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:
The symmetrical triangle pattern trading strategy utilizes price action which is a form of technical analysis and is based on the symmetrical triangle- mostly considered a continuation pattern. When a symmetrical triangle formation is formed on the chart, it indicates a period of consolidation in a trend and after that, the trend may resume. The Symmetrical Triangle chart pattern is a really effective chart pattern that you can use for swing trading. This price action trading pattern can appear in any market and on any time frame. Like most patterns, they are more reliable on the higher time frame charts. The symmetrical triangle pattern is formed by converging of two trend lines where one is considered a resistance level and the other is considered a support level Symmetrical triangles can be either bullish or bearish if a symmetrical triangle forms after an uptrend, this is considered bullish. If a symmetrical triangle forms after a downtrend, this is considered bearish. Because the symmetrical triangle is considered a continuation pattern, you should watch for the breakout to occur in the overall trend direction. Symmetrical triangles can be very profitable when you trade the breakouts that happen either downwards or upwards. SUCCESSFULLY TRADING THE SYMMETRICAL TRIANGLE CHART PATTERN These are the two important things to be able to trade the pattern successfully: know what you are looking for and being able to spot the symmetrical triangle as it is being formed get in at the right time near the breakout point which can be either the support or resistance trend line depending on the trend direction CHARACTERISTICS OF SYMMETRICAL TRIANGLE PATTERNS The two trendlines drawn in the formation of the triangle should have similar slope at a point know as the apex. The price will bounce between these trendlines towards the apex. The breakout as most times will happen about 3/4 of the way towards the apex. This pattern become unreliable if price gets inside the apex. The breakout often happens in the direction of the original (prior) trend HOW TO TRADE THE SYMMETRICAL TRIANGLE CHART PATTERNS Look for this trading pattern in both an uptrend and down trend. We are looking for the breakout of the support or resistance trend line in the direction of the overall trend. This is not a reversal trading pattern. For those, you may want to consider other price patterns such as ascending and descending triangles. Wait and watch for a candlestick to breakout of the triangle pattern. This candlestick must then close outside the descending or ascending trendline. Once this candlestick closes, depending on which side the candlestick closes, you either place a buy stop/sell stop order 2-5 pips from the closing price of that candlestick. Set your take profit target equal to the “pattern height.” Stop loss must be set and there are a few ways you can do this: If you placed a buy stop order, place your stop loss anywhere from 10-30 pips (this depends on what time frame you are using to get into this trade) under the low of the candlestick that broke out of the triangle chart formation You can place your stop loss on the other side of the triangle chart formation…that is if you were to take a sell trade, where you could have placed your sell stop order then this is where you place your stop loss. Stop loss placement on this area is quite effective as you would have less chance of being stopped out prematurely. You can place is at halfway point between the descending and ascending trend lines just right where the breakout happens. If you place a sell stop order, place your stop loss 10-30 pips above the high of the candlestick that broke the triangle pattern. You can also use one of my favorite stop setting indicators, the ATR HOW TO MANAGE YOUR TRADE THAT IS IN PROFIT When your trade is in profit and is halfway towards hitting its profit target, you can move stop loss break even to minimize your risk You can take half of the profits and leave the other half running. Continue to lock your profits by moving your stop loss and trailing it behind higher swing lows as price moves upwards to your profit target(this is for a buy order). Do the opposite for sell order: move stop loss for each lower peak that forms until your take profit is hit. ADVANTAGES OF THE SYMMETRICAL TRIANGLE PATTERN TRADING SYSTEM the symmetrical chart pattern trading system is usually a very explosive breakout swing trading system. if you catch the breakout at the right time, profits come fast. its based on price action and there is really no need to add any other indicator-keep it simple. the symmetrical chart pattern happens in all time frames Any trader that looks for this type of chart pattern must have an objective means to draw the trend lines. This will allow consistency in your approach that does not change from Forex trading to trading futures. Keep everything consistent.
Another form of support and resistance trading is called the Support Turned Resistance and Resistance Turned Support trading system. How The Support Turned Resistance And Resistance Turned Support Trading System Works Sometimes when price breaks a strong level of support, at some stage in the future, price rises back up to this support level that it broke previously only to be pushed back down from that previous support level. What has happened is that the previous support level has now acted as resistance level. The opposite is also true: a resistance level broken has the potential to act as a support level when price falls down to this resistance level it broke previously. Indicators Required: none Timeframes: Any Currency Pairs: Any Rules Buy Rules: Once Resistance Level is broken, wait until price starts to fall back down to the the resistance level it broke. Different types of orders can be used to enter into a trade: for buy stop order wait until a candlestick touches the level and place your order 2-5 pips above the high of that candlestick. Buy limit orders can be placed 2-5 pips above the resistance turned support line. Or you can buy immediately at market once price hits that level. Place your stop loss 10-30 pips below the resistance turned support line if you use buy limit and market orders. For buy stop orders, place 2-5 pips below the low of the candlestick that touches that line. For take profit targets, look for previous significant swing high and place your profit targets within that. Sell Rules: Once Support Level is broken, wait until price starts to rise up to the the support level it broke. Different types of orders can be used to enter into a trade: for sell stop order, wait until a candlestick touches the level and place your order 2-5 pips below the low of that candlestick. Sell limit orders can be placed 2-5 pips below the support turned resistance line. Or you can sell immediately at market once price hits that level. Place your stop loss 10-30 pips above the support turned resistance line if you use sell limit and market orders. For sell stop orders, place 2-5 pips above the high of the candlestick that touches that line. For take profit targets, look for previous significant swing lows and place your profit targets within that.
Horizontal Support and Resistance Trading is a very popular forex trading system that is used by many traders worldwide. To know how to use support and resistance trading effectively, you first need to know how to identify support and resistence levels. How To Recognize Support & Resistance Levels Its very simple to find support and resistance levels: Look at the chart Look for a series of low points where price does not fall below this any further, this is your support level. Look for a series of high points where price does not rise above this any further, this is your resistance level. The more price bounces off this support & resistance levels, the stronger these levels become So next time price comes this level, expect it to bounce again like it did before. Thats pretty easy to understand, right? Indicators: None Timeframes: Any (Larger Timeframes like 1hr, 4hr & daily are much more reliable) Currency Pairs: Any Rules: Buy Rules: Once a support level is identified, draw a horizontal support line and wait for price to fall back to that support line. (a)When price falls back and touches the support line, wait for the that candlesticks to close and place a buy stop order 2-5 pips above that high of the candlestick that touches the support line or (b) place a buy limit order so when price reaches it, it activates it and you are in a trade 0r (c) you can buy immediately at market price when price touches that level. for buy limit or at market orders, place your stops 10-30 pips below the support line. Take profit target levels should aim for the resistance levels above. Set them within the resistance levels so there is a greater chance of your profit target being hit. Sell Rules: Once a resistance level is identified, draw a horizontal support line and wait for price to rise up back to that line. (a)When price rises back up and touches the resistance line, wait for the that candlesticks to close and place a sell stop order 2-5 pips below that low of the candlestick that touches the resistance line or (b) place a sell limit order so when price reaches it, it activates it and you are in a trade 0r (c) you can sell immediately at market price when price touches that level. for sell limit or at market orders, place your stops 10-30 pips above the resistance line. Take profit target levels should aim for the support levels below. Set them within the support levels so there is a greater chance of your profit target being hit. Trade Management Consider closing half of your position off in profit when price travels to halway point between the support and resistance levels. move stop loss and trail stop your profitable trades to lock in profit as your trade moves in favour. the best way as usual, is to move behind those swing highs or lows and place your stops just a few pips behind so there is less chance of you getting stopped out prematurely.
Overview of the Floor Trader’s Method The floor trader’s method is a trend following system which can be used effectively as a swing trading strategy. The floor trader’smethod is built on 3 important concepts: 1) it is a retracement-continuation trading method. 2)it uses moving averages to identify the trend and trades in the direction of that trend. 3) the trading setup or the trading trigger is a reversal pattern that forms after the retracement. If you spend a little bit more time understanding some of the most common reversal candlestick patterns, then it would make it much easier for you to understand this trading method. Retracements: In a downtrend, the retracement (or pullback) is the minor rally upward In an uptrend, the retracement(or pullback) is the minor rally downward Timeframes: 1hr and above Indicators: 9ema and 18ema Short Entry Rules (1) Wait for 9ema to cross 18ema to the downside. When this happens, it signals a downtrend. (2) Wait for a retracement where price goes back up and touches the 9ema or both ema’s. (3) Sell on the breakout of the Low of the candlestick prior to the current one (4) Place stop loss 1-5 pips above the “peak” of the retracement. Long Entry Rules (1) Wait for 9ema to cross 18ema to the upside. When this happens, it signals an uptrend. (2) Wait for a retracement where price goes back down and touches the 9ema or both ema’s. (3) Buy on the breakout of the High of the candlestick prior to the current one (4) Place stop loss 1-5 pips below the “trough” of the retracement. Floor Trader’s Method Buy Setup How To Manage Your Trade Here are some suggestions on how you can manage your trades that are in profit: move stop loss to break-even when the trade moves by the amount risked you may consider taking some profits off the table when price moves twice the distance of the retracement where you took the trade on. trail stop your trades behind each subsequent lower swing high that forms as price continues to move lower for a short trade. trail stop your trades behind each subsequent higher swing low that forms as price continues to move higher for a long trade. How To Setting Profit Targets Here are a few ideas on how you can set your profit targets: use fibonnaci tool to project your profit targets-the 161.8 & 261.8 fib levels are potential profit targets. or you can use 2 to 3 times the distance of the retracement to calculate your profit targets. Or you may not choose to set profit targets but trail stop your trades, locking profits as the trade moves in favour until you get stopped out. Advantages of the Floor Trader’s Method The trend is your friend. The floor trader’s method is a trend following trading system. It is simple swing trading strategy, easy to understand and implement Allows you to get into a trend in its beginning and you can ride out the trend if the first retracement happens happens quickly after the ema crossover. Higher timeframes are much more reliable. Trade Entry is dictated by Price Action Stop Loss is not placed at any arbitary location but above resistance levels for a short order and below support levels for long orders and this reduces the changes of getting stopped out in a trade prematurely. Disadvantages of The Floor Trader’s Method Forex Trading Strategy Tendency to give a lot of false trading signals in a sideways trending market. In a fast moving trending market, sometimes, the retracement will not happen close to the ema crossover and you may see that you have missed a massive part of that trendy move and by the time a signal is given for you to enter a trade, the market at most times would have lost its steam anyway and you will tend to get stopped out frequently. The further away the retracements(pullbacks) happen away from the ema cross over, the less reliable the trading signal would be. This means “A” retracement is much more reliable than “B” retracement and “B” retracement is much more reliable than “C”. Additional Floor Trader’s Entry Technique The original floor trader’s method specifically talks about entering on the failure of a retracement when the high or a low of the candlestick prior to the present one is intersected. That’s one way to look at it. However, we can take this a bit further by using reversal candlesticks to time our trade entries. Did you enjoy this? It would mean the world to me if you shared it:
The double top chart pattern is a reversal pattern that can be seen in all time frames. It often forms when price has moved up for an extended amount of time, forms resistance, pulls back and as traders try to get in on another leg, price stalls at the previous swing high. Once traders see the previous swing high is not violated by current price, a few things begin to happen: Traders that are holding longer term longs such as a swing trader, began to take profits Traders that get into the last leg up, start to panic and exit their longs Counter trend traders see price not able to break the swing high (resistance) and look to short the market. The selling action from shorts and from those exiting long positions (who must sell to exit), fuel price to the downside. IDENTIFY THE DOUBLE TOP FOREX CHART PATTERN It is not complicated issue to identify a double top chart pattern. Being a reversal pattern from a previous swing high, you can easily scan for swing highs and set an alert when price revisits that price zone. Two tops, top 1 & top 2 (or swing highs or peaks )that are almost on the same price level. Financial markets are not perfect so expect some price splash around the levels. There should be equal distance in terms of time it takes to form the highs (peaks) Some currency futures traders like to include a third requirement to classify a double top: volume. They want to see a decrease in volume on the second high. This give them added confidence that the buyers are losing steam and a price reversal can happen. Double Top Forex Pattern Let’s review this chart: Two tops or peaks were formed after a strong move upward. The second top or swing high (or peak) was unable to break the second top or swing high (top 2). When price does not break this resistance level above top 2, this is a strong indication that a reversal is going to occur. As a Forex swing trader, once you see all these things lining up, you know you are should take your trade because price usually moves fast downward once top 2 resistance level is not broken to the upside. Why? Failed expectations. When price fails to move as a trader expects, panic can often set in and they will exit their positions. Nothing scares a trader more than a loss (and that is not a good thing to be afraid of!). Price doesn’t even have to test a traders protective stop loss. Once they see their P/L start to shift, they grab the profits that they have. Even though the double top is a reversal pattern, it does not always mean a full scale trend reversal. It can also be setting up a short term correction in the market. Trading The Double Top Chart Pattern Trading the double top Forex trading strategy is simple and there are three ways to trade it: The Aggressive Entry The Reversal Candlestick Entry Technique & The Conservative Entry Rules of The Aggressive Trade Entry Once the first top is formed and now you see price going back up to that level, place a sell limit pending order just 3-5 pips under the high of the candlestick the formed the Top 1. ou can also sell instantly at market order as soon as price is within 3-5 pips of the high of Top 1 candlestick. Place your stop loss at 10-30 pips above the high of top 1 candlestick or use the ATR stop loss strategy here For take profit targets, you can use the neckline as your take profit target level 1 and or even use the previous swing low below the neckline for your take profit target. Rules of The Reversal Candlestick Trade Entry Once the second top is formed, what you do is watch for a bearish reversal candlestick formation. Place a sell stop order just 3-5 pips under the low of the bearish reversal candlestick formation. Place your stop loss at either a few pips above the bearish reversal candlestick formation, 5-10 pips or you can place it just a little bit outside of both the 1st top and the 2nd top, anywhere from 5-20 pips. For your take profit target, you can use the neckline as your take profit target level Rules of the Conservative Trade Entry: Wait for price to break below that neckline. Make sure the candlestick that breaks the neckline must close below it. Then place a sell stop order 3-5 pips under that breakout candlestick’s low. Place your stop loss anywhere from 3-10 pips above just above the neckline or just above the high of the candlestick. For you take profit target, calculate the distance in pips between the neckline and the 1st top (or the second top…whichever you prefer) and use that number to project your take profit target price level. Double Top Chart Pattern Trading System The bigger problem I see with trading using the conservative approach is your stop loss would be too large if the neckline is too far away from the tops. This can often happen if the reversal begins with a large momentum candlestick to the downside. Advantages of Trading Double Tops The downward moves that happen after the formation of the 2nd top can go a long way, even for weeks, if you are trading off the daily chart and if you continue to ride the trend, that’s means you make lots of money too. This is price action trading at its best Easy to spot and trade once you know what to look for The risk for each trade is much better compared to other forex trading strategies simply because you will be using support and resistance levels to place your stop loss. What this means is that there is less chance of you getting stopped out frequently. Disadvantages Sometimes you will come across situations where there will be price spikes just to trigger all the stop losses placed just above top 1 and it would seem as there would be a breakout to the upside but this is just a trick. Price fall back all the way down. (The key is being vigilant and if a price spike takes you out with loss, then watch and wait to see if you enter on the 2nd time…just wait for another reversal candlestick…even if it is the spike candlestick, enter again!) Trading in smaller time frames anything below 1 hr may not be really good. The higher the time frames you use, the better. I personally use chart patterns such as this on daily charts and above. Note: You can also use double tops on lower time frames as a means to enter a larger time frame rally.
The Bearish Pennant Trading Strategy is an effective forex trading strategy that is based on the bearish pennant pattern. With the Bearish Pennant Trading Strategy, you do not require any other forex indicators. Its all based on Price Action Trading. The Bearish Pennant Trading Strategy only requires you to be familiar with how to draw trendlines & secondly, be able to spot the Bearish Pennant Chart Formaton when its happening right in front of you. This forex swing trading system is similar to the Bullish Pennant Trading Strategy except for one thing only: its the complete opposite. Here’s what A Bearish Pennant forex chart pattern looks like: Notice how it is the exact opposite of the Bullish Pennant Pattern? Notice that Pennant Chart Patterns (bullish or bearish) are different from the Flag Chart Patterns (either bullish or bearish) with the bearish pennant pattern, you should have a market already in an existing downtrend. at some stage, this downward trend will pause & consolidate for some time until a breakout happens. The breakout usually happens to the downside. with the Bearish Pennant Forex Strategy, we will be entering short orders (sell orders) when the breakout happens to the downside. HOW TO SPOT THE BEARISH PENNANT PATTERN FORMING First, there has to be an existing downtrend. Next, watch for price to pause and slow down and consolidate. You need to draw 2 converging trendlines: one connecting the decreasing peaks (the downward trendline) and the other trendline connecting the increasing bottoms(upward trendline). wait and watch for price to break the upward trendline which was drawn connecting the increasing bottoms (or swing lows). There you have it. You have to be careful though. Sometimes, the peaks and bottoms may not be so clear when this bearish pennant chart is forming. HE RULES OF THE BEARISH PENNANT TRADING SYSTEM watch and wait for the upward trendline to be intersected. the intersecting candlestick MUST close below the upward trendline. then place a sell stop order 3-5 pips below the low of the intersecting candlestick then place your stop loss order anywhere from 5-10 pips above the high of the intersecting candestick. if that intersecting candestick is a true breakout, price will fall and activate your sell stop order. For take profit targets, you have a couple of options: set your take profit level at the price level where your profit will be 3 times what you risked. or you can use a previous swing low point (bottom) to set your take profit target level. So there you have it, the Bearish Pennant Trading Strategy. See if you can use it and make some pips. Trading Tip: if you trade using 4hr timeframe and above like daily, you can make hundreds of pips easily with this forex trading system
Trading end of day charts for swing traders can be a great way to free up your day and still take part in the big moves. In Forex, it may be a little difficult as it is a 24 hour market but there are times in Forex where volatility dries up. If you are swing trading Forex, think of entering your positions at the New York session close. You may have to edit your candlestick closing time (if possible) to have a snapshot on how they day played out. Remember that the market does basically 3 things: Price mean reverts – pulls back from the dominant swing Consolidates – stops putting in the price action trending patterns Moves with momentum If you are trading pullbacks on an end of day play, it is fairly easy to see if price action confirms that the pullback, at least at that point, is complete and price is resuming trend. Even an inside day pattern as indicated in this graphic can enable you to get involved in the resumption of trend. Trading Consolidated Breakouts Even the end of day candlestick can show you the breakout of consolidation and if that breakout has some strength to it. This will enable you to simply enter with a market order or in this case you can buy stop the high of the breakout candlestick. There are other ways to trade breakouts from consolidation but would require you to look at smaller time frame charts for multiple time frame analysis for the most part. Trading Momentum Moves Can Be A Problem Momentum moves pose a slight problem. Far too many traders wait to get into a price move and when they look at momentum, traders often times buy the highs before a turn in price. After a multi day run of momentum, it is often a safe bet to wait until there is a reaction in the opposite direction of price. However, if you were to drop down to a lower time frame for the momentum trades, you can place yourself in position to take advantage of the momentum that comes the next day. You will also be taking advantage of price action that indicates there is potential for another move higher as opposed to flipping a coin and just joining momentum. This graphic shows two days of price action. On the left is the daily chart and you can see the momentum candlestick that we are interested in. The problem is all we have is the candlestick but really no context. To trade it would be a coin toss. Look to the next candlestick and you can see a lower shadow. That lower shadow represents a pullback on the lower time frames. If you are able to drop down to a lower time frame to look for price action and structure that hints to continued momentum, you may want to do it. On the right is the inside of the second daily candlestick. Price was tracking sideways and we have a poke below support and bulls stepped in. This is called a “spring” or failure test pattern and is one of my favorite trading plays. This show intent on behalf of the buyers and you could either market in or simply buy stop the high. Doing so gives you a 40 pip better entry than simply buying the close of the previous day Assume you missed the first entry but understood the meaning of the failure test. You may opt to enter here at the basing that is setting up prior to the break of the previous day high. Either one of these entries will allow you to take advantage of momentum as well as a bigger position size because you know exactly where the failure of momentum is. If price breaks below the consolidation especially after the failure test move, you know that momentum is not as strong as it should be for higher probability trading. You may want to stand aside and wait for better price action. Higher Probability Momentum Swing Trading Using this trading technique with momentum candlesticks can put the odds in your favor as you are getting inside the candlesticks. Seeing forming price action and structure that points to continued momentum can allow you to lessen your losing trades and position size larger. You will still loose regardless of the swing trading strategy you use but anything we can do to put the odds on our side is worth a shot. If you liked this article, please do me a favor by sharing it! I also found this great trade tracking sheet that helps you see if your trading is really making you money. It’s free!
Trading with trend lines as your swing trading strategy uses the rhythm of the market and price action as the core of your trading strategy. You can not go wrong with that. Many price action traders will use trend lines as their way of determining everything from trend to reversal points. It’s not even necessary to actually draw them when you have enough experience as you can visualize them on your charts. How Trend Lines Work Trend lines are one of the most basic technical analysis tools around but powerful in their usage. First, let’s look at trend lines in terms of defining a trend. We all know that an uptrend has price making higher highs and higher lows. When we are talking about an uptrend line, we are referring to a trend line line that uses the higher swing lows and that defines the trend. When price is moving up or down, it forms those higher swing highs and higher swing lows (uptrend) and lower swing highs and lowers swing lows (downtrend). If you draw a trendline connecting a minimum of 2 higher swing lows, you have an upward trend line. The upward trendline generally trends to provide support. The opposite is true when you connect a minimum of 2 lower swing highs, what you have would be a downward trendline. The downward trendline provides resistance. This chart is using an uptrend line on a Forex chart and shows two examples of a trend line. The red line would be the first line you would draw. When price starts moving away and you have to cut through price, you will have to “fan” the trend line This is the new main trend line and you can see price bounced various times from the zones around the uptrend line. Trend Lines In An Uptrend Just because price comes close to the trend line, you will need some type of trade trigger or price action to get you into the trade. Also know these are general rules. There are a few ways to draw your trend line and the key is consistency! Understanding Trend Lines It is one thing to simply draw a line on your chart but do you know why they may/may not be valid? Every market, every Forex currency pair, they all have a rhythm to them. There will be times where price is following a general path and at other times, it will establish a different rhythm. It is this rhythm we are looking to exploit. On this chart, you can see there are several trend lines drawn. This is due to a change in the state of the market as indicated by the arrows. At various points on this chart, the market will thrust to the upside, find a price point, consolidate, and push off again. Fanned Trend Lines That is the nature of each and every market and as a technical analysis tool, the simple trend line can show you , objectively, when this occurs. What is also common, and you can prove this to yourself, is often times pullbacks in price are similar in price between each of them. Trading With Trend Lines The most common method of trend line trading is using them as support or resistance and trading the reversal off of either of them. Buying Trend Line Bounce For Buying A Trend Line Bounce Draw an upward trend line connecting a minimum of 2 higher lows (or higher swing lows) Wait for price to come come and touch the trend line at some stage down the future Place a buy stop order 2-5 pips above the high of the candlestick that touches the trend line Place your stop loss 2-5 pips below the low of that candlestick Place your pofit targets on previous significant lower swing highs (or peaks) that you see on the chart. To summarize the buy off the trend line, connect two points and wait for the third touch for the trading opportunity. For Selling A Trend Line Bounce Draw a downward trendline connecting a minimum of 2 lower highs (or lower swing highs) Wait for price to come come and touch the trendline at some stage down the future Place a sell stop order 2-5 pips above the low of the candlestick that touches the trendline Place your stop loss 2-5 pips above the high of that candlestick Place your pofit targets on previous significant higher swing lows (trougs) that you see on the chart. Selling Trend Lines The selling is the exact opposite of the buying – Look to trade the third touch of the trend line. Trading Trend Line Breaks There are 2 ways that trend line breaks can equal a trading opportunity Trade a longer term trend reversal Trade short term trend line breaks to get on the longer term trend Here we have a down trend and we fanned the trend line due to the strong pushes down in price. Trading Trend Line Breaks Each time price pulls back towards the resistance trend line, we draw a support trend line on the pullback. The trade is on the break of the trend line. On the far right of the chart, you can see the main trend line has broken. What do we do now? We wait to see price retrace to test the former resistance trend line. Will it become support? We look for price action to tell us. If we see a muted pullback, that is a great sign for an opposing trade. Strong momentum in the pullback would have me standing aside until price action showed that there will be support coming into the market. Trade Management Trade management is a skill and probably one of the most important skills you will learn as a trader. Don’t be greedy with your profits when a trade is profitable. Learn to lock your profits by moving your stop loss and trailing it behind swing highs or swing lows that form as price moves in favor. The reason for this is that there is less chance of you getting stopped out frequently as you are placing it behind support and resistance levels essentially. Now, some people may decide to use profit targets while others will take more of a position trading approach with trend lines. They are trading the trend and will only exit when the trend has shown itself to be broken by a break in the trend line. The key to long-term survival and prosperity has a lot to do with the money management techniques incorporated into the technical system. -Ed Seykota
The Fakey Trading Strategy was made popular by a Forex trader named Nial Fuller from Australia. I don’t know if Nial actually “discovered” this price action pattern but he certainly helped bring it to the forefront of trading strategies. It is a very good Forex swing trading strategy because it can setup on even the larger time frame charts. It’s actually a great idea to hunt for them on the larger time frame charts because you could be catching the beginning of a very big move in price. Here is one of Nial Fuller quotes explaining the power behind the Fakey trading setup: Often times the market will appear to be headed one direction and then reverse sucking all the amateurs in as the professionals push price back in the opposite direction. This can set off some pretty big moves in the Forex market Some of the biggest and fastest moves in Forex or any other market is when a lot of traders are caught on the wrong side of price. This creates some powerful order flow that can help drive you into profits very quickly. Here Is The Strategy For Trading The Fakey Setup Forex Indicators: The Fakey Forex trading strategy does not require the use of any forex indicators at all. All you need are your eyes and a bit of price action analysis of candlesticks Time frames: Preferably larger timeframes from 1hr to daily Currency Pairs: Any pairs including the sometimes volatile JPY crosses This Forex chart below shows a Fakey trading strategy example when we are interested in a continuation trade in an uptrend Fakey Trading Strategy Being Used In An Uptrend Looking at the context of this chart, we can see price has tested a pivot high that appeared at the left side of the chart. Price began to consolidate at what is now resistance (generally a sign of strength) and then we start to look for the setup to begin to form. An inside bar forms after price has found support in this consolidation pattern Price dips below and is rejected from lower prices. The closing price is back inside the range The Fakey entry is triggered as price moves back up past the high of the inside bar (or the low in the case of a bearish Fakey). In our example chart, you can see the market was recently moving higher before the Fakey formed. Note the Fakey was formed on the false-break of an inside bar setup that occurred as all the amateurs tried to pick the market top, the pros then stepped in and flushed out all the amateurs in a flurry of buying. “It’s Just A False Breakout” Some people will call this a “false breakout pattern” but I firmly believe there is nothing “false” about it and am not a fan of that definition When price does something such as this when traders are leaning one way (or when they are enticed to enter on a breakout), the move is designed to take their money and give liquidity to the market. Breakouts tend to sucker a lot of traders in looking to catch the beginning of a new trend and the Fakey pattern looks to take advantage of those traders. Breakout trading can work but it depends on the context in which we find the breakout occurring. Learning how to avoid “false” breakouts, while not always 100% perfect, can be done depending on the chart. It’s not a false move but a carefully orchestrated attempt to hurt those who are leaning to the wrong side and force liquidity into the market. In our example, when traders identify a break and pile in short but the real intention is to the upside, they must exit their shorts and perhaps then buy into the market once they’ve been taken out. This adds liquidity for the players who use a Fakey strategy and propels their trade in the intended direction. HOW TO TRADE THE FAKEY TRADING STRATEGY If you are interested in a bullish position Place a buy stop order anywhere from 2-5pips above the high of the false breakout candlestick. Place your stop loss anywhere from 2-5 pips below the low of the false breakout candlestick. Take Profit When price moves 3 times what you risked or you can use a previous swing high as your take profit target. Consider trailing stop your your trades when it is in profit so you lock in your profit as price moves upwards. If you are bearish Place a sell stop order anywhere from 2-5 pips below the low of the false breakout candlestick. Place stop loss 2-5 pips above the high of that breakout candlestick. Profit should be 3 times what you risked initially or use previous swing low point as your take profit target. Trailing stop technique should be utilized to lock in your profits as price moves down. Using The Fakey Setup As Retracement or Rally Entry One really good way to use the Fakey is in concert with another trading pattern: continuation chart patterns In this graphic we have a daily chart that is in an uptrend and is completing a complex correction. Often times traders have a hard time entering a pullback trade and this is where the Fakey setup can help. FAKEY SETUP IN RETRACEMENT Once you have seen a complex pullback taking place (can be inferred from candles on bigger charts), you would drop down to a lower time frame and look for a Fakey setup to help get you into the trade. Your stop loss is under the Fakey candle which leaves no room for you to be subjective. ADVANTAGES OF THE FAKEY FOREX TRADING STRATEGY The trading setup is not complicated and it is easy to spot if you know what you are looking for. Its a Forex strategy based solely on price action and candlesticks and does not have any Forex indicators to make things look too complex. Explosive moves can happen with the Fakey setup so it makes sense to use the higher time frame charts for the setup and lower for the entry. DISADVANTAGES OF THE FAKEY FOREX TRADING STRATEGY Price action is not always 100% right, sometimes you will get caught out. Avoid trading Fakey setups when price is consolidating (moving sideways). Trade fakey setups in strong trending markets or as part of a range trading strategy. The Fakey Trading Strategy is a multi-use trading setup and as shown, can be used as it’s own trade or an entry into another trading pattern. As with all trading, ensure you are paying close attention to risk.
I know I may take some heat for going after the trend direction indicator as a useful technical analysis tool but the fact is that they can do more harm than good for most traders. Indicators get a bad rap and the reason is not so much in the indicator themselves…but in how traders use them. Trend Direction Indicators Have You Miss The Big Picture Because most traders get handcuffed by the indicator and fail to see what price is really doing. Before I go on, I know some people are never going to give them up so here is a trend indicator for mt4 that you can download and use for free. Just apply it to your weekly or 4 hour MT4 charts if you are day trading according to the installation video and you will see how it works. Trend Indicator Download For MT4 It’s no shock to learn that since indicators are a derivative of price (or volume) they are going to be lagging behind the movement of price. Depending on your settings, especially the look-back period, you may be a little behind the turn if using a short period or be miles behind. Also keep in mind that Forex does not trade through an exchange so getting a valid volume number is impossible. If you are only keeping your eyes on the indicator, you are missing the story that price is telling you. Price will clue you in to a change in direction long before any trend indicator will. Forex Technical Analysis Tools That Most Traders Use For Trend No doubt one of the most popular tool used today is the moving average not only to identify zones where a short term trend reversal may take place (as in trading pullbacks – but there is no magic there) but also as trend direction indicator. What is the most popular? Usually the 50 period, the 100 sma, the 200 sma and the 20 sma. You could swap out the sma for an ema but it makes little difference. The question I hope you are asking is “what is so special about those numbers”? Good question!! There is nothing special except the bigger ones will be further away from current price which will lag the turns much more. Of course there are others including CCI, MACD, Stochs and other trading indicators so out of all them, is one of them ranked as the best trend indicator? Since they all depend on some mathematical calculation of the same initial input (price) there is not one that is better than the others. They all have the same drawback…they lag the actual price movement! Can Candlestick Patterns Be A Trend Indicator? There is some school of thought that an individual candlestick can help define the current trend or trend reversal. I am going to generalize here but it depends on where they form on the chart and what pattern candlestick we are looking at. Where I take notice are candlesticks that are out of the ordinary from recent price action. For example, if this bearish engulfing candlestick takes place at a prominent resistance zone, could that suggest long before an indicator does, that a new trend direction is occurring? Bearish Engulfing It certainly can be considered a trend reversal candlestick pattern due to location (even though it’s only 2 candles) and it can range from a short term trend move to putting in a top in whatever currency pair you are looking at. While a moving average or any other indicator is still indicating long trades, I’d be looking for a position short. You can bet that if there was a support zone close by, traders that look at lagging price indicators may look to take a long on a pattern like a pin bar or inside bar. And that is how a trend indicator can help drain your trading account if you only focus on the indicator. It can draw your eyes away from what is really important. PRICE! Moving Average Indicator Sets You Up On Wrong Side Of Price This may not be the best example but it gets the point home of using price and context. 50 SMA Trend Indicator You can see that price was telling a story long before that short trade set up. The bear candle after entry would have late traders jumping into what they deemed to be a move down. You can see momentum in that candles as it closed on the low of the session so you KNOW traders looked to short in the “trend direction” of short. And they lost. Moving average are not all bad though. Simply due to their calculations, you can see when a market is actually trending or consolidating. Make no mistake…there is no magic in those pullback trades after the upside turn. If you think about how the calculations work, you can fully understand why it can not only show a turn but also meet price at points on the chart. Price turns from negative to positive and turns the indicator. Price pushes to the upside giving a higher average price so indicator rises. Price pulls back at times with momentum and then consolidates. Moving average calculates a lower average…..meets price. You can use a moving average as a quick scan however to see if you are looking at a chart that is moving or one that is consolidating. Use Price Action and Patterns as Your Trend Direction Indicator Price always tells a story and sometimes the story can be a little confusing. If it is, pick another chart. Indicators can smooth out the volatile price movements so you think you are looking at a calm chart but the reality is it’s a chart with no clear direction full of spikes back and forth. Trading that environment will wipe you out. Seeing momentum candles in one direction along with weaker candles in the opposite direction can be a great indicator of the current trend of price. We also can never forget the standard higher high and higher low for an uptrend and lower highs and lows for a downtrend either. My general rule is that, as you can see on this chart with the red circle, we must see a true swing and that’s something you have to decide. Regardless, due to the strong up trend that happened after the higher low, the area with the white box, if broken, would signal to me a true trend change. Market Structure As Trend Direction Indicator You want to help save your account? Learn some price acting trading strategies (which are really great for swing trading) from my free course and learn to listen to what the chart is telling you.
Swing trading inside bars is a simple trading pattern where one or many bars are contained between the high and low of another known as the “mother bar”. Often times, depending on the length of the inside bar pattern, it will appear as a triangle on your chart. Swing Trading Inside Bars This is a breakout trading strategy that you can use when price has found itself near levels of support and resistance. Using Inside Bar Candlestick Pattern At Good Areas Since the inside bar indicates a lower level of volatility, it can appear just about any place on a chart and that is why you must have some trading rules about using the pattern. A few rules you may want to use for a higher probability trade and to avoid over trading are: How many inside bars do you need to see inside the mother bar? Does the mother bar include the low and highs or will you use the real body of the candlestick? Will inside bar trading only take place at obvious levels on the chart? What technique will you use to pull the trigger on the trade? What system will you use in placing your protective stop loss? Every proper trading system has rules and this strategy is no different. Without trading rules, you will fall victim to emotional trading and that is one of the fastest ways to dwindle your trading account to zero. Developing Your Own Inside Candle Trading Strategy Let’s take the 5 points above and expand on them as you develop your trading strategy. I want to focus on swing trading inside bars in Forex because even though FX is a 24 hour market, not all of those hours are worth sitting at your desk for. 1. How many inside bars do you need to see? Since the formation of this pattern indicates lower volatility (volatility compression) and indecision, the longer it plays out the more pent up energy is contained within the pattern. You could have multiple occurrences of them which will form a triangle or you may only have one. For trading patterns, the more the merrier for me and some traders need to see weeks of consolidation before taking a trade. multiple inside candlesticks pattern 2. Mother bar body or shadows? For simplicity, you could simply use the entire candlestick but there are arguments for both. Remember that each close on a candle is an acceptance and willingness of market participants to hold their position at that price. Where the close occurs with the mother candle may have you decide which part to use. 3. Obvious levels on the chart? You may elect to only consider swing trading inside bars when they present themselves at obvious turning points on the chart. What about seeing a large momentum move and then a series of inside bars forming at the highs? Depending on where these occur, this strategy may be showing a trend reversal or continuation. You have to know how to read price action to have your order leaning one way or the other. Two examples of location 4. How will you enter the swing trade? Some traders will wait for the break of the mother bar and others will look for a price pattern on a lower time frame to indicate an entry. Just keep in mind that at every breakout point, there can be a lot of volatility which could also include slippage. One technique is to look on a lower time frame to see if there is an indication like a pin bar showing up in a range inside of the inside bar pattern. You may find an entry in that zone. 5. Stop loss when trading inside bars You could elect to use the low of the mother candle but keep in mind that you may be the victim of a bull or bear trap if you use a tight stop. You may study using the ATR as a stop measure or, depending on the strength of the break, you may use a point inside of the pattern. Swing Trading Inside Bars Conclusion Swing trading inside bars is a great non-day trading strategy since, once the mother candle has formed and the amount of inside bars have formed that your trading plan requires has formed, you can set a stop order to be taken into the market. If using that method, you may want to use the ATR value x 2 at the mother candle. This way you will have a better representation of the range prior to the inside bars.
We know that markets go through periods of high and low volatility. The size of individual price bars during these periods will also vary, from larger bars during high volatility periods to smaller bars at other times. We can use this to our advantage when calculating the size of our trades and positions by using ATR – Average True Range Indicator. Figure 1 Take a look at Figure 1. This shows a four hour chart of the USDJPY covering the period around the recent US presidential election. Notice how the average range of the price bars dramatically increased at the time of the election and continues to be higher on average than it was in the month before. Also note that we’ve seen more of a trending move after the election than we did before. This suggests that may be able to book larger trades now than we could in October. To do this we will use the Average True Range (ATR) indicator that’s on the bottom of the chart and is included in all charting platforms. ATR measures the average of the true range. The true range is very similar to the range of the bar except that it factors gaps into the calculation. That means that if the close of the prior bar is higher or lower than the high or low of the current bar we will use that prior bar close in the true range calculation. We see a good example of that on Nov. 6, 8pm in Figure 1. The high and low of the bar are 104.45 and 103.73 giving us a range of 72 pips. The prior bar had a close of 103.06 however, which is below the low of the 8pm bar and we therefore use that value to calculate the true range which in this case is 104.45 – 103.06 or 139 pips. The ATR then applies a simple moving average to these true range calculations using a default period of 14. Using ATR to dynamically size our trade setups. What we do is apply different multipliers to the ATR to calculate an entry value above or below the price bar and then determine the initial stop and target placement. As a starting point use the following rules: Long setup– Multiply ATR by 0.25 and add this value to the high of the bar for your entry price. This is the price where you trigger into the long trade.– Multiply ATR by 2 and subtract this value from the entry price. This is your initial stop price.– Multiply ATR by 4 and add this value to the entry price. This is your target price. Short setup– Multiply ATR by 0.25 and subtract this value from the low of the bar for your entry price. This is the price where you trigger into the short trade.– Multiply ATR by 2 and add this value to the entry price. This is your initial stop price.– Multiply ATR by 4 and subtract this value from the entry price. This is your target price. As you can see the size of the entry offset and size of the setups will vary with the changing ATR values but the reward:risk ratio will always remain at 2:1. Let’s look at a couple of examples. We can apply this sizing approach to any of the swing trading strategies that we’ve covered here. Most of those strategies give us a setup bar and suggestions for placement of entries, stops and targets. We can apply the ATR approach instead to any of those setups. As an example let’s use the basic RSI fade system that we covered last month. Figure 2 shows us a couple of setups. Figure 2 Let’s apply our sizing rules to each of the two setups. Long Setup A– High of the bar is 103.27.– ATR is 0.44 (44 pips).– 0.25 times 44 is 11 pips. This is our entry offset so the entry price is 103.27 plus 11 pips or 103.38.– 2 times 44 is 88 pips. The stop price is therefore 103.38 minus 88 pips or 102.50.– 4 times 44 is 176 pips. The target price is therefore 103.38 plus 176 pips or 105.14 Long Setup B– High of the bar is 103.76.– ATR is 0.81 (81 pips).– 0.25 times 81 is 20 pips. This is our entry offset so the entry price is 103.76 plus 20 pips or 103.96.– 2 times 81 is 162 pips. The stop price is therefore 103.96 minus 162 pips or 102.34.– 4 times 81 is 324 pips. The target price is therefore 103.96 plus 324 pips or 107.20. As you can see both trades reached their target. Using fixed stops and targets we risk getting stopped out of trades during periods of increased volatility or failing to reach our targets when volatility is low but the dynamic sizing of our trades allowed us to profit in both cases here. Of course like every system and method that we use in trading we will still see losing trades. On this chart for example there were two short setups after setup B, where the RSI dipped below the 70 level. The last short setup for example triggered in but stopped out. The short setup prior to that however never triggered in because the ATR entry offset calculation placed the entry far enough away. Using a fixed offset on the other hand might have resulted in a trigger and another losing trade. The values we used in our calculations are a good starting point but can be tweaked through experimentation and back testing. Some suggestions for you to consider: Change the period of the ATR calculation. We used the default period of 14 but you can use values between 5 and 25 for shorter or longer term charts. Modify the 0.25 entry multiplier if you find that you’re getting triggered into losing trades too often. A larger multiplier will avoid some of those. Modify the 2.0 stop multiplier if you find that you’re getting stopped out by choppy price action too often. Modify the 4.0 target multiplier or the reward:risk ratio if your trades fail to reach your target too often. A reward:risk ratio of 1.5:1 or 1:1 (multipliers of 3.0 or 2.0) may be more appropriate for your strategy or instrument. Be aware of the bigger picture in your markets and adjust your trading accordingly. Although this is not the only approach, the ATR provides a simple and straightforward method of adjusting to changing market volatility. Good luck in your trading.
The DeMark Trading Strategy was developed by a guy called Tom DeMark. I don’t need to go into detail about who Tom DeMark is. DeMark Strategy is based on drawing trendlines on recent swing highs or lows. And as soon as these trendlines are broken, a trade is initiated. This forex trading strategy may not be 100% actually as the original demark trading strategy because I’m going to add my own variation. Why? To keep it simple for you to understand and execute trading setups when you see them. Timeframes: 15min upward to daily would be suitable. Forex Indicators: Nil DRAWING TRENDLINES The DeMark Trading Strategy Relies on you drawing trendlines. If you don’t know how to trendlines then here’s a brief lesson on drawing trendlines: There are only two types of trendlines: upward trendlines and downward trendlines. To draw upward trendlines, you find two “bottoms” of price moves and connect them and you have a trendline. To draw downward trendline, you find two “peaks” of price moves and connect them and you have a trendline. click here on more information on how to draw trendlines DEMARK TRADING RULES Step 1: Draw your up and down trend lines on your chart. Step 2 Look out for a break of the trend line on the chart to signal trend direction Step 3 At the close of the candlestick that breaks out, place an pending (buy stop or sell stop order) a few pips away from the high or low of the candlestick. Step 4 Use Previous Peaks or Bottoms as your take profit target. Step 5: Or you can use a trailing stop and place it behind the peaks and bottoms as a trade moves profitably to lock in your profit. ADDITIONAL NOTES with the demark trading system, you must draw trendlines based only on the most recent swings (peaks or bottoms). you can use 5mins, 15mins, 30mins, 1hr, 4hr or daily timeframe to trade this forex strategy. Just take 5 seconds of you time to” like: this on facebook, tweet , or tell you friends and connections about this website, It would mean the world to me for you to do that. Thankyou.
Learning how to trade pin bars can help a trader grab trade entries just as the balance of power is shifting between the bulls and bears. Trading pin bars is one of those Forex trading strategies that can be learned quite easily and is great for swing trading because you may have caught a turning point in the market. You can bring up any Forex chart and see how a pin bar reversal can often highlight important turning points although a higher time frame carries more weight than a small time frame when using any type of candlestick pattern The pin bar, is one of the most high probability reversal candlestick patterns and if you can identify a pin bar on your Forex chart and know where and in what location on the chart it is occurring, you can make a great swing trade. The pin Bar Trading Strategy relies on the Pin Bar Formation. The Pin Bar Formation The Pin Bar is a price action reversal pattern and when it forms, it shows that the price was rejected by the market at a certain price level or point. They stand out on the chart which makes them obvious and can bring order flow into the market if other traders take a position. The Pin Bar The Pin Bar is very different from other reversal candlestick chart formations because it is a bar/candlestick with a long tail or wick, a very short body. The name itself (the pin “bar”) refers to using a bar chart but I prefer using candlestick charts can help you see the formation clearly on a chart. This is a more detailed analysis of the pin bar and then we will cover the Pin Bar Trading Strategy Rules. For A Bearish Pin Bar Formation: The long tail tells you that the bulls took over and pushed the price up to form a high, but that high was not maintained. The bears came, took over and pushed price down all the way, wiping away the price gains made by the bulls The price fell, made a low and then closed below the opening price in the red. When you see such a bearish pin bar formation, you should be alert that the bears are now most likely taking over the market and may continue to push price down. For A Bullish Pin Bar Formation: a bullish pin bar formation is the exact opposite of the bearish pin bar formation: the long tail tells you that initially, the bears took control of the market and pushed the price all the way down to make a low but this low was not sustained. After the low was made, the bulls took over with such ferocity and force and pushed the price all the way up, completely wiping all the downward price moves made by the bears and making a high and finally closing a little bit below the high in the green This means that when you see such a candlestick formation, you should be alert now that that bulls are most likely taking over the market and will continue to push price up. BEST LOCATIONS TO TRADE THE PIN BAR This is one very important criteria if you are looking to trade the pin bar: you just cannot trade all the pin bars you see. It does not make any sense at all to trade all the Pin Bars you see because of one very simple reason: the location of where the pin bar forms impacts you probability of success. So the best places to trade pin bars are in areas that technical analysis traders are aware of already: Fibonacci levels of 31.8, 50 & 61.8 Major support levels Major resistance levels traders action zone pivot levels trendline bounces. HOW TO TRADE THE PIN BAR FORMATION Trading pin bar is really straight forward which makes it a go to trading method for price action traders whether they swing trade or prefer day trading. Pin Bar Trading Strategy Wait and watch for pin bar to form on the levels above like Fibonacci levels etc..that I’ve listed above. Depending on whether its a bullish or bearish pin bar you will have to place a pending sell stop order 3-5 pips below the low of the bearish pin bar and place a buy stop order 3-5 pips above the high of the bullish pin bar. Place your stop losses on the other side of the pin bars of the same distances as you placed the pending orders, that is, 3-5 pips above the high if its a sell stop order and 3-5 pips below the low if its a buy stop order. Take profit targets: use previous swing high points/peaks or swing low valleys/bottoms as you take profit targets. When the price moves favorably, you have to lock in your profits by using the trailing stop technique where you move and place behind subsequent decreasing swing high points/peaks for a sell order and behind increasing swing low points/valleys/bottoms for buy order. In this way, whatever happens, you have locked profits for that trade and if the market moves against you, you would have still made a profit anyway. Trailing your protective stop order allows you to stay in the market as long as possible before the reversal takes you out. BEST TIME FRAMES TO TRADE THE PIN BAR I believe the larger time frames are the best time frames to trade the pin bar: you should be looking at pin bars in the 1hr, 4hr and daily time frames. If you are trading in the 1hr, don’t be just focused only on 1hr charts, check in the 4hr charts as well because sometimes you will notice that you may not see a pin bar in the 1hr chart but in the 4hr chart, a pin bar may be forming which you will not see because you are so focuses on looking at one hr charts only. What I’m saying is learn to use multi-timeframe chart analysis. This is an essential trading skill all forex traders should know.