrend and at some stage, the price will consolidate when it hits a support line and then it will move up but only to find resistance on the downward resistance trendline. The Price will continue be to squeezed into a tight spot until it a breakout happens-usually to the downside. HOW TO TRADE THE DESCENDING TRIANGLE CHART PATTERN As long as you know how to spot the descending triangle pattern chart formation, trading the pattern should be very easy. Here are the rules of the descending triangle pattern swing trading system: Wait for a breakout candlestick to break and close below the support line. Once that happens, place your sell stop order 3-5 pips under the low of the breakout candlestick. For stop loss placement, you have a couple of options: first option is to place you stop loss right above the downward resistance line (this is the best stop loss placement option because you wont get stopped out prematurely). The next option is to place you stop loss anywhere from 5-30 pips above the high of that breakout candlestick. Your take profit target: you can calculate the height of the pattern and use it to calculate your take profit target price level or you can place it at 3 times what your risked. Did you enjoy this? It would mean the world to me if you shared it:
The double bottom chart pattern is a bullish reversal price action chart pattern that develops in a down trend and is recognized by the appearance of a low, a rally, and then price revisiting the same zone of the previous bottom. It is much like it’s double top chart reversal pattern cousin except we are doing everything in the reverse. A double top looks for a reversal after an uptrend. Since we are using price action as the main building block of this swing trading strategy, you don’t have to rely on the lagging nature of any technical indicator. Even the entry is done through a breach of the potential resistance level that shows up after the first bottom of the double bottom pattern is put into place. This reversal pattern can be used to show a reversal in the man trend and as an entry pattern for a trade in the direction of the trend and in this case, we look to go long. In the case of the latter, we are trading in the direction of the major trend after the shorter term trend ends with the double bottom pattern. There can be many ways to trade a double bottom chart pattern strategy but like any trading, the important of risk management can never be ignored. Key Elements of The Double Bottom Chart Pattern After a long run of a downtrend, the formation of the double bottom can signify the potential for a complete reversal of the trend. Getting involved at the beginning of an uptrend (picking the bottom) can add to your bottom line in amounts that you can’t imagine. That is best case scenario. The second bottom does not have to come directly to the same price point of the first low that is put in. In fact, a pure double bottom pattern is rare and you will often see price come above the zone or even poke below and then rally. That is a trade setup by itself where traders get trapped short and are forced to cover their position as the uptrend gets underway. The peak that shows up as price puts in the first bottom, starts to rally and then turns back down again is called resistance. The violation of that resistance is what confirms the double bottom. I will repeat that….. A double bottom is not confirmed until the resistance level that forms between to the two lows is violated. Depending on the size of the rally after the first part of the double bottom is put in, waiting for the resistance level to break can end up leaving the trader on the sidelines as a huge move gets underway. You will want to learn other continuation chart patterns such as flags that can show that the double bottom is a likely chart pattern so you can find a trade entry before the resistance is broken. What Is The Swing Trading Strategy We are looking to take advantage of this chart pattern by allowing it to alert us to a possible change in trend. We can even use it to get involved in the longer term trend as the short term downtrend exhausts itself. The market is in a downtrend which can be determined by price action, a technical analysis indicator, or by a simple glance at the chart. We need a downtrend in place. Price bottoms here with a solid rejection and after a quick test of support (not needed), price begins to rally The high is put in and for the double bottom to be confirmed, you will need a break of this level. This is a weekly chart and this peak over a 1000 pips from lows Price moves back down and tests the zone of the previous bottom. We need this zone to hold to have a chance at using our trading strategy to go long Price begins to rally and although not shown on this chart, price retraces to the .786 Fibonacci level (also the same level as that cluster of price above our number 4) and then goes onto a 7000 pip run before stumbling into a long term consolidation. Stops and Price Targets You need to use a stop loss and you can place it below the double bottom pattern as an easy choice. Keep in mind that if you use another entry besides the break of confirmation resistance, a breach of lows does not make this double bottom invalid. You can use an ATR – average true range – stop and that is my preferred method of placing stops regardless of the pattern I am using. One point – the only time I don’t use an ATR stop is when trading a reversal as a violation of the high or low of the retrace or rally would invalidate my trade. Price targets can be set via a measured move in line with the chart pattern. The measured move target is simply the height of the pattern projected upwards which will give you a 1:1 reward risk ratio. The Fibonacci targets simply use extensions which are price projections over 100%. You can also trail your stop to lock in profits with various methods. Alternate Trade Entry You know that the low to resistance area is over 1000 pips and it can be frustrating for a trader to see price move without them. We can use another technical analysis tool, the trend-line, to help us get into this trade Draw a down trend line and enter when price breaks the line. This is a front run of the confirmation entry and remember that you will often see price break a trend line and then retrace to test the trend line. Ensure you have the psychological willpower to sit through the retrace. Trust in the process and your calculated stop loss. Some traders will for watch for a bullish reversal candlestick formation and we do get one on the formation of the second bottom. I would call that a failure test of the lows of a consolidation which is a bullish signal.
Let me say right from the start the any moving average swing trading strategy, including this 34 EMA trading strategy (this is not an EMA crossover strategy, relies on a lagging technical indicator. As such, using something other than a derivative of price such as price itself, we can combine the best of both worlds: An objective view of an ongoing trend stopping us from attempting to pick extremes Seeing what the market is actually doing before price is calculated with the moving average No matter what Forex swing trading strategy you are using, I will always hit home the importance of risk management. If you loose all your chips, you go home. Requirements For The 34 EMA Trend Line Strategy You will need to plot a 34 exponential moving average on your chart. That is simple to do and if you are having any issue, consult the user manual of your charting platform. Ensure you have a rule based method of drawing a trend line. You must be consistent with all aspects of your trading. You can use any currency pair you choose. Time frames will depend on you as a trader but I prefer daily charts for swing trading any strategy. This allows me to not be glued to the trading charts or be at the beck and call of alerts being sent to my phone. That said, you can use any time frame from 1 hour and above. This can be a short-term trading strategy but that all depends on the run the market makes. You can swing trade which is simply taking one clean swing out of the market and not tolerating any retrace in your position. You can position trade taking advantage of the current long term trend and wait until an opposing trading signal to exit. Only you can determine the type of trader you are. These swing trading strategies are designed for you to experiment with and hopefully you will find one that sticks. It could be a trend trader or swing trader. Can you live through wild swings in the market? Forget trend trading. You can determine the long term trend simply by increasing your trading chart 3-5 times such as daily – weekly long-term trend. Four hour would be daily chart. What Is The Trading Edge Moving averages are generally used as an objective measure of trend. An up sloping trend line indicates an uptrend and the down sloping line is a down trend. We can also use the break of the moving average to determine trend. One price breaks above the moving average, we are looking at longs. A break below a moving average (in this strategy it is the 34 EMA) indicates a down trend. We are introducing the very popular technical analysis tool called a trend line. Trend line breaks are a very common trading strategy and we are going to utilize the trend line break as a way of showing a change of character in the market. When a trend line breaks, traders look to position on the break or a retrace to test the backside of the trend line. We want to trade a break only if the trend line break happens in the same area as a break of the 34 EMA This is a semi-mechanical trading strategy where either the trend line is broken, or it isn’t. Is the 34 EMA crossed or not? Not much guesswork involved. 34 EMA Trend Line Strategy The following is a daily chart of a Forex pair showing two buy setups. Shorts are the exact opposite. Stops and targets have not been plotted. The first trade setup is #1. You can see I’ve connected the obvious peaks of price that broke lows. A down sloping trend should not connect a lower peak if the low of that peak has not broken lower than the previous (mechanical trend line drawing tip!) Price does break above the trend line but takes 3 more candlesticks to break above the 34 EMA. We have confirmed: The current swing down has been broken and we are looking to trade a trade long The down trend has been broken upon the breach of the 34 EMA as indicated by the arrow. That is our entry candlestick. This trade did not run very far and I will show later that you would have still made a profit on it. I will show two methods to take your profit targets. Our second trade is #2. The last green circle is simply highlighting that the trend line still interacted with price weeks after it was drawn. A huge candlestick takes out both the moving average and the trend line as indicated by the arrow. Stop Loss And Take Profit Targets The stop loss is straight forward. You enter at the close of the valid candlestick (the ones with the arrows) and place your stop below the low of it. Your stop loss will vary depending on the size of the candlestick that validates the setup. If the candlestick is much smaller than the candlesticks before it, you may opt to use a 2 or 3 bar stop instead of below the valid candlestick. This chart is showing where you would place your stop. If your stop lies just above (or below for shorts) a consolidation of price, you may decide to protect the stop below the cluster. That will increase your stop size and reduce your position size so be warned. The chart also shows structural resistance price targets other wise known as support and resistance. Those will depend on the overall trend of the market and how aggressive you want to be at these price points. This next chart shows a different way to take profits – Fibonacci extension levels As shown by the arrows, you draw a normal Fibonacci retracement level but you also have extension levels activated. I use the following: 1.272 1.618 2.0 2.618 (rarely) You want to use obvious swings to draw your Fib and even is you used the full swing down on the first trade, you would still monitor price action at resistance. Our first trade eventually rejects slightly below the 1.618 level for an approximate profit of 174 pips. A decent R multiple of 1.46 The second trade is using the full pull of the swing down. There is not an obvious swing level other than the original pivot. I want you to note the top of the chart at the 2.0 level. Price stalled directly at that level! A conservative 1.272 profit target on this 34 EMA swing trade gives you 572 pips with a great R multiple of 2.29. If you didn’t get spooked out of the trade during the sideways consolidation (note that the price action is still bullish and did not close below 34 EMA with any conviction), your R multiple is 4.5 with a profit of 1142 pips potential How Can You Manage Your Swing Trade This trading strategy gives you targets so you can decide to do a few things at each target: Scale partial position at Fib extension levels or structure points Tighten the stop level to reduce your capital exposure Full exit depending on price action at these levels Trailing your stop can be done using an ATR trailing stop which will take into consideration the current volatility of the market. You can trail your stop behind structure or bring your stop to break even when you hit 1R and just wait until a profit target is hit or an opposing trade sets up. You will have to find a method of stops and targets that you are comfortable with. Nobody knows what is right for you….except you.
You by now, have seen and read many two(2) moving average crossover forex trading strategies. But this one here is bit different: you need to have 3 moving averages. Why tripple Moving Avearge? Well… The added Moving Average helps avoid false signals commonly encountered in the standard MA crossover. Forex Indicators Required: 10 EMA (fast) 25 EMA (medium) 50 EMA (slow) Timeframes: 15 Minutes and Larger Currency Pairs: Any HOW TO TRADE THE TRIPPLE MOVING AVERAGE FOREX CROSSOVER FOREX TRADING STRATEGY Buying Rules: When the 10 ema crosses 25EMA, and then also crosses the 50 EMA, then buy. Place your stop loss a few pips below the nearest swing low point. Use Previous Swing High Points As your take profit target level. Exit when the fast EMA touches the medium EMA or Exit when the fast EMA crosses over the medium EMA. You have to wait till the current bar/candlestick has closed before taking the exit signal. Selling Rules: When the 10 ema crosses 25EMA, and then also crosses the 50 EMA to the downside, then sell. Place your stop loss a few pips above the nearest swing high point. Use Previous Swing Low Point As your take profit target level. OTHER MOVING AVERAGE COMBINATION OPTIONS Fast Moving Average Settings for shorter time frames. (15 min – 1 hour) 10 EMA, 25 EMA, & 50 EMA 4 EMA, 9 EMA, & 18 EMA Slow Moving Average Settings for longer time frames (1 hour – 1 week) 17 SMA, 14 SMA, & 21 SMA 5 SMA, 10 SMA, & 20 SMA 4 SMA, 10 SMA, & 50 SMA SIMPLE Vs EXPONENTIAL MOVING AVERAGE Simple Moving Averages (SMA) have more lag. SMAs are more suited for trading on longer time frames (over 1 hour). These can also be used to help identify support and resistance areas, especially the 200 SMA. Exponential Moving Averages (EMA) have less lag. These are more suited for trading on shorter time frames (under 1 hour). ADVANTAGES OF THE TRIPPLE MOVING AVERAGE FOREX TRADING STRATEGY Simple and easy to follow. Easy to automate. It is A Very profitable forex strategy in trending markets. DISADVANTAGES OF THE TRIPPLE MOVING AVERAGE CROSSOVER FOREX TRADING STRATEGY Doesn’t work well in ranging markets. Can lead to numerous false signals. So You have to Avoid using this strategy during ranging markets. Requires monitoring after every new bar has closed. Remember to wait till the current bar has closed before taking any action. Signals can change frequently if you are watching the graph tick by tick.
The Ascending Triangle Pattern Swing Trading System Is Another Explosive Chart Pattern Trading System That Can Bag You A Lot Of Pips Easily If You know what to look for. The ascending triangle chart pattern forms when two converging trendlines (support levels & resistance levels) converge to form an apex (point). The ascending triangle chart pattern is generally considered a bullish formation and it usually forms during a currency pair uptrend as a continuation pattern. This ascending triangle chart pattern is confirmed when the currency pair price breaks out of the ascending triangle formation to the upside and closes above the upper resistance trendline. If however, when the currency pair breaks out to the downside, the ascending triangle now is a reversal pattern. HOW TO SPOT THE ASCENDING TRIANGLE CHART PATTERN Firstly, the market has to be in an uptrend and there will come a time when it will slow down(consolidate) with it hits resistance levels. Price will fall and find support on a rising trendline. Price gets squeezed into a tight spot(more like a coiled spring!) and then a breakout happens The two important clues are the upper horizontal resistance line & the rising support trendlines. You must be able to spot these and draw them and wait for the breakout to happen. HOW TO TRADE THE ASCENDING TRIANGLE CHART PATTERN SETUP Trading the ascending triangle chart pattern is very simple and here’s how: Once you’ve identified the formation of the ascending triangle pattern, you wait for a breakout candlestick to break the resistance line to the upside. Make sure that, that breakout candlestick CLOSES first above that resistance line, ok? Then next thing you do is place a buy stop order 3-5 pips above the high of that breakout candlestick. Then Place you stop loss. You have a couple of stop loss placement options: the first option is to place it down below the support line which is the best option. The second option is to place it halfway point between the resistance and support line. Another alternative is to place it anywhere from 5-30 pips below the low of the breakout candestick. Your take profit target should be 3 times what you risked in pips or you can use the height of the pattern (in pips) and calculate your profit target price level. ADVANTAGES OF THE ASCENDING TRIANGLE PATTERN SWING TRADING SYSTEM It is a very robust & reliable trading system in a strong trending market where you can make profits very easily. It is price action trading at its best-no other forex indicators are required. It is easy to spot the trading setup and wait for the breakout-if you know what to look for. if you trade in larger timeframes like the 1hr and 4hrs or the daily chart, your profits in pips would be big. A FEW PROBLEMS WITHE THE ASCENDING TRIANGLE PATTERN SWING TRADING SYSTEM depending on the timeframe you are trading in, the stop losses may be quite large, therefore you need to determine your trading risk before placing your trade(s) such is the nature of the forex market, don’t expert a 100% success rate on every ascending triangle pattern formation. Did you enjoy this? It would mean the world to me if you shared it: