Categories
Forex Basic Strategies

WHAT TECHNICAL TOOLS I CAN USE TO MEASURE THE MOMENTUM.

Introduction

One of the major goal of every trader is to measure the momentum of the asset they are trading; momentum can confirm that whether the security is about to reverse or the trend is strong enough to print brand new higher high. Simply momentum indicators are the tools utilized by the traders to get a better understanding of the speed of the price action changes its direction. Most of the technical indicators used to measure the momentum are bound between the two technical levels. This is important because when the asset goes above the centerline, it is an indication that the momentum of the underlying security is increasing. So when the price action reaches the overbought and oversold conditions, it suggests that the asset momentum is weakening and would signal a reversal in a trend. Some of the major tools to measure the momentum are Stochastic, RSI, ROC, and MACD.

ADVANTAGES OF THE MOMENTUM INDICATOR.

Momentum indicator shows the strength of the trend regarding less the direction of the up and down moves. Momentum indicators are specifically useful to find out where the market can potentially reverse its direction. In this case, the divergence and the overbought and oversold signals are quite useful. So to identify the direction of the trend, it is advisable to pair them with the Moving average, trend lines, or any other directional indicator to identify the trend of the underlying asset.

MOVING AVERAGE CONVERGENCE AND DIVERGENCE {MACD}

MACD is a trend-following momentum indicator developed by the Gerald Appel in the late seventies, which used to measure the momentum of the security. The indicator shows the relationship between the two moving average of the asset price. The MACD is calculated by subtracting the 26 period EMA from the 12 periods EMA. The result of this calculation provides the MACD line, and then the nine-day EMA of the MACD called the signal line is transposed over the MACD line. This gives us the buy and sell signal depending on where the MACD crosses the signal line.

STOCHASTIC OSCILLATOR.

Stochastic is a momentum indicator developed by George Lane in the late 1950s. The stochastic doesn’t follow the price or volume; instead, it follows the speed and momentum of the market. This indicator is the leading indicator when it comes to measuring the momentum because the indicator changes its direction before the price action changes its direction.  The indicator measures the closing price of the asset to a range of its historical prices over a predefined period. Stochastic is a range bounded indicator which used to generate the overbought and oversold trading signals using the 0 to 100 levels. Values of 80 considered to be overbought, and the values of 20 considered to be overbought. When values reach these levels, it’s an indication of weakening momentum, and the reversals are very likely to happen.

RELATIVE STRENGTH INDEX.

RSI is a momentum indicator developed by the J. Welles. Wilder. It used to measure the magnitude of the recent price changes to evaluate the overbought and oversold conditions. Just like the stochastic RSI is a range bounded indicator, which oscillates between the 0 to 100 level. According to the Wilder, the RSI considers to be overbought when above the 70 and it is oversold when it reaches the 30 level. When prices reach the 70 level, it means the buying momentum is dying and now can expect the reversal or the correction in the trend. Conversely, when the price action reaches the 30 level, it means the selling momentum is dying, and now the reversal or the correction is required to print brand new lower low.

RATE OF CHANGE {ROC}

ROC or Rate of Change is the speed at which the variable changes over a specific period. The ROC is often illustrated by the Greek letter Delta, and it is often used to measure the momentum of the asset. Graphically the indicator represented by the slope of the line, and it is expressed as a ratio between changes in one variable relative to the correspondence change in another. An asset with a higher momentum has a positive ROC outperforms the markets, and the negative ROC is likely to decline in momentum, which is an indication to take sell.

FINAL WORDS.

Momentum indicators are the major tools for traders to analyze the market. Still, these indicators are rarely used in isolation, and most of the traders use them in conjunction with the other technical analysis tools that reveal the direction of the trend. Once the direction of the indicator has been determined, then the momentum indicators are helpful to gauge the momentum of the price action to identify the major trading opportunities.

 

 

 

 

Categories
Forex Basic Strategies

3 Tips How To Trade Ascending Tops.

Introduction

The ascending top is a technical chart pattern, where each peak in price is higher than the previous peak in price was. The ascending tops are such a predictable pattern because of its amount and time price action required to complete the formation of the pattern, which increases the reliability of the pattern. Ascending tops is a bullish chart pattern. Trading is all about the matter of probability. If you see the price action continuously printing the new highs and higher lows in an uptrend, then expect the Ascending top pattern on price chart.


3 Tips for How to Trade the Ascending Tops Chart Pattern.

TIP 1 HOW TO ENTER THE TRADE.

First of all, find out the trending conditions and look for two minimum ascending tops and two higher lows. Once the price action prints the second top, wait for the price action to reach the major support level, here you can use the other technical tools to identify the trading signals. Don’t use some of the difficult tools to identify the trade, instead choose the simple technical tools. Some traders here like to use the Gann Square or, Gartley patterns or Elliott waves by using these tools you are making it hard for you to trade the market. So here look for the simple tools such as trend lines support and resistance levels.

TIP 2 HOW TO PLACE YOUR STOP LOSS ORDERS.

The problem with the traders is they never choose to believe that trading is the game of probabilities and always trade the market without the stop loss. No matter how good the setup is, no matter how reliable the trading opportunity is, always go with the stop loss. For this pattern, the best place to put the stop loss is below the higher low created after the second top.

TIP 3 WHEN TO BOOK A PROFIT.

The problem with the traders is that they exit their trade very early because of fear or panic, or the voice inside keeps telling them their trade is not going to perform. So by having a lot of self, negative talks traders end up making little money in the market. It doesn’t matter how good your technical analysis skills are if, at the end of the day, you end up making little or no money in the market. No one call you Pro Analyzer or a Trader, you are a wannabe.

So how long do we stay in a trade?

There is one simple rule you can use, and that is to stay in a trade anticipating a price move at least the same size as the prior impulsive move was.

 

Trading Example By Using the Ascending Tops.

The image below represents the ascending top pattern in the EURUSD forex chart.

 

As you can in the image below, it represents our entry, exit, and stops loss in this forex pair. The EURUSD was in an overall uptrend, so in a trending market, we expected the ascending top pattern. When the price action printed the first top, we choose to wait for the second top, and when the second top printed, the price action immediately goes down for a correction to the most recent support area. The price action held at the support area for the couple of candles, which is a sign to go long. As we explain above, the stops below the support were good enough and the two dotted lines on a price chart indicating the size of the impulsive leg, so we choose to close our trade based on the size of the previous impulsive move.

ANOTHER EXAMPLE.

The image below represents the ascending top pattern in the GBPUSD forex pair.

As you can see, the image below represents the strong uptrend in the GBPUSD forex pair, so when the price action printed the first and second top, it pulled back to the most recent support area. The sellers during the pullback phase weren’t strong enough, so we didn’t expect any breakout of the most recent support area, instead of when buyers respond strongly from the support area, we choose to go long in this one. The take profit was similar to the previous move, and the stop was just below our entry.

Conclusion.

In both of the above examples, have you noticed that the buying trend in both of the examples was super strong. This is the one essential component or the foundation of the ascending top pattern. You will always going to witness this pattern in the strong trending market in any underlying asset. Try not to trade it in the channel conditions or ranges because we choose to go for the smaller stops in trending conditions. If you put the smaller stops in ranging or in the channel market, you will end up losing in your trades because of the higher volatility. By following the below-mentioned steps, you can confirm the ascending top pattern on the price chart.

  1. In an uptrend, find the two tops where the second one is higher than the first top.
  2. Wait for the correction after the second top.
  3. The correction must be choppy if the down movies aggressive then stay away from the market.
  4. After you confirm the pattern wait for the price action to test the support area.
  5. Here you can look for any bullish candle pattern to enhance the probability of the setup.
  6. Take buy entry.
  7. Put the stops below the support area.
  8. Take profit must be the same the size of the previous impulsive move.
  9. If you desired the deeper target, then simply hold your position, and after the third top, expect the price to move the same as the size of the previous leg.
  10. In some cases, you will get the deeper targets, and in some, you don’t. To have bigger gains, choose the setup very carefully, the super-strong trending market is always appreciated to trade ascending top pattern.
Categories
Forex Basic Strategies

Bollinger Bands – Top 5 Trading Strategies.

Introduction

A Bollinger band is a technical indicator used to find the trading opportunities, and it traces the market volatility. The indicator is developed by John Bollinger, and the bands are placed above and below the moving average. The volatility is purely based on the standard deviation, which changes as volatility increases and decreases. The bands of the indicator widen when the volatility increases, and it contracts in the less volatile market. Most of the traders used the 20-period moving averages for the default settings you can use them, or you can adjust them according to your trading style. Most of the traders think that the Bollinger bands only measure the market volatility, but it is not true, the indicator also provides a lot of useful information such as:

  1. Trend continuation and reversal.
  2. Possible tops and bottoms.
  3. Period of the upcoming volatility breakouts.
  4. The breakout trades above and below the bands.
  5. Buy and sell trades when price action hits the upper and lower band.
  6. It also identifies the market consolidation.

Before diving into the trading strategies, we want you to read the below-mentioned facts about the Bollinger Bands.

  1. John Bollinger CFA/CMT is the creator of the Bollinger Bands.
  2. The indicator consists of three lines where price fluctuated around.
  3. The indicator is the excellent tool to understand how widely stock swings from peaks to valleys.
  4. Do not spend your time to test the random configurations; instead, go with the default settings.
  5. In order to make money ride the Bollinger bands, go long when prices approach the lower band, and go short when price action approaches higher band.
  6. If you desire better signals, then find out the trending markets and wait for the pullback near to the centerline, this honestly is the most profitable approach to print cash.
  7. Filter out the low profile trading signals by pairing the indicator with the other technical tools.
  8. Bollinger bands perform very well in ranging conditions, look for buy when the price hits the lower band, and look to short the currency when prices hit the upper band.
  9. A single candle outside the band does not mean that the breakout occurred; most of the time, price action immediately came back to wait for the hold outside the band.
  10. The indicator works in all the type of markets either it is equity market, forex market, futures, or options.
  11. The best book on the indicator is written by the John Bollinger “Bollinger on Bollinger Bands.”
  12. The bands work very well on all the timeframes; even this indicator is one of the favorite indicators of the scalpers.

BOLLINGER BANDS TRADING STRATEGIES:

DOUBLE TOP.

The image below represents the double top on the GBPNZD forex pair.

As you can see in the image below, the pair represents the entry, exit, and stop-loss in the GBPNZD forex pair. The trade below represents the double top pattern by using the Bollinger bands. The double top is simply a trading pattern where the buyers try twice to break the major level, and the failed to do so; as a result, we got the reversal. In the image below, the pair was in a strong uptrend both of the time buyers tried hard to break the Bollinger bands dynamic resistance level, but they were unable to break the level. When the price action respects the second top, it was a sign for us to go short in this pair. The stops were just above the entry, and for taking profit, we choose the brand new lower low.

REVERSAL STRATEGY.

The image below represents the reversal pattern on the Bollinger bands forex pair.

As you can see in the image below, it represents the entry, exit, and stop-loss in this forex pair. The reversal pattern is when the price action breaks below the Bollinger bands and then immediately came back. Some traders called it railroad pattern or fakers or even spikes; no matter what you called it in the end, the pattern represents the upcoming reversal. When the price action prints the pattern, we immediately took the buy entry for the brand new higher high.

BUYING AT THE LOWER BAND.

The image below represents the two buying trades in the GBPNZD forex pair.

As you can see in the image below, it represents the entry, exit, and stop-loss in the GBPNZD forex pair. This is one of the simplest and most effective trading strategies used by intraday traders. As you can in this one, we choose to trade the lower band because we choose to follow the trend of the market. In a trending conditions market often goes into one side for an extended period of time, even on the face of the opposite party. So whenever you choose to trade the Bollinger upper and lower bands, then look at the market flow first, and only place the trade in the direction of the market flow. In the below image, we took two buying trades in an uptrend; both prints the brand new higher high, and stops were just below the entry.

TRADING THE RANGE AGGRESSIVELY.

This approach works very well for the aggressive traders only because here, we choose to go long and short when the price action hits the lower and upper band as well as the support and resistance level. As you can see, we took three aggressive buys and three sell trades. You can trade the ranges in this way and always go with 1:1 R: R trades.

TRADING BELOW THE MIDDLE BAND.

The image below represents the selling trade in the EURGBP forex pair.

As you can see in the image below, it represents our entry, exit, and profit in this forex pair. This strategy is all about the trending market, where we activate the trade when price action goes below the middle band. In the trend conditions, the middle band acts as a breakout level to trade the market. When the price action gives reversal at the upper band, it is a sign of price action to resume the downtrend, and when it breaks below the middle band, it is a sign of sellers gained enough momentum, and expect the new lower low. In the image below, when the price action hits the upper band, and the sellers break below the centerline, we decided to go short for a brand new lower low.

CONCLUSION.

Bollinger bands are a wonderful trading indicator it provides reliable trading opportunities in the market. Bollinger bands are the only indicator in the market which provides the opportunity to trade every kind of market; it doesn’t matter if the market is trending or in a range or the trend is about to finish. We can use this indicator to trade every market situation. In the article, we provide the five different trading ways to trade the Bollinger bands, you can apply all of these trading strategies, or you can choose to trade the only one or two above strategies. The choice is yours; we suggest you master the one trading strategy first then choose the second one to trade. In this way, you can quickly learn all these strategies without any confusion.

 

 

Categories
Forex Basic Strategies

Forex Weekly Trading Strategy.

Introduction

Trading the forex market is a challenging thing for some traders, but it’s quite an easy game for other traders. The only difference between the successful and unsuccessful trader is the mindset and the ability to wait for the correct setup to pull the trigger. Most of the lower timeframe traders often miss these qualities; on the other hand, the higher timeframe trader possesses these qualities to trade the market successfully. In this trading strategy, we will share some tips and tricks to trade the higher timeframes successfully.

What is the Timeframe in Forex Trading?

Time frame means the unit of time that the price chart which you are viewing based on. The weekly timeframe of Japanese candlestick represents the one week, and the 5-minute chart of the Japanese candlestick represents the 5 minute time. The smaller the timeframes, the more candlestick chart prints, and the higher the timeframe, the lesser the candles you will see.

The weekly timeframe has so many trading advantages as compared to the lower timeframes. The higher timeframes move slowly, so there is no chance of any noise on the higher timeframe. Most of the technical indicators work very well on the higher timeframes because you are not going to see any fake or odd signals on a higher timeframe. On the lower timeframe, you are not going to have much countertrend trades, but on the weekly chart, you can easily find the countertrend trades. Weekly trading always produces better results because to trade the market successfully; you need trend or momentum. When you use the trending market with the momentum indicator, then you automatically end up at the top in your trading game. Another major problem we have with intraday trading is the Algorithms, which also known as high-frequency trading, where the robots or the trading systems placed hundreds of trades in a single day, which added considerable danger to the retail trading. These trading systems jamming price action higher and lower, and they creating the hell amount of volatility which prints the fake outs, spikes triggered the stop losses. Higher timeframes are far from these kinds of behaviors, which often provide an excellent risk to reward ratio trades.

Weekly charts move very less, so it is advisable to follow the risk management rules we explained below.

  1. Weekly timeframe provides fewer opportunities, so it doesn’t mean you use the higher-margin to trade it. A smaller number of lot sizes do the same work when you let the price action travel further.
  2. Be selective in position sizing, and always go for the good trades, ignore the bad or low profile trades.
  3. Always try to trade your edge only, focus on the moving average to successfully trade the weekly charts.
  4. Respect the power of the opportunity cost. The capital you set aside to trade the weekly chart can last for several months. So patience and having full faith in your analysis is the key to trade the weekly chart.

TRADING STRATEGIES BY USING THE WEEKLY CHART.

WEEKLY CHART SUPPORT AND RESISTANCE TRADING.

BUYING TRADE.

This one is the simplest yet most important trading strategy investor’s use. The idea is just finding out the trending market and take buy entries when price action approached the support level. Conversely, the idea is the same for the sell-side; look at the selling market on a weekly chart and take sell trades every time price action hits the resistance area.

The image below represents a couple of buying trades in the GBPUSD forex pair.

The image below represents a couple of selling trades in the GBPUSD forex chart. As you can see in an uptrend, whenever the price action approached the support area, we took buy entry, so price action thrice gave us the buying trades, and whenever we got the opportunity, we choose to scale our trade. So when the fourth time price gave another opportunity, we took the buy entry, but prices failed to hold at the support area, so we end up closing all the three buying trades. Weekly charts often took a couple of months, even years to perform. So most of the investors expect three to four trades on the weekly chart in a year.

SELL TRADE.

The image below represents a couple of selling trades in the GBPCAD forex pair.

The image below represents a couple of selling trades in the forex pair. As you can see, the pair was in a strong downtrend, and at every pullback, we choose to go short in the market. After the first trade price action printed the brand new lower low, then it pulled back again to the most recent resistance area. The price action respects the resistance area by printing the one red candle, and it was the clue for us to go short again. For the third time, prices again go to the most recent resistance area and the same story again, major level reject the price action and third time we end up taking a selling trade. On the weekly or even daily and monthly charts, do not expect the price action to stay at the major levels for a more extended time period. This is something not possible; most of the time, prices spent one to two weeks at the major level, and then it starts moving again.

 

TRADING THE ENGULFING PATTERN ON THE WEEKLY CHART.

BULLISH ENGLUFING

A bullish engulfing is a reversal pattern that forms when the larger green candle follows the small red candle. The body of the red candle completely engulfs the previous day candle. This pattern indicates the market hits bottom, and now the buyers are going for the brand new higher high.

The image below represents the bullish engulfing pattern in the GBPCAD forex pair.

As you can see in the image below, the pair was in a strong uptrend, and during the pullback, it prints the bullish engulfing pattern, which was a sign for us to go long in this pair. As we took the buy entry, the price action goes up; it holds at the major resistance level and then blasts to the north. On the weekly chart, this trade ends up milking 200 pips within just four months. The higher timeframes perform very well for those traders or investors who have enough patience to hold their trades for a longer period.

BEARISH ENGULFING.

A bearish engulfing is a reversal pattern that forms when the larger red candle follows the small green candle. The body of the green candle completely engulfs the previous day candle. This pattern indicates the market hits the top, and now the sellers are going for the brand new lower low.

The image below represents the bearish engulfing pattern on the GBPCAD forex pair.

As you can see, the GBPCAD pair represents the bearish engulfing pattern on the weekly chart. In a strong uptrend, when we got the bearish engulfing pattern, the price action immediately blasts to the north, and it prints the brand new lower low. This trade ends up generating nearly four thousand pips within just four months. Imagine if you took this trade with a higher lot size, you could very easily make a six-figure income from one single trade. The higher timeframes provide less but accurate trading signals, so whenever you find the trade go big.

CONCLUSION.

Weekly charts are specially designed for investors who are not interested in sitting in front of the computer; instead, they desire to invest the cash for the longer term. Most of the investors inject large sums on money on the higher timeframes, making the market move. Overall, trading the higher timeframe is a lot safer than, the lower timeframes. Here you are not going to get any unnecessary spike of fake outs. Simply follow the rules of your strategy and trade the market. It is advisable not to use the technical indicators to trade the weekly chart because most of the indicators are the laggard indicators, so you will end up taking trades very late. Trend line trading, support and resistance trading, and candlestick pattern trading is best for the weekly charts.

Categories
Forex Basic Strategies

Best Moving Average For Day Trading.

Introduction

Moving Average is the most common indicator used by the traders in the industry. The Moving average is quite popular among the traders because the indicator itself serves the foundation for a couple of other indicators, such as MACD and Bollinger bands. Day Trading is a fast game; most of the intraday traders and scalpers trade the markets couple of times a day. As a trader, you need to understand very clearly and precisely which way the indicator is moving. So here the moving average plays an important role for the traders, first of all, it is a simple indicator, if it is below the price, then the trend is up, and if the MA is above the price, then the trend is down. This thing makes it easier for traders to identify the market trend, and without any wasting time on additional analysis, traders can make quick decisions to trade the market. In intraday trading, having the ability to make quick decisions without performing any additional manual calculations can make a huge difference in your trading.

Moving Average Settings.

Choosing the right moving averages for day trading is the real key to trade the market effectively. The right average adds reliability to your analysis, whereas the wrong or any randomly chooses average can easily let you stay away from the profitable trading opportunities. The smaller averages work best for the intraday trading and. In contrast, for the bigger timeframe traders, smaller averages are useless; conversely, for the lower timeframe traders, the bigger averages are useless. To trade the market professionally, it is advisable to use the ten-period averages for the intraday trading. Most intraday traders use to trade the market breakouts to make some quick bucks, so the ten periods give enough room to the market to trend.

Example of using the ten period Average for trading the breakout.

So for intraday trading, always use this indicator on the 15 minutes and below charts. Below are the buy and sell example; you can use this same way to trade the markets.

FOR BUY.
  1. Find out the trending market.
  2. Look for a breakout above the most recent higher high.
  3. MA must be below the price action.
  4. Price action must hold above the breakout.
  5. Go long.
  6. Put the stop loss below the Moving Average.
  7. Go for brand new higher high.
The image below represents the buying trend in the EURGBP 
forex pair.

The image below represents the entry, exit, and stop-loss in this forex pair. As you can see, the pair was in a strong buying trend, and it gives the small pullback and price action breaks above the most recent higher high. When it breaks the higher high, it holds there for a couple of candles, which confirms the breakout, and the MA below the price action indicates the buying momentum. So we took the entry above the breakout was good enough, and we choose to go for the brand new higher high.

FOR SELL.
  1. Find out the trending market.
  2. Look for a breakout below the most recent lower low.
  3. MA must be above the price action.
  4. Price action must hold below the breakout.
  5. Go short.
  6. Put the stop loss above the Moving Average.
  7. Go for a brand new lower low.
The image below represents the downtrend in the EURGBP 
forex pair.

The image below represents the entry, exit, and stop-loss in this forex pair. You can see when the price action breaks below the most recent lower low; after that, it gravitates towards the resistance line, and the hold below the resistance line confirms the selling entry. The price action dropped hard after our entry, and the smaller stop loss above the entry was kind enough to ride the move.

Trading the Five-period Moving Averages using the Support and Resistance levels.

So in this strategy, we are using the five-period averages for purely intraday trading. Do not use it on the higher time frame; only trade this average on five and 3-minute charts.

FOR BUY.
  1. Look for the trending market.
  2. Wait for the price action to pull back to the nearest support area.
  3. The moving average must be below the price.
  4. Let the price to test the support area.
  5. Hit buy.
  6. You can exit your trades on the most recent higher high, or you can go for the brand new higher high.
  7. Use five pip stop loss.
The image below represents the buying trend in the EURUSD 
forex pair.

As you can see, the image below represents the entry, exit, and stop-loss in the EURUSD forex pair. The pair was in a strong uptrend, and during the pullback, it holds above the support area. Whenever the prices tried to go below the support area, it failed to do it, which shows the buyers are maintaining the ground, and sooner, we will witness the brand new higher high.

FOR SELL.
  1. Look for the trending market.
  2. Wait for the price action to pull back to the nearest resistance area.
  3. The moving average must be above the price.
  4. Let the price to test the resistance area.
  5. Hit sell.
  6. You can exit your trades on the most recent lower low, or you can go for the brand new lower low.
  7. Use five pip stop loss.
The image below represents the selling market in the GBPNZD 
forex pair.

The image below represents the entry, exit, and stop-loss in the GBPNZD forex pair. The pair was in an overall downtrend, and during the pullback phase, it holds below the significant resistance level, and when the moving average goes below the price action, it was a sign to go short. Soon after our entry, price smoothly dropped downside, and it prints the brand new lower low.

TRADING THE CHANNELS BY USING THE 15 PERIOD MOVING AVERAGE.

Channel trading is when price action has a hard time to print higher high, or the price action is about to end its trend. In his strategy, we will show you how to trade the 15-period averages to book intraday profits.

FOR BUY.

  1. Look for price channel on any trading asset.
  2. Moving Average must be below the price action.
  3. Go long when the price action approach to the lower channel line.
  4. Avoid trading short trades.
  5. Scale in the next opportunities.
  6. Exit your position when price action breaks the Channel.
  7. Put the stops below the Moving Average.

The image below represents a couple of buying trades in a buying channel, as you can see in a channel we only choose to trade the buying opportunities, and we ignored all the selling trades, this is because we were looking for the good reliable trades and the selling trades wasn’t good enough to take. So whenever the price action hits the lower Channel and the MA is below the price action, it is a sign for us to scale in each position.

FOR SELL.
  1. Look for price channel on any trading asset.
  2. Moving Average must be above the price action.
  3. Go short when price action approach to the upper channel line.
  4. Avoid trading long trades.
  5. Scale in the next opportunities.
  6. Exit your position when price action breaks the Channel.
  7. Put the stops above the Moving Average.

The image below represents a couple of selling trades in the GBPNZD forex pair. The selling channel is an indication of a choppy trend, and also it is an indication of sooner the trend might reverse. So whenever the Channel and the price action gave us the trading opportunity, we choose to go short and at every opportunity we choose to scale.

CONCLUSION.

Moving average is an extremely popular indicator in the industry; without this indicator, trading wasn’t secure. There are infinite numbers of averages exists and use them according to your trading approach. Intraday traders should go for lower averages, whereas the higher timeframe traders should go for the higher averages. Do not think the Moving Average as a holy grail in the market; instead, it depends on you how you use this indicator and manage the risk effectively to make cash from the market. Keep the things simple and do not add too many MA on one price chart, it will create confusion, and even it required additional analysis to scan the asset. So for intraday trading, keep your strategies very simple and to the point. As an intraday trader, we suggest you do not expect home runs as it is nearly impossible for the price actions to give more significant moves, so avoid the habit of trying to make million dollars in just one trade. Trading is an everyday process; stay consistent in your approach, go for the smaller targets, and smaller stops to make a good amount of cash in the longer run. Stay disciplined, stay persistent, control your mindset, follow the rules, do not fall into the emotions, focus on the process, or fall in love with the process, and you will end up making a handsome amount of profit from the market. SIMPLICITY IS THE KEY. Hope you like the article, have a good day. God bless you.

Categories
Forex Basic Strategies

MACD and Stochastic Double Cross Strategy.

Introduction

Most of the trader always desire to trade with the multiple indicators on the price chart. Multiple indicators provide more information, and it also enhances your results dramatically. The major problem with the traders is they don’t know which two indicators they need to pair to improve their game. For solving this problem, we write this article. In this article, we paired the Stochastic with the MACD indicator; this team worked well because the stochastic is comparing the asset closing price to its price range over a certain period of time, and the MACD is the formation of the two moving averages diverging from and converging with each other. This dynamic combination is a highly effective way to deal with the markets.

STOCHASTIC.

Developed by George C. Lane in the 1950s, the stochastic is a momentum indicator that shows the location of the close relative to the high low range over a set number of periods. The stochastic doesn’t follow the price or volume or anything like that instead, it follows the speed and momentum of the price, which makes it the leading indicator in the market. The bullish and bearish divergence on the stochastic indicator is the major signal identified by the Lane on the indicator. The indicator consists of two lines; the first one is K% and D%. K% is the main line of the indicator, which indicates the number of time periods, and D% is the moving average of the K%.

  1. The stochastic is a range-bound indicator which oscillates between the 0 to 100 level.
  2. The 80 and 20 are the major level which considered to be overbought and oversold levels.
  3. When the K% drops below 20, the asset is considered to be oversold, and it signals the buying reversal.
  4. When the indicator reaches the 80 level, it is a sign of asset. It is considered to be overbought and expects the downside reversal.

MACD.

The MACD stands for the Moving Average Convergence and Divergence. Developed by Gerald Appel, it is one of the simplest and most effective momentum trading tools. The MACD turns the two moving averages into a momentum oscillator by subtracting a longer period average to the shorter one. As a result, the MACD is a trend-following and a momentum indicator. If a trader needs to determine the strength of the trend or the direction of the asset, for that overlying the moving average line onto the MACD histogram is very useful.

  1. Look for the divergence, or a crossover of the centerline of the indicator is an essential trading signal.
  2. The bullish and bearish crossovers at the 80 and 20 levels are another major trading signal of the MACD.

CROSSOVER STRATEGY.

BULLISH CROSSOVER.
  1. Look for an uptrend.
  2. Let the price action pull back.
  3. Wait for both of the indicators to reach an oversold area.
  4. Look for a crossover at an oversold area.
  5. Hit the buy.
  6. Place the stops just below the entry.
  7. If the trend is healthy, then go for brand new higher high, if not then exit at most recent higher high.
The image below represents the buying entry in the GBPCAD 
forex pair.

As you can see in the image below, it represents the entry, exit, and take profit in the GBPCAD forex pair. The price action was in a correction phase, and the strong reversal at the oversold area was a sign to go long in this forex pair. After our entry price action blasts to the north, and we witnessed the brand new higher high. This one is the most basic and simplest trading strategy, which works very well in all the type of trading conditions. Both of the indicators filter out all the bad trading signals, and they only give the signals which have a very high probability to perform.

BEARISH CROSSOVER.
  1. Look for a downtrend.
  2. Let the price action to pull back.
  3. Wait for both of the indicators to reach the overbought area.
  4. Look for a crossover at the overbought area.
  5. Hit the sell.
  6. Place the stops just above the entry.
  7. If the trend is healthy, then go for brand new lower low, if not then exit at a most recent lower low.
As you can see in the image below, it represents the selling 
signal in the NZDCHF forex pair.

The image below represents the entry, exit, and take profit in the NZDCHF forex pair. Overall the currency was in an uptrend, and after the most recent correction, price action struggled to print the new higher high. At the same time, both of the indicators indicating the crossover signal at the overbought area, which is a sign to go short. As we took sell entry, prices go sideways for a little time, and then it goes down and prints the brand new higher high.

CENTRE LINE CROSSOVER.

FOR BUY.
  1. Look for a healthy uptrend.
  2. Let both of the indicators to go above the centerline.
  3. Go long.
  4. Put the stops below the entry.
  5. Go for brand new higher high.
The image below represents the buying signal in the USDCAD 
forex pair.

The image below represents the entry, exit, and stop-loss in the forex pair. As you can see, the trend was not strong enough, and when the MACD indicator gave reversal at the oversold area at that stage, stochastic was also approached the middle of the trend, which means that the market started gaining the momentum. Soon the probability of the brand new higher high is very high. After our entry price action smoothly goes higher, and it printed the brand new higher high.

FOR SELL.
  1. Look for a healthy downtrend.
  2. Let both of the indicators to go below the centerline.
  3. Go short.
  4. Put the stops above the entry.
  5. Go for a brand new lower low.
The image below represents the selling trade-in the GBPNZD 
forex pair.

The image below represents the entry, exit, and stop-loss in the GBPNZD forex pair. The pair was in an overall downtrend, and the price action was held at the resistance area. When the MACD indicator gave reversal below the zero line at that stage, the crossover happened on the stochastic oscillator, which was an indication to go short.

CONCLUSION.

This strategy works very well on all the trading timeframes and in all the types of markets. Keep in mind that both of these indicators are momentum indicators, so always use them in trending conditions only. Do not apply this indicator in the consolidation phase. Both of the indicators allow the traders to change the intervals, which is useful to find the optimal and consistent entries. This way, the indicators are helpful for day traders, swing traders, and investors. Both of the indicators enhanced the probabilities of your trades, separately both of the indicators work on different premises; if you ever desired to use only one indicator, then the MACD is a reliable option.

Categories
Forex Basic Strategies

Strategies Using The 200 Day Simple Moving Average.

Introduction

The moving average is one of the most popular and widely used indicator in the industry. There are different types of moving averages that exist based on the calculation and the duration. Here we will discuss one of the most popular moving averages, which is a 200-day moving average.

A 200-day moving average is a significant tool for the traders and market analysts for determining overall long term market trend. The indicator appears as a line on the price chart, you can change it to even dotted line, and it meanders above and below the price action. The indicator also serves as dynamic support and resistance to the price action. When the 200 SMA is above the price, it indicates as a resistance line to the price, and when it goes below the price action, it acts as a support level to the price action.

The SMA takes the average price movement over a given number of periods which used to smooth the price action of an underlying asset. Instead of tracking the highs and lows of every candlestick, this way moving average simply calculates its value based on the closing price. So visually, this provides the trader with a straightforward view of where the price action has been and where it likely to headed in the short term. There are an infinite number of averages exists; you can change the settings of the moving average. If you desire to measure the price movements over a shorter duration, then simply use the shorter average and if you desire to measure the price movements over a more extended period of time simply use the longer average.  In this article, we will discuss some tips and tricks and strategies to use the 200-period simple moving averages.

TRADING STRATEGIES BY USING THE 200 PERIOD SMA.

SIMPLE SMA STRATEGY.

This is one of the most straightforward 200 period SMA strategy that widely used by the traders. Most of the traders think to make money from the market they must follow the complicated strategies because making money from the market is super hard. This is not true; you can make money by using simple trading strategies.

FOR BUY.
  1. Look for an uptrend.
  2. When the SMA goes below the price action take buy.
  3. Stops below the entry.
  4. Go for the brand new higher high.

 

The below image represents the Buying trade in the EURUSD pair.

The image below represents the entry, exit and take profit in this forex pair. As you can see when the SMA goes below the price action, it means now the trend is up or the buyers started gaining momentum, and any buy entry from here will be a good idea. As we took the buy entry price action smoothly goes to the north, and the stops were just below the entry.

FOR SELL.
  1. Look for a downtrend.
  2. When the SMA goes above the price action take sell.
  3. Stops above the entry.
  4. Go for the brand new lower low.

The image below represents the selling trade in the EURUSD forex pair.

As you can, the below image represents our entry, exit and take profit in this forex pair. So when the SM goes below the price action, it was a clue to go short for the brand new lower low. Soon after our entry price goes down and it prints the brand new lower low. This one is the basic 200-period strategy, but it is super effective on all the trading timeframes.

BREAKOUT TRADING.

In a trending market, when the price action breaks the major level and holds above the significant level that’s something is breakout trading. Breakout trading is a leading way to trade the market, and by using this method, you will always anticipate the market ahead of the time.

FOR BUY.
  1. Look for the buying market.
  2. If the SMA is below the price, it means the trend is up.
  3. Wait for the price action to pullback.
  4. Let the price action to break the most recent higher high.
  5. Take buy entry.
  6. Put the stops below the entry.

The image below represents the buying trade in the EURUSD forex pair.

The image below represents the entry, exit and stop loss in the EURUSD forex pair. The pair was in an overall uptrend, and it took a couple of days to pull back and when we got enough pullback, the price action break above the most recent higher high which is a sign to go long. As we took the buy entry, the price action smoothly goes north, and it prints the brand new higher high. So this trade belongs to the daily chart, so in this, we end up making nearly 300+ pips.

FOR SELL.
  1. Look for the selling market.
  2. If the SMA is above the price, it means the trend is down.
  3. Wait for the price to pullback.
  4. Let the price action to break below the most recent lower low.
  5. Take the sell entry.
  6. Put the stops above the entry.

The image below represents the downtrend in the EURCHF forex pair.

As you can see in the image below, the pair was in an overall downtrend, and when it breaks the most recent lower low, it was a sign for us to go short in this one. As we took the sell entry, it prints the brand new lower low, and the stops were just above our entry point.

TRENDLINE TRADING.

FOR BUY.
  1. Look for the buying market.
  2. If the SMA is below the price, it means the trend is up.
  3. Wait for the price action to pull back to the support area.
  4. Draw down trend line.
  5. Wait for the price action to break the trend line.
  6. Take buy entry.
  7. Go for brand new higher high.
  8. Put the stops below the support area.

The image below represents the uptrend in the CADJPY forex pair.

As you can see in the image below, it represents the buying trade in the CADJPY forex pair. So at first, the price action was in a downtrend, and when the SMA goes below the price, it was the first sign of an uptrend. When the price action holds at the support area, and the SMA was below the price, these are clues to soon prepare for the buying trade. So when the price action breaks the trend line, we choose to go long in that one. As we took the buy entry, the prices blast to the north, and it prints the brand new higher high.

FOR SELL.
  1. Look for the selling market.
  2. If the SMA is above the price, it means the trend is down.
  3. Wait for the price action to pull back to the resistance area.
  4. Draw the uptrend line.
  5. Wait for the price action to break below the trend line.
  6. Take sell entry.
  7. Go for a brand new lower low.
  8. Put the stops below the resistance area.

The image below represents the selling trade in the GBPJPY forex pair.

As you can see the image below represents the selling trade in the GBPJPY daily chart. So when the price action breaks the most recent lower high, it started holding below that level which means buyers are trying very hard, but they failed to take the prices higher. Furthermore, sellers took advantage of the significant resistance level and also they broke the trend line, which was a sure sign for the brand new lower low after our entry price action dropped 2400+ pips within just two months of period.

CONCLUSION.

The 200 days SMA represented as a line on the price chart, which represents the average price over the last 40 weeks. SMA helps the traders to find the trend of the market, and it also acts as dynamic support and resistance to the price action. There are infinite numbers of averages, and the traders use the average according to their trading style, but the 200 period is the most common and widely used average by the investors, traders and market technicians.

There are two basic rules of the SMA.

  1. When the price is above the SMA, You should go long.
  2. When the price is below the SMA, You should go short.

There are two groups of SMA signals.

  1. BREAKOUT TRADING.
  2. TRENDLINE BREAKOUT.
Categories
Forex Basic Strategies

15 Minute Forex Scalping Strategy Using The Donchian Channel Indicator

Introduction

Scalping is a trading strategy designed to profit from small market changes. The Scalpers took a couple of trades in any trading session, and the goal of every scalper is to seize gains when they appear on a price chart because the aim is to have a few small wins rather than one large one. Scalping is one of the most challenging style of trading to master because it requires unbelievable discipline and focus.

A scalper must follow the rules of their trading strategy like a religion because one large loss can easily wipe out dozens of successful trades. One of the most critical aspects of scalping is liquidity because we would not scalp any instrument that is not liquid enough and ensuring liquidity also ensures that we are getting the best price while entering and exiting in a trade. In this article, we will show you how to scalp the 15-minute trading timeframe by using the Donchian Channels Indicator.

Working Of A Donchian Channel

Donchian channel consists of three lines, which are generated by the moving average calculations that comprise an indicator formed by the upper and the lower band, also the median band. The celebrity trader Richard Donchian developed the indicator in the mid-twentieth century so that he can identify the trend of the market. The area between the upper and lower band represents the Donchian channel. The indicator identifies the bullish and bearish extremes areas, which are followed by the reversals or breakouts in price action.

15-Min Trading Strategy

The scalping strategies are only created to trade the lower timeframes, such as 1, 3, 5, 15-minute timeframes; do not apply any of these strategies on any higher timeframes; otherwise, you will face some trouble in your trading.

As you can see in the below image of the USDJPY forex pair, overall, the instrument is in a strong uptrend, and when the price action hits the lower band of Donchian channel it indicates the buy trade, and when it hits the upper Donchian channel, it means to go for a short trade.

In the below image the price action gives us three buying and three selling trade, most of the time the buying trades perform bit longer than the selling trades, it is because the flow of the market was up, but for the scalpers, the flow doesn’t matter, all the scalpers want is to in and out from the market. Close your position when the price action hits the opposite channel, and when you take the entry, if the price action goes a bit against you { for, e.g., 4 to 5 }, then close your position immediately and wait for the new signal.

The below image represents a couple of buying and selling trades in a downtrend. The goal of every scalper is to, first of all, check the trend of the market, and expect more trades by following the trend and simply expect less counter-trend trades. You can see that the below image of the GBPNZD forex pair shows us the nine selling and six buying trades. Most of the selling and buying trades worked very well, and each trade generates a significant amount of money for us. The whole goal is to activate the position when the price action hits the Donchian channel and close your position when the price action goes a bit against us.

Range Trading

If you trade the trending market, then expect the more trend-following trades, and if you scalp the ranges and channels, then you can expect both the buying and selling trades because in ranges and channels both of the parties hold the equal powers this is the reason ranges and channels are favorite for the scalpers. The image below shows the 15-minute chart of the NZDJPY, forex pair, which shows the ranging market, and in range price action gives the five selling and four buying trades. In the ranging market, we suggest you go for the 1:1 RR trades because the price action more often spikes in ranges.

Scalping Trading By Following The Market Trend

Buy Trade

The scalping is all about having a strong and aggressive mind to face the rollercoaster ride in the market, and some of the conservative and confirmation traders want to scalp the market, but they little hesitate to react on every signal, so if you are a conservative or confirmation scalper then here is good news. We specially created a strategy that suits your trading personality. In this strategy, you will find fewer trades, but the trades will be accurate. Apply this strategy only on the fifteen-minute timeframe and avoid trading the ranges and channel markets because both situations have higher chances of fake outs. First of all, on a lower timeframe, find out the clear uptrend in any instrument, and when the price action hits the lower Donchian channel go long and hold your position till the price action hits the opposite channel. Do not go for selling trades in the buying market simply wait for the next buying trade. In the below image, by following the trend of the market, we only got the five buying trades in the EURAUD forex pair. Each of our trade travels a significant amount of time; then the price action generates the next trade. By following this strategy, you will face less mess and good trades in the market.

Sell Trade

The image below represents the six selling trades in the GBPUSD forex pair, you can see that the downtrend was quite smooth, and after activating our every trade, the price action immediately goes into our favor. In the strong trending market, you can go for the smaller stop loss and book profit when the price action gives the buying signal.

Conclusion

Scalping is not easy, but it is a quick way to make some money from the market. As a scalper does not expect a continuous win, most of the scalpers face the ups and downs in their trading journey. Every trading day awaits a couple of buy and sell trades, do not judge yourself or your strategy according to every single trade, instead of at the end of the day find out how many wins and losses you have. If the end of you have more wins than the losses, then it means you have a successful trading day. Scalping works very well on the lower timeframe and the strategies we show in this article created, especially for the 15-minute trading timeframe.

Categories
Forex Basic Strategies

8 THINGS SUCCESSFUL FOREX TRADERS WON’T SAY.

Introduction

Forex trading is nowadays gaining more and more popularity because youth are attracted to this new hot trend. Newbies believe forex is an easy game, but they don’t know fully about this game. It’s hard to distinguish myth from reality, but below are the eight things which successful traders won’t say.

  1. A SUCCESSFUL TRADER NEVER SAY “I’m SELF TAUGHT.”

Most of the newbie believe that all they need is to buy the $99 forex robot to make a gazillion of dollars from the market. They think that by using the one robot or by taking one trading course they can easily make hell amount of money. On the other hand, a successful trader won’t tell you that he makes all his money by just completing one trading course. There are so many different aspects of trading where the traders need to improve. Successful traders tried so many different courses they hundreds of books on mindset, emotional intelligence, market psychology, spirituality to understand themselves and the forex game completely. They knew they have to acquire the whole knowledge from all the sources to become a successful trader in the long run. They knew the path to become the successful trader is often rocky and filled with ups and downs and for them, learning from their own mistakes and the mistakes of other traders is very crucial.

  1. A SUCCESSFUL TRADER WILL NEVER SAY ‘I NEVER LOSE.’

You will never hear from the successful trader that they never lose. It is something which is not possible. Some traders even failed two to three times before timing the trade successfully. If any trader is showing you his or her one or two-month results then simply that’s not a success. Success is always measured in the long run. If you are a consistently winning trader from the last 2 to 3 three years then only you are a successful trader. The successful trader holds the ability to embrace the market ups and downs, and they can adjust themselves and their strategies according to the market. To become a successful trader you should accept that wins and losses are the part of the game, they knew that they are going to lose in some trades and they are going to win in some trades. Their whole focus is when they lose they should lose a very little amount, and when they win, they should win big.

  1. A SUCCESSFUL TRADER WILL NEVER SAY ‘I AM 90% ACCURATE.’

If any trader is saying to you that they win ten out of 9 trades then merely they are lying. It is not possible to have a 90% win rate in the long run. Yes, in the short term you can have a 90% win rate, but for the long run, it’s not possible. Highly successful traders maintain a 70% win rate and with 70% per cent win rate they make a lot of money in the market. A successful trader never expects each trade to be a home run; instead, they focus on the accurate risk-reward ratios to take the trade. Home run is something never matter for them. The never put pressure on themselves to succeed 100%, because they knew the more they want something they less likely they are going to get it. Having a 90% accuracy is not the goal, or we can have a consistent win is not the goal. Instead, they take a couple of trades, and they stopped out two, three times before catching the home run.

 

  1. A SUCCESSFUL TRADER NEVER SAY ‘YOU SHOULD TRADE every day.’

Novice traders always in a hurry to take trades, whereas successful traders trade the market significantly less. They knew that they are not going to get the setups every single day. They knew the market needs time to print the setups. The successful trader has patience; making irrational choices increase the chance of committing the mistakes. Don’t forget that sometimes taking a break from the market is more important than making bad choices. During the news time or political events where newbie traders’ eyes full of greed to take advantage of the market volatility, whereas the professional at that time only watches the markets, they are not interested in trading the hot events. They knew during the hot events price action moves vaguely, and none of the edges works, so they choose to stay away from the market because it is not only beneficial for the bank balance, but it is also helpful for the mental health.

  1. 5. A SUCCESSFUL TRADER WILL NEVER SAY RISK MANAGEMENT IS NOT IMPORTANT.

    Newbie always believes that the risk management strategies are not necessary. Most of the time, they just took the trades without putting the stop loss and started taking irrational trades. Successful traders knew it’s not possible to win in each trade, so before taking the trade, they already clear about the stop loss and take profit area and if price action approach to the stop loss they then are happy to close their trade. They knew that booking loss is a healthy habit, and fear of not booking the loss is a sure way to blow the trading account. So if you are even a world’s leading trader, you’ll never be being able to avoid risks. Successful trader knew we couldn’t predict the market, but they knew they could decide how much money they want to risk in each trade. Without a risk management strategy, traders fall into the emotions, and they started taking the trades vaguely.

  2. A SUCCESSFUL TRADER WILL NEVER SAY ‘MY STRATEGY IS PROFITABLE IN ALL MARKET SITUATIONS’.

If anyone says my strategy is profitable in all the market conditions, then only that guy is lying, or he is trying to sell you his courses to make some money. None of the trading strategies works all the time; even big players strategy failed in the market. It takes a lot of practice and hours of trails and mistakes to establish a successful forex strategy and that strategy also fails from time to time. Everything in this universe is changing and moving; nothing is static. Even every year, new players coming to the market and their trading style affecting the market. When it comes to stock or forex market, there is no strategy which that can be successful in all the market conditions. If there were all the traders’ will be billionaires. Some trading strategies worked in one market conditions and failed in other situations. So you must know ahead of time which strategy works at which market condition and adjust your trading accordingly. When it comes to trading, knowing when to stop trading the market is an essential key to success.

  1. 7. A SUCCESSFUL TRADER NEVER WILL NEVER SAY ‘I KNOW EVERYTHING THERE IS TO KNOW ABOUT FOREX.’

Human beings are so small when it comes to infinity. Life is eternal; it is a long journey which never going to end. There is no way you know everything about the forex market. The world is rapidly changing every day. Things are moving, evolving different economic factors affecting the markets every day. If you start studying everything about the market, it will be going to take so many years. Trading is a journey where you learn new things every day, which helps your consciousness to grow and evolve and create new things. Trading allows you to increase your mindset, your understanding about everything; it helps you to develop into your spiritual journey. So you can’t learn everything within a few months or in a few years. Things take time and never underestimate the importance of lifelong learning. So don’t fall into the illusion that you know everything about the market to know. Every day make some mistakes learn from them, make some changes in your trading strategy according to the market conditions to become a successful trader in the long run.

  1. A SUCCESSFUL FOREX TRADER WON’T SAYS ‘FOREX TRADING IS EXCITING.

You will never hear from the successful traders that forex trading is exciting. When it comes to forex newbie traders’ started thinking about the fancy gadgets, advanced trading platforms, but in reality, all you need is a laptop, internet connection to get started. Trading isn’t exciting here you need to regulate your emotions, stay patience and scan the market very deeply to understand what’s going on. This game isn’t exciting, infect it is a boring game where traders wait all the time for the perfect setups.

CONCLUSION.

Forex trading is gaining popularity nowadays, and so many traders are coming into the game to make quick bucks. Making quick bucks isn’t easy; it’s a hard, lonely road where traders hours and hours practising the game then only they become successful. In the end, becoming a successful trader is lucrative, you will grow spiritually, your mindset will grow, and your consciousness evolves. It is a beautiful journey which I believe everyone should follow. You will encounter so many new experiences every day; you will become peaceful, your mind achieves the new level of growth. You will develop patience also you will learn hardcore lessons of life. Follow the steps above to reach the new heights in your growth. Make a change, grow, make money, help the society, and evolve into the new levels of consciousness.

Categories
Forex Basic Strategies

FOUR SIMPLE AND PROFITABLE FOREX SCALPING STRATEGIES

Introduction

Forex scalping is the riskiest trading strategy trader use. It is a strategy where traders are looking to make short term profits throughout the trading session. Most of the day traders and the long term traders always avoid the scalping because they believe that the fast-paced nature of it can quickly become gambling. It doesn’t mean that scalping is not possible; some so many successful scalpers made millions of dollars from the market. In short, scalpers took numerous small trades throughout the day to make small profits usually 10 or 20 pips from one single trade. For successfully scalping the market you need the below necessities:

  1. THE RIGHT MINDSET.
  2. A SUPER FAST BROKER.
  3. A SUPER FAST PLATFORM.
  4. MARKET VOLATILITY.
  5. The Right Mindset As a scalper, your goal is to take a lot of trades every single day, and most of the time scalpers deal with the stressful environment, and they have to be much disciplined. If you are not able to cope with the stress, then you should shift your focus from scalping to day or swing trading. Scalpers make quick decisions of entry and exit, and if you caught into the emotions or you misinterpreted the direction, then you can quickly lose money. So the first thing is the right mindset which must be free from the emotions, doubt and negativity.

 

  1. A SUPER FAST BROKER In scalping every little pip count, so you must choose the excellent broker who can execute your trades as fast as they can. Always look for STP, ECN and DMA type of brokers who gave them greater access to the market because big brokers most of the time provide the as close to the actual forex prices. Before opening an account with any broker always choose to check the reviews of the broker and find out the broker allow the scalping or not.
  2. A SUPER FAST PLATFORMYour trading platform should be able to place the order as the exact price you choose or at least get as close as possible to them.
  1. MARKET VOLATILITY Scalpers thrive on the market volatility and if any of the currency isn’t volatile enough then it is not possible to scalp it, so always choose the pair which is volatile enough and place a couple of trades throughout the day. If the market is not volatile, then you can skip the scalping, or you may try a different trading approach. When specific markets overlap, that’s the excellent time to find volatility such as a London opening or US opening. Some traders scalp the market before the significant news events and other scalp it directly during the news.

SCALPING STRATEGIES.

Some scalpers use the price action for scalping the market, and some use the indicators. Ideally, whatever the strategy you use, you must always look for confluence. Confluence is when the two things line up in one direction and giving the buy or sell opportunity. By using the two signals, you can very likely to get the results in your favour and in this way you can filter out the low probability trades.

  1. USING THE DOUBLE MOVING AVERAGE TO TRADE THE MARKET.

The very first strategy is to pair the two moving averages to trade the crossovers. If the crossover happened below the price, it means merely buy, and when the crossover occurred above the price action, it indicates the selling.

The image below is the representation of the selling trade in the GBPAUD forex pair. As you can see, when the price action pulled back enough, we witnessed the moving average crossover, which was a sign to go short. The activation of the trade was with the smaller stop loss, and the aim was to let the prices shows us brand new lower low.

  1. USING VOLUME AND TREND LINE TO TRADE THE BREAKOUT.

Volume is a wonderful tool to find out the story behind the price action. Rising volume is an indication of rising momentum, so when the price action breaks the major zone with rising volume, it is an indication to take a trade. Conversely for the sell-side when volume rises and price breakdown it means to get ready to go for short selling.

The image below is the indication of the buying entry in the GBPAUD forex pair. Price action was holding below the significant level; this is because buyers were not strong enough to challenge the resistance level. The breakout with the rising volume was a sign of buyers got enough power to go for brand new higher high. At the breakout of the major level, we choose to go long with the stops just below the entry.

  1. PAIRING THE TREND LINE WITH THE STOCHASTIC OSCIALLTOR.

Stochastic is a wonderful tool to trade the overbought and oversold market conditions. In an uptrend place the trend line below the price action and let the prices break the trend line to the downside and look for a stochastic reversal at the oversold area to go short. For sell-side place, the trend line above the price action and wait for the prices to break above the trend line and reversal on the stochastic at the overbought area is an indication to go long.

The image below is the indication of the buying trade in the GBPAUD forex pair. The pair was overall in an uptrend during the pullback phase price action was continuously respecting the trend line. At the breakout of the trend line, the stochastic oscillator gave crossover at the oversold area, which was a clear indication of buyers gaining the strength. The entry was at the breakout of the significant level with the stops just below the trade.

  1. USING THE BOLLINGER BAND TO SCALP THE MARKET.

Bollinger Bands is a wonderful tool to scalp the market successfully. You can use the Bollinger bands in so many different ways, you can take buy and sell trades when the price action hit the lower and upper band, or you can use it to take the buy trade in the uptrend and sell trade in a downtrend. Another way traders use this indicator is they look for the breakout above the centerline to ride the trend. For scalping don’t use the complicated techniques, we are in the game for small moves only. So for buy when price action hit the lower band and go for sell when price action hit the upper band and if the trend is healthy, then try only to take the trade with the trend.

The image below represents a couple of buying and selling trades on EURGBP forex pair. In this one, we purely trade the buy and sell opportunities based on the bands of the indicators. This method of trading is beneficial in scalping, but your mindset and emotions must be entirely in control to trade this method and don’t force the market to give you trade and don’t make rational decisions.

CENTERLINE BREAKOUT.

We are using the centerline breakout method to trade the market. This method purely works in strong trending conditions only. On this three minute chart, when the prices go above the main level we choose to go long, and when the prices go below the centre line, it was an exit for us. In this way, we took two trades, and both of them end up in good profit.

CONCLUSION.

Scalping is a game of the brave-hearted alphas that have fucking full control on themselves. By placing a couple of trades in a day and over time, these small gains generate large profits. Make sure you are fully ready to scalp the show. Your mindset must be ready, don’t fall into the trap of emotions, go hard and must have a fast broker and lightning-fast platform. Don’t use the new strategy every day to scalp the market; in this way, you are not going to make any serious money. The successful trader always repeats the same kind of setups every day to make the big kill at the end of the year.

Categories
Forex Basic Strategies

5 STEPS FOR DAY TRADING THE RECTANGLE FORMATION.

Introduction

The rectangle is a classical horizontal chart pattern which appears in an up and downtrend. The tops and bottoms of the pattern are parallel to one another; also, the high and lows are horizontal. There are two ways to trade the pattern you can buy at the support and sell at the resistance, or you can wait for the breakout to happen to take a trade.

HOW TO DRAW THE BULLISH RECTANGLE PATTERN.

  1. First of all the market should be in a strong uptrend, because big money is only going to make in a trending market.
  2. We need the two equal lows and highs to draws the horizontal lines that should contain the price action.

The image above represents the Rectangle Chart Pattern.

THE PSYCHOLOGY BEHIND THE RECTANGLE CHART PATTERN.

In an uptrend, before the rectangle pattern market is under the control of the buyers and at the significant level buyers stopped buying and price action started turning sideways. In the consolidation market, you will witness the equal amount of highs and low which is a sign that no one is in control and you wait for the breakout to happen at either direction to take the trade. If the price action breaks to the upside, then it means the buyers are back into the game, and you can go for the brand new higher high, and if the breakout happens to the downside, it merely means you are going to get a reversal trade.

5 STEPS FOR TRADING THE PATTERN.

  1. BEFORE THE PATTERN FORMATION RECOGNIZE THE PRIOR TREND.

Just because you can spot the pattern in the market, it doesn’t mean immediately trade it. Remember, we need the right context, and everything needs to line up before trading the formation. If the market is in an uptrend, then your goal is to go long in the market and if the market is in a downtrend, then only go for sell-side rectangle pattern. Identifying the trend is probably the most significant ingredient that can determine the success of the pattern.

The image below represents the downtrend in the AUDNZD forex pair.

  1. IDENTIFYING THE PATTERN.

The next step for you is to identify the rectangle price formation to make cash from the market. Look for the trending market and wait for the price action to hold at the significant support or resistance (according to the trend) for some time. When the price action prints the smaller range on your trading timeframe then you can draw the rectangle pattern on the price chart.

The image below represents the rectangle chart pattern.

  1. WAIT FOR THE FALSE BREAKOUT.

We are here to trade the pattern as a continuation of the trend but sometime in the market rectangle pattern also act as a reversal pattern. Here in this strategy, we used the unique trading technique to trade the formation successfully; in this way, you can easily avoid the low probability trades.
Generally, for the buy order, we need the price action to break the resistance area of the pattern to trade the market. Before entering a trade waits for the price action to break below the support area and let the prices came back immediately. In short, we are looking for the fake-out before entering a trade.

But why is false breakout important?

Typically some newbie traders or impatient traders enter the market even before the proper formation because the greed to make tons of money is very high. So when these newbie traders enter a trade, they put the stops just below the entry and when the market print the fake-out, they immediately stopped out which fulfil the orders of the more prominent players. Secondly, it traps some sellers who take the support level breakout trades. Both of these actions fuel the upside momentum when the breakout happens.

In the image below the more substantial buyers goes up but immediately sellers eat everything and close inside the pattern. This was a confirmation sign that the sellers are there and soon we can expect the brand new lower low.

  1. BUY AT THE CLOSING CANDLE THAT GENERATES THE RECTANGLE BREAKOUT.

When the price action confirms the above rule, the next step is to enter a trade. Wait for the price to break above the rectangle formation to take the trade. Some traders wait for the prices to hold above the pattern to take the trade, but we here aren’t going to follow the rule because the fake-out already confirm the pattern. So when the prices close above the rectangle, it means bulls are in control, and you can go long, and in a downtrend when the prices close below the pattern, it means bears are in control.

The image below represents our entry in the AUDNZD pair. When the prices closed below the pattern, it was a sign of sellers dominated the game. We took the entry at the closing and chose to go for the brand new lower low.

  1. TAKE PROFIT AND STOP LOSS ORDER.

According to the textbooks, you can measure the distance between the two parallel lines and add that to the breakout to obtain your profit targets. You can follow this way, or you can close your trade according to the market situations. If you are a conservative trader, then you can put the stops below the rectangle pattern, or if you are an aggressive trader, then the stops must be just below the resistance line. We advise you to put the stops just above the closing of the most recent candle because fake out already confirms the pattern.

The image below represents our exit and stop loss in this trade. The fake-out confirms the pattern that’s why we choose to go with the smaller stop loss. The price action was started struggling around 1.300 area, so we choose to close the trade early.

CONCLUSION.

The rectangle pattern is a very popular pattern among the traders; this is because this pattern is straightforward to spot and simple to trade. This pattern is a real-time tool whereas most of the indicators lagged. You are only going to get this pattern in the trending market conditions and make sure the ongoing trend should not be volatile enough.

Categories
Forex Basic Strategies

5 STEPS TO TARADE TEH COUNTER TRENDS SUCCESSFULLY.

Introduction

Traders believe that counter-trend moves are hard to trade or even impossible to trade. It is possible to trade the counter-trend moves, but it is not easy to time the counter-trend markets. If you are not focused then the false trading signals, and overall frustrations will blow your trading account. First of all, avoid trading the counter-trend moves in the volatile markets and secondly avoid counter-trend moves when the new sessions begin. During the opening of the session, volatility is very high because the professional traders are busy in building orders. In this article, we will show you to easily trade the counter-trend moves successfully to make consistent money from the market.

5 STEPS FOR TRADING THE COUNTER TREND MOVES.

STEP 1. ALWAYS LOOK FOR REVERSAL CANDLESTICK PATTERN TO IDENTIFY THE COUNTER TREND.

First of all look for an uptrend, if the uptrend is not healthy enough then that’s a good sign. Draw the trend line by matching the two to three higher lows. While the asset is trending, you should constantly watch for the reversal pattern. This first step is the hardest one to trade the counter trend moves because some traders have a hard time to identify the candlestick patterns. When you identify the reversal pattern, it means merely the overall trend is ready to take the breath for a short time.


STEP 2.THE CONFIRMATION.

When the price action prints the reversal pattern at that stage, you must confirm the pattern. The confirmation can come in two ways. The first way is after the pattern; you can go to the lower timeframe to check if the price action is holding near to the pattern. Another way is after the pattern wait for the price action to hold below the pattern to confirm the trade.

STEP 3. TRADE THE COUNTER TREND.

When you identify the reversal pattern, the next step is to activate your trade. If the original trend is bullish, then the counter move will be bearish, so you should open a short position. If the original trend is bearish, then the counter-trend move should be bullish. These means you should open a long position.

STEP 4. COUNTER TREND STOP LOSS.

It is advisable always to use a stop-loss order to trade the market. If you are in the habit of not putting the stop loss, then you are going to face some serious issues in the future.

BULLISH TREND – The stop loss is necessary, and you must put it above the reversal pattern.

BEARISH TREND -The stop loss order must be below the reversal pattern.

STEP 5.HOW TO BOOK PROFITS TRADING THE COUNTER TREND.

Now that we confirmed how to enter in a counter-trend trades and where to put the stop loss, the next step is to know where you should book your profits. The rule is simple for booking profits; You should hold your trade until the price action touches the major support or resistance level, you can use any indicator to close your trade or look for the reversal candlestick pattern.

COUNTER TREND TRADING STRATEGY.

TRADING THE COUNTER TRENDS BY USING THE ENGULFING PATTERN.

The image below represents the uptrend in an AUDCAD forex pair.  You can notice that the uptrend is not strong enough, and both of the parties were holding equal power which makes us more comfortable to take the counter-trend trade.

The image below represents our entry, exit and stop loss in the counter-trend. We are using the bearish engulfing pattern to trade the market. Bearish engulfing is a reversal pattern which appears at the top of the uptrend. It is a two candle of pattern; the first pattern is red in green in color which indicates buyers are strong and the second candle is red which completely engulfs the first candle, the pattern shows the buyers are not stronger enough in the moment, and sellers overtake the buyers. We activate the selling trade when market prints the engulfing pattern at the major support area and for booking profit we choose the most recent lower high.


TRADING THE COUNTER TREND BY USING THE SHOOTING STAR PATTERN.

The image below represents the uptrend in the GBPCAD forex pair.

The below represents our entry, exit and stop-loss order. Overall the market was in an uptrend, and after some aggressive moves, buyers started struggling to go higher and end up printing the shooting star trading pattern. A shooting star is a reversal pattern that consists of long upper shadow and a small real body near the low of the candle. The pattern indicates at the opening of the day buyers came strongly, but the aggressive sellers smacked down and closed the prices at the opening of the day. We activate the selling position at the closing of the pattern with smaller stops and take profit goes to the most recent support area. These are the two above methods we use the trade the counter trend markets. If you found a reversal candle in the strong trending market, never use that candle alone to trade the market for a single candle, it is hard to reverse the market. Always let the original trend to slow down then only go for the counter-trend trades.

CONCLUSION.

The market moves in a cycle; you will witness the counter-trend moves and impulsive legs also. After the long move, the ongoing trend needs rest, so as a result, we witness the pullback. These pullback moves which we are interested in trading, and these moves are known as the correction moves. In volatile conditions, it’s hard to trade these counter moves so always look for the dying trend to trade the markets. To trade the moves successfully follow the above five steps, find a reversal candles after a significant move, confirm the pattern, take the trade, put the stops above or below the trade (according to the market conditions and close your trade when prices approach the trend line.

Categories
Forex Basic Strategies

HOW TO TRADE THE CUP AND HANDLE PATTERN.

Introduction

The chart pattern is the most common way to trade the markets. Patterns are when the price action resembles a common shape like Rectangle, Triangle, Cup and Handle, Head and shoulder etc. These are the visual pattern that provides an excellent risk to reward ratio trades. Here in this article, we will explain to you the cup and handle chart pattern formation. The Cup and Handle is one of the classical pattern used by the traders. The pattern occurs on all the trading timeframes, and it indicates the reversal and continuation signals. On higher timeframes pattern even take two to three months to print the complete formation. This pattern occurs at the end of the downtrend, where the market first is in a downtrend, and then we witnessed the price action challenged the most recent lower low. By printing this movement, we witnessed the ‘U’ type or ‘CUP’ shape on the chart.

Furthermore, when the prices challenged the most recent lower high, then you will witness the handle portion of the pattern. Make sure the handle formation should be smaller than the cup, and it should not drop to the lower half of the cup. Wait for the price action to complete the handle formation to trade the pattern. If the pattern forms in a downtrend then simply it is an indication of reversal and if you witness it in an uptrend, then it means it’s a sign to trade with the trend.

TRADING THE PATTERN ON THE HIGHER TIMEFRAME.

Cup and Handle pattern provides really good trades on the higher timeframe. This pattern holds the ability to reverse the trend entirely, so whenever you recognize this pattern on the higher timeframe, hold it for a couple of months to milk the trend completely. First of all, look for the downtrend and wait for the pattern to form fully. The handle portion of the pattern forms in the shape of the descending channel or a triangle, and even sometimes it goes sideways. Wait for the price action to break above the cup and handle portion to take the buy trades.

The image below represents the Cup and Handle Pattern on the EURCAD pattern.

The daily chart of the EURCAD indicates the buying trade in the currency as you can see that the currency was in a downtrend and the break of the handle portion above the cup was an indication to go long. On this daily chart our activation was around 1.3767, and with 150+ pips stop loss we choose to go for brand new higher high. Overall it was a really big trade which we hold for nearly six months end up making 2100+ pips.

TRADING THE PATTERN WITH THE TREND.

Cup and handle pattern also provide the intraday or lower timeframes trades. On the lower trades, find out the uptrend, wait for the price action to pull back enough. After the pullback, if the price action prints the cup and handle formation, then take long trade only after the breakout. The stop-loss order must be below the handle portion and go for the brand new higher high.

The image below represents the Cup and Handle formation in the NZDCHF forex pair.

The image below represents the selling entry in the NZDCHF forex pair. The currency was in a downtrend, and during the pullback phase prices goes higher and end up printing the cup and handle pattern. In the above trade, we choose to take the entry after the handle breakout, but here we decide to go before the breakout of the handle portion. This is because the cup formation was so strong, which confirms the pattern ahead of time. With the smaller stops, we activate the trade around 0.6058 with a take profit of 0.5953.

PAIRING THE PATTERN WITH THE STOCHASTIC OSCILLATOR.

In this strategy, we paired the Cup and Handle with the Stochastic Oscillator to trade the market. Most of the traders believe that they should trade the pattern alone to make some money. It is possible to trade the pattern alone, but if you pair it with any oscillator, you can easily time the market.

  1. On the lower timeframe, find an uptrend and wait for the prices to pullback.
  2. Look for the cup and handle formation.
  3. During the handle, phase check what the stochastic is saying if it is at the oversold area then go long and go for brand new higher high, and if the stochastic is at the overbought area, then it means buyers are exhausted now and expect the one leg down first. Wait for the stochastic to reach the oversold are to take an entry.
  4. By using the Stochastic, we are timing the market to the point, so using the more significant stops makes no sense at all. Put the stops just below the handle portion and ride for the brand new higher high.

The image below indicates the cup and handle pattern in the EURUSD daily chart.

In the image below the pair was in an uptrend, and during the pullback phase, we witnessed the cup and handle formation. During the handle phase, when stochastic approached the oversold area, it means the sellers who are going down are exhausted, and sooner we are going to witness the uptrend. The stochastic oscillator is very useful to time the market when it helps to activate the trade even before the formation of the pattern. As a result, we can quickly get a better risk to reward ratios.

CONCLUSION.

The cup portion represents the price action found the bottom zone and the prices have very low chances to go down. The brake out of the handle portion means the sellers are no more in the market, and bulls are ready to lead the game. If the pattern came in an uptrend, it means it’s a continuation pattern, and now the market has very high chances to print the brand new higher high. To improve the timing of your trade, you can use the stochastic indicator, or if you are a professional, then there is no need to use any indicator. Cup and Handle is a reliable pattern which performs most of the time; most of the professionals market technicians use these patterns to cash out the money from the market.

Categories
Forex Basic Strategies

THE CORRECT WAY TO USE THE TRAILING STOP LOSS WHILE DAY TRADING.

Introduction

A trailing stop order is used to reduce the risk in the trade. In other words, this tactic is used to lock the profit as the trade moves in the direction of the trader. If the intraday traders aim for the more prominent targets, then only use this tactic and if the goal is to book the profits every day, then do not use this technique.

EXPLAINING THE TRAILING STOP LOSS ORDER.

Trailing stop loss controls the risk of a trade. It is the way that trader used to get out of the trade if the market moves against them.

For, E.g., You bought ten lots of AUDJPY at 110 market prices and placed a stop loss at 109.70, which is 30 pips below your entry. Price action moves 40 pip in your favour, and then it started dropping, and in the end, the market fell back to the 109.70 is where you set your stop-loss order. Now the price action triggers your stop loss, and you are out from the market with a loss. This is how the simple stop-loss order worked.

On the other hand, if you used the trailing stop loss, then the stop-loss order can be moved as the price moves to reduce the risk in the trade. With the trailing stop loss, the trader moves the stop loss above the 109.70 area, which reduces the risk in the trade. If the market moved 70 to 80 pips in your favour, then the trader can even move the stop loss above the 110 area, then the trader even makes a profit if the trade hits the stop loss.

Assume you take a short position in the CADJPY forex pair at 88 and place the stop-loss order at 88.20 which is twenty pips above the entry. Price action dropped to 87. 40 and you are in 60 pips profit. Now you can opt to trail your stop loss, and you moved it to 88 levels. If the price action came back to the 88 levels now your trailing stop loss order will going to hit, and you end up in 20 pips profits. Keep in mind in selling trade the stop loss order should be moved down not up.

There are multiple trading platforms which provide the automatic trailing stop loss facility, and you can even set the trailing stop loss manually also.

PRICE BASED TRAILING STOP LOSS.

Price based trailing stop loss is one of the best and hassle-free way to reduce the risk. Because here you only need to set the stop-loss order after the entry and the rest of the work will be done by your trading platform automatically. A trailing stop loss will automatically move the stop loss of your trade. All you need to do is to set the number of pips you want your stop loss to move according to the market movement. If you put 30 pip stop loss, then it will remain away 30 pips from the market price.
Assume you bought NZDJPY at 132.20 and you set the stop loss at 132 which is 20 pip away from your trade. So if the NZDJPY price rises from the 132.20 to 132.40, then your stop loss will automatically move to 132.20, and if the price goes to the 133.20, then the stop loss will move to 133 levels. If the price of the NZDJPY start dropping then your stop-loss order is not going to drop down, instead it will stay at 133 levels. In this way, you are not going to end up in loss; instead, the stop loss will liquidate your position in 80 pip profit at 133 levels.

On the other hand, if the trader activates the short position in CHFJPY at 145.80 and set the stops at 146, then they are risking 20 pips in per lot. If the price declines to 145.50, then the trailing stop loss will be at the 145.70, locking in a profit for a trader. Furthermore, if the price of the forex pair moves to the 142, then the stop loss will automatically move to the 143.20. Once the trailing stop loss drops, it never goes back up. So if the price of the security starts rising, then the trailing stop loss will close the position at the 143.20 level. You can close your trades even manually by choosing the take profit according to the markets. This is the automatic version of the trailing stop loss which is available at the most trading platforms and at the time of activating your trades don’t forget to set your stop loss from manual to trailing.

MANUALLY USING THE TRAILING STOPLOSS.

The experienced traders commonly use the manual stop-loss order because it provides the flexibility to move the stops freely. Instead of using the trailing stop loss, in this case, they use the standard stop-loss order to trade the market. The most common way traders use the manual stop loss is they wait for the price action to pull back to the significant level and when the prices have risen enough, they move the stops below the pullback.

For example, a trader bought GBPJPY at 132.20 and prices action pulled back to 131.70 and started its uptrend again; in this case, the manual stop loss must be around the 131.65 level.

Some breakout traders also use the manual stops to trade the market. The breakout traders mostly move the stops just below the breakout line. This is because if the price action came inside the breakout, then it simply means Prices used the breakout line as a fake-out to bring some more orders to the table.

INDICATOR BASED TRAILING STOP LOSS METHOD.

Some of the indicators also designed specifically for the trailing stop loss. Here you also need to move the stop-loss order manually to trade the market. Most of the trailing stop loss indicators are based on the Average True Range (ATR), which measures how much the prices of an asset moved in a particular time period.  If any currency moves 15 pips every 10 minutes, then the ATR will show the readings of 15, and if any asset moves 25 pips every 10 minutes, then the ATR readings will be 25. Assume you buy an AUDJPY at 88.40 and using the stop loss of 25 pips at 88.15. So when the price action moves to your favour, you should trail your stop loss 25 pips behind the highest price achieved since entry. If the prices moved to 88.90, then stops should be moved to 88.65. Continue to do this until the price action hits the stop loss order and close the trade.

The ATR trailing stops is another tool which can be used to trail the stop loss on the price chart.
The image below represents the indicator. Keep in mind this indicator is not useful to take an entry; instead, it is only helpful to close your trade. If you took a buying trade, then you must hold a trade until the price action moves above the dots and for the sell-side only closes the trade when prices break above the dots. Using this indicator to enter a trade is quite useful but using it to staying in trade is beneficial.
Moving Average, Chandelier exits, Parabolic SAR stop loss indicators are the other tools which traders can use to trade the markets well.

PROS AND CONS OF TRAILING STOP LOSS ORDERS.

Trailing stop loss is very useful to trade the strong trending markets. In the strong markets prices most often moved in one direction continuously, and much of that trend will be captured for profits. In other words, allowing the trades to run in strong conditions until they hit the trailing stop loss can result in significant gains. Trailing stops is also beneficial when the half or more than the half of the trade moves into your favour and reverses and end up hitting your stops. In these cases, you will go to end up in profits always, or it prevents the winning trades turning into losers.

The major problem with the trailing stop loss is it is hard to use in the channel conditions, high volatile market and during the major news events. When the trend is about to end or in a highly volatile market, we often witness the price action continuously reversing and hitting the trailing stop loss. In this case, most of the time traders end up by making a small amount of money only. During the news events prices sometimes smack back very hard, and then it again moves back to its original side. So here trailing stops almost failed to perform. The quick advice is to avoid using the trailing stop loss in the volatile or in a dying market, and during the extreme news, events don’t trade the market at all.

CONCLUSION.

In the world of trading, there is no perfect solution at all for the problem mentioned above. The real traders adjust themselves and their trading strategies according to the market circumstances. Change, evolve, adjust is the real key to everything, mould or bend yourself according to the situations to make the cash from the game. It is advisable to use the stop loss indicators first on the demo, and then only applied them to the live, because sometimes these indicators didn’t perform well in the market. We advised you to use the manual stop loss method to move the stop loss, if you solely depend on the indicator or automatic stop loss then the indicator may get you out from the market too early or too late on some occasions.

Categories
Forex Basic Strategies

PSYCHOLOGY BEHIND THE HEAD AND SHOULDER PATTERN.

Introduction

Ask any professional trader, what is your secret to making money from the market?

The answer will be they trade the chart patterns to make money consistently.

Chart patterns? Another common answer.

Most of the traders also use the chart patterns, but still, they failed to make money from the market, but these professionals are also making money by using the patterns. Professional and common trader both use the chart patterns to trade the markets but why one is more successful and other even losing the money. What do you think about what will be the reason?

The answer is simple, professionals use the chart pattern, but they use them differently. The common trader just looking for the formation and they take an entry, but this is only the half the picture. On the other hand, professionals never trust on the formation alone; instead, they focus on the psychology behind the candle to successful time the pattern even before the complete formation of the pattern. Before diving deep into the pattern, let me explain the Psychology behind the Hand and Shoulder.

PSYCHOLOGY BEHIND THE HEAD AND SHOULDER PATTERN.

Head and shoulder is a reversal pattern. It appears at the top of the trend, and it indicates the uptrend is over and sooner the market is ready for the brand new downtrend.

LEFT SHOULDER.

When the uptrend is completely visible to everyone, then it merely means there is an excessive amount of supply in the market, which leads to the pullback phase. If the pullback phase ends up near the most recent higher high, then it simply means buyers are no longer dominated, and sellers are stepping into the game. This is the first sign recognized by the professionals, and they started preparing to take sell trades sooner.

THE HEAD.

After the left shoulder is completed, buyers entered into the game again; they took the prices high again. The sellers, who short sell the market, buy back again, and both of the buyers and sellers printed the brand new higher high. When the prices print the head phase, it means the buyers are completed exhausted, and the sellers again gain the upper hand. This leads to the second low if the Head and Shoulder pattern.

RIGHT SHOULDER.

At this stage of the market, professionals knew the buyers are exhausted and sooner we are going to witness the new downtrend. On the other hand, the common traders still believe that the market is in an uptrend because visually market is giving the illusion of buying trend. So some of the traders who are caught in the illusion retook the buy trade and expecting the brand new higher high because every time price action pulled back it prints the brand new higher high the professional traders looking to take the sell entry near the top of the head. In the end, price action prints the right shoulder, professionals are in profit, and newbie traders are at breakeven with the hopes of the market will go up from the support area. Price action tests the support level but the support failed to hold it, and we witness the brand new lower low. The professional traders enjoying the profits because they didn’t trust the visuals of the patterns, whereas the newbie traders end up in losing side just because of the visual representations makes them blind.

HOW TO TRADE THIS PATTERN.

The one way which is most common among the traders is to let the pattern to form completely then only they execute the trade. You can follow that way, but if you want to level up your game then explain the things deeply and take the trades even before the formation of the pattern. This way, you will get an excellent risk-reward ratio trades, and you will end up making handsome money. Below we shared the two different way to trade the Head and Shoulder pattern. The first one is to trade before the formation and the second way is to let the pattern to form fully to trade it.

FIRST EXAMPLE.

The image below represents the head and shoulder pattern.

As you can see, the head and shoulder pattern in the image below. The buyers printed the head pattern quiet strongly and check the right shoulder {circled} leg. The right side buyers were super weak, which was a first clue of soon we can expect the right shoulder. Always compare the head’s left leg with the left leg of the right shoulder, and If the buyers were weak, then it’s a sign to take the trade.

The image below is the entry, exit and stop loss in the EURUSD pair. Here we used the weak left shoulder buyers to take an entry. We used the second supply zone to activate the trade with the stops just above the entry and take profit below the trade.

SECOND EXAMPLE.

The image below represents the Head and Shoulder Pattern.

The image below represents the buying entry, stop loss and take profit in the USDCAD forex pair. When the market printed the complete pattern, we choose to take the selling trade. You can see that it was a straightforward textbook style pattern where everything was perfect. A complete pattern gave the ideal entry and take profit.

CONCLUSION.

Everything requires the mastery and mastery needs doing the same thing over and over again. The more you practice these patterns on demo and rehearsing them in your mind, the more comfortable you are going to recognize them on the price chart. If you are not a super professional in the game, then try not to use the first trading example in the live market because it requires a lot of focus and you need to believe on your intuition to make a trading decision. When you developed enough neurological networks in your brain, and you are able to spot the pattern within a second, then only trade them. Otherwise, stick to the second method and trade it for a couple of months, then only graduate to the higher levels. In the end, pattern trading is a super easy to make money from the market but don’t get up caught up only in the pattern design, instead, extract the pattern go deeper into it then only make any decision.

 

Categories
Forex Basic Strategies

TRADING THE REVERSALS USING THE BEARISH REVERSAL CANDLESTICK PATTERNS AND RSI INDICATOR.

Introduction

There are so many different trading tools that exist in the market, and most of the tools are connected, for example, price action directly connected with the candlestick patterns and trading indicators. On the other hand, traders use the trend lines, price channels, patterns in conjunction with the indicators to filter out the bad trades. When you use something alone, things will be hard for you, but if you use all of these tools according to the time or the market circumstances, then one can easily win in the market. In this article, we will show you how to use the different candlestick patterns in conjunction with the RSI indicator to benefit the different market situations.

BEARISH ENGULFING PATTERN.

Bearish engulfing is a reversal pattern which appears at the end of the uptrend. The pattern consists of two candles, Green and Red. The first candle is green in colour, which indicates the buyers are in control and the second red candle completely engulfs the first candle, which shows that the sellers overtake the buyers.

EVENING STAR.

The evening star is a three candle pattern that appears at the top of an uptrend, indicating that the buyers’ domination is about to end. The first candle is green in colour indicating buyers are in control and the second candle which is a Doji opened gap up indicting the fight between both the parties and the third candle is red indicating sellers stepping in. They are ready for the brand new lower low.

SHOOTING STAR.

A shooting star is a bearish candlestick pattern appears after an uptrend. The pattern consists of a long upper shadow and a small real body near the end of the day. The candlestick pattern indicates that the price tried to rise significantly during the trading hours, and then the sellers took over and pushed the price back towards the opening price.

HANGING MAN.

The hanging man represents the potential reversal in an uptrend. The candlestick consists of a small real body with little or no upper shadow and a long lower shadow. The candle indicates the demand has pushed the price higher, but in front of the stronger sellers, the buyers only able to pushes the price near to the opening price of the candle.

RSI.

RSI stands for Relative Strength Index. The indicator is displayed as an oscillator that has readings of 0 to 100. The indicator is developed by the J. Welles Wilder, and he introduced it in his book 1978 book “New Concepts in Technical Trading Systems.” The value above the 70 is an indication of the overbought security and the value below the 30 is an indication of the oversold conditions.

TRADING STRATEGIES.

RSI AND BEARISH ENGULFING PATTERN.

The image below represents the uptrend and Bearish engulfing pattern in the AUCAD forex pair.

The image below represents our entry, take profit and stop loss in the AUDCAD forex currency. The pair was in an uptrend, and at first, it failed to go above the resistance line, and when the second time buyers tried, we witnessed the bearish engulfing pattern, where the strong sellers completely engulf the first red candle. The bearish engulfing pattern on price chart backed the resistance line, and the RSI reversal at the overbought area was a signal to go short. The three signals aligning in one direction gave us the confidence to go for smaller stop loss and booking profit we choose the higher timeframe main level.

EVENING STAR AND RSI.

The image below represents the downtrend and the Evening star pattern.

The image below represents the entry, exit and stop loss in the AUDCAD forex pair. The market was in an uptrend and the evening star pattern indicates the buyers are no more in the game also the RSI already gave the reversal at the overbought area, so going short was a good idea. This trade was taken on the 240 chart, and after the pattern, formation prices turned sideways for a couple of days where most of the traders choose to exit there trade, but in trading, patience is the real key. Embrace the risk, have faith in your analysis, hold your trades and aim for the bigger targets.

SHOOTING STAR AND RSI.

The image below represents the uptrend and the shooting star pattern on the Daily chart.

The image below represents the entry, exit and stop loss in the AUDCAD forex pair. The currency on the daily chart was in a strong uptrend, and the appearance of the shooting star pattern at the top of the trend was a sign of upcoming reversal. We took the selling trade when the pattern was confirmed by the RSI reversal at the 70 level.

RSI AND HANGING MAN.

The image below represents the Hanging Man pattern in the GBPCHF forex pair.

The image below represents the selling trade-in the GBPCHF forex pair. As you can see the market was in a strong buying trend, the one strong green candle is enough to create panic among the chasers, but on the other hand anticipators by pairing the hanging man pattern with the indicator, end up making money. Don’t fall into these type of traps set by the bigger players. Follow your trading strategy very well; If the market is giving you the signal, go for it without any doubt. Your goal is to bet on your edge every time and when you go in negatives close your trade as fast as you can and when it performs go for the bigger targets.

CONCLUSION.

In this article, we shared the four reversal trading patterns with you, the very first one is a bearish engulfing pattern, evening star, shooting star and hanging man. All of these indicators are well proven in the markets; first, master them on demo and use them for trading the live markets. In the markets you will face every type of situations, some time you will find easy trades like the second one we shared above, and some time you will find a hard time just like the forth strategy, don’t go in a panic instead always try to bend yourself according to the situations to stay longer in the game.

Categories
Forex Basic Strategies

Trading Reversals Using Bullish Reversal Candlestick Patterns

Hundreds and hundreds of trading tools make it super easy for the traders to trade the markets. There are candlestick patterns, indicators, price action trading. All of these things making trading are an easy game for the traders. In this article, we are using the reversal patterns and double moving average to successfully trade the counter trend situations. Below is the explanation of a couple of reversals candlesticks and the double moving average.

BULLISH ENGULFING PATTERN

Bullish engulfing is a reversal pattern that appears at the end of the downtrend. The pattern consists of two candles, Red and Green. The first candle is red, which indicates the sellers are in control and the second candle completely engulfs the first candle, which shows that the buyers overtake the sellers.

HAMMER

Hammer is a single candle reversal pattern, and it appears in a downtrend. The pattern forms a hammer-shaped candlestick, where the lower shadow is twice as big the size of the real body of the pattern. The boy of the candlestick represents the closing and opening price, and the lower shadow indicates the low of the candle.

MORNING STAR

Morning star is a reversal three candle pattern appears in a downtrend. The first candle is red indicating the downtrend and the second candle opens gap down which means the sellers are in control and the third candle pushes the prices and closed near the opening of the first candle indicating the buyers stepping in and get ready for the brand new higher high.

DRAGONFLY PATTERN

Dragonfly is a single candle pattern which shows the extreme strength of the buyers. The candle open, close and high is the same, indicating the buyers are ready for the brand new higher high. It has a long lower shadow with no upper body.

MOVING AVERAGES

Moving average is a trend following lagging indicator based on the past price. The indicator is used for identifying market trends. If it is pointing upward and below the price, it means the trend is up, and if it is above the price and pointing downward, it means the trend is down. All the type of traders uses moving averages, and there are infinite numbers of averages exists, which traders used according to the market circumstances. If you are a lower timeframe trader, then use the lower averages and if you are trading the higher timeframe or swing trader, then go for the bigger averages.

REVERSAL TRADING STRATEGIES

The image below represents the Bullish engulfing pattern in the EURCAD forex pair.

The image below represents the buying entry after the short term reversal in the EURCAD. When the second green candle completely engulfs the first red candle and closes above both of the moving averages, it was an indication to go long. We took the entry after the pattern completion and choose to go for a brand new higher high with stops below the entry.

TRADING THE HAMMER PATTERN

The image below represents the Hammer pattern in the EURCAD forex pair.

The image below represents the hammer pattern and our buying entry in the EURCAD as you can see the price action prints the hammer pattern, but it failed to go above the moving average. At this stage, some trader chooses not to trade the pattern just because half of the criteria aren’t met. This happened some tie in the market where one tool is saying something and another one is saying something. In these situations, it is advisable to have enough patience and let the second trading tool to align with the first one. In our trade after the three hours prices goes above the moving average, which indicated the buying momentum is back into the show. With the stops just below the pattern, we choose to milk the trend for the brand new higher high.

TRADING THE MORNING STAR PATTERN

The image below represents the Morning star pattern in the EURCHF forex pair.

The image below represents our entry, exit, and stop-loss in the EURCHF forex pair. The market was in a downtrend, and when the prices prints the morning star pattern and both of the moving averages goes above the price, it means the market is printed at the bottom, and going long will be beneficial. We activated the buying entry after the pattern completion with the stops just below the entry, and for taking profit, the brand new higher high was a good area.

DRAGONFLY PATTERN

The image below represents the buying trade in the EURUSD forex pair.

As you can see in an ongoing downtrend when the market printed the dragonfly pattern, but it was below the moving average, which means we need to wait for another signal to line up to take the trade. Patience matters, if you take trade by having only one signal, then the chances of loss are very high. So wait let the things to settle, let both of the tools to align in one direction then only go. On this 15 minute chart when the moving average goes above the price action, we choose to go long with the stops below the entry.

CONCLUSION

In today’s world, we have a lot of tools which makes trading is an easy game. Do not try to use all the trading tools; instead, choose the one or two and master them on demo first then only choose another one. Here in this article, we discussed the four well-known candlestick patterns to trade the reversals. By pairing them with the moving average traders can time the market well. In these four trading strategies, two of them gave use the trades immediately, and two of them took some time to confirm the entry. Never be in a hurry to pull the trigger; it can produce disastrous effects. The major problem with the traders is that they always try to tell the market what to do next; instead, it is the market duty to tell us what to do next in the game, when to pull the trigger and when not.

Categories
Forex Basic Strategies

Using Bollinger Bands to Time the Rectangle Pattern

Trading the markets is an art, which is hard to master but very fruitful in the long run. There are various tools that traders can use to time the market such as Candlestick patterns, Indicators, Trading patterns, Price action tools, etc. Traders who decided to master these tools always end up generating huge money from the market. In this beginning, it is advisable to pick only one or two trading tools and use them in conjunction with others to master the markets. Here in this article, we choose the Bollinger Bands indicator with the Rectangle Pattern to successfully time the markets.

RECTANGLE PATTERN

The rectangle is a technical chart pattern that appears during an ongoing trend in an asset. This pattern is known as the continuation pattern used by the traders to anticipate the ongoing trend. The rectangle pattern is easily identifiable by two comparable highs and two comparable lows. Connect the highs and lows to form the two parallel lines that make up the bottom and top of the pattern. The qualify as a continuation pattern, the markets must be trending. Look for two equivalent highs and lows to have a pattern on the price chart. The pattern appears on all the trading timeframes, and ideally, the higher timeframes sometimes take nearly 3 to 4 months to form a pattern, and on the lower time frame the pattern prints very often. There are various ways to trade the pattern, some like to trade it after the breakout, and some like to trade it before the breakout, and for trading it before the breakout, we must use the Bollinger band to time it successfully.

BOLLINGER BANDS

Bollinger Bands are a price envelope developed by John Bollinger. The indicator consists of 20 periods SMA and upper and lower band. When the bands tighten, it is an indication of low volume, and the wider pattern is a sign of high volume. Sometimes prices immediately go in the opposite direction and reverse before the proper trend begins, watch out for all of these fake moves before taking an entry. The price action touches the upper band, it’s a sign of selling trade, and when it touches the lower band, it is an indication to go long. When the prices continually touch the upper band, it means the markets are overbought, and when it keeps touches, the lower band is a sign of the oversold market conditions.

TRADING STRATEGIES

FOR BUYING

The image below represents the rectangle pattern in the EURNZD forex pair.

The image below represents the buying entry in the EURNZD pair. We witnessed the rectangle pattern in an uptrend, and after the pattern was a sign to go long. The price action touched the upper band; it was a clear sign that the buyers are gaining momentum, and soon we are going to witness the brand new higher high. On the other hand, Bollinger band traders were preparing to go short just because the prices approach the upper band. This is not a good approach, always uses the indicator in context with the trading pattern, and follows what the pattern is saying, and made decisions accordingly.

FOR SELLING

The image below represents the Rectangle pattern in the AUCHF forex pair.

The currency was in an overall downtrend, and during the pullback phase, the appearance of the rectangle pattern is a sign for us to look for the selling trade. After the breakout of the pattern when the price action touches the lower Bollinger band, we choose to go short. Some traders believe when the prices touch the lower band, it means to go long, and when the prices touch the upper band, it means go short. That’s not the right approach. In reality, if the prices keep touching the lower band, it means the downtrend is gaining momentum, and going short will be a good idea.

USING THE BOLLINGER BAND TO TRADE THE PATTERN BEFORE COMPLETION

The idea is to let the price for printing half of the rectangle pattern first, and when the prices touch the lower band and go above the center line, it is a sign to go long. The center line breakout is an indication of the buyers gaining momentum, and soon we can expect the breakout of the pattern.

The image below represents the buying trade in the CHFJPY forex pair.

As you can see in the image below when half of the pattern was completed, and the prices go above the center line aggressively, we choose to go short with the stops below the pattern. The stronger buyers break the pattern, and it prints the brand new higher high. In this way we can easily time our trades well and often we got a better risk to reward ratio trades.

LOOKING FOR THE FAKEOUTS TO TRADE THE RECTANGLE PATTERN

Sometimes the price action prints the fake-out first before moving to the original direction. These fake-outs are the signs that the original trend is trying to trap more and more of the opposite party to move in the original direction. When you identify any fake-out where the prices go above the pattern and immediately came back, it is a sign for us to anticipate in the market.

The image below represents the rectangle pattern in the ADUCHF forex pair.

 

In the image below, when the price forming the rectangle pattern, the buyers just went out and touched the upper band of the Bollinger. By acting as a support area, the upper band immediately pushed the prices back into the rectangle pattern. The failure of the buyers to break above the pattern is a sign to go short. We use the smaller stop loss above the Bollinger because the rectangle upper line and upper Bollinger band line was a strong level to hold the prices.

CONCLUSION

Bollinger and rectangle both are different trading tools that help the trader to identify the different market conditions and trading opportunities. One can use these two tools alone, or we can pair them with one another. If the traders use the rectangle pattern alone to trade the markets, it will give you good trades, but pairing it with the Bollinger band will give you the extra edge to time the market even before the pattern formation. Most often you will find this pattern only in the trending market conditions, and it is advisable to go big when both of these tools to lining up in one direction.

Categories
Forex Basic Strategies

Four Powerful Above the Market Trading Strategies that Work

Above the market is an order type that executes above the current market prices or we can say order triggers in the future at the desired price we set. For, E.g., EURJPY is in a downtrend, and prices hovering around 132.50. Well, you believe that if the price action goes below the 130 Major level, then the asset is off the races.

Unfortunately, you are doing a 9 to 5 job, and trading is your part-time business and you are unable to watch the market the whole day. Therefore you place the order to automatically sell five lots of EURJPY once the prices can go beyond 130. At this point in the game, one of the two things happened. If the prices go below 130, your order will be a trigger. If the price action failed to cross the 130 major levels, your order is never executed. We have covered the basics here now let’s dig a little further.

TYPE OF ORDERS ABOVE THE MARKET

BUY STOP ORDER

Buy stop order is the order price that you set above the current market price to buy. If you place a buy stop order, then your broker will automatically trigger your order once the price is reached. No one knows at what price your order will fill; it should be close to your buy stop order price. Most traders use the buy stop orders to open a long position on a breakout or to close a short position that is going against you.

SELL LIMIT ORDER

The sell limit order is also above the market order. Here you believe that the market will run to a specific level and then it fails to move further and sooner we going to experience a downtrend. Therefore you are looking to open a short position at a significant level. Assume there is a significant resistance level at 130 levels in the EURJPY pair and you set the sell limit order because you believe when the prices hit this level, we will witness a downtrend.

TRADING STRATEGIES FOR USING THE ABOVE THE MARKET ORDERS

BUY STOP ORDERS AND SYMMETRICAL TRIANGLE

Buy stop order works very well in bullish chart patterns. Here in this strategy, we are using the symmetrical triangle to trigger the buy stop order by connecting two lower high and higher low draw the symmetrical triangle on the price chart, and place the buy stop order outside the symmetrical pattern. Your buy order will be trigger when the price action breaks the pattern. Place the stop loss order below the pattern and go for a brand new higher high.

The image below represents the symmetrical triangle chart pattern on the AUDUSD forex pair. The blue arrow was the area where you should place the buy stop order. After the breakout when the price action triggered the buy stop order, the stop loss should be placed below the resistance line of the pattern. The resistance line acts as dynamic support to the price action, which helps the traders to stay in a trade and always choose the brand new higher high for the take profit.

HIGHER HIGH BREAKOUT TRADES

The buy stop order is efficient for trading the trending market conditions. Find out the trending market, wait for the price action to print brand new higher high, after the brand new higher high let the price action to pull back enough and place the buy stop order above the most recent higher high. Wait for the prices to break the most recent higher to trigger your order. Most of the time, when price action breaks the recent higher high, it is a very high likelihood that the prices will continue more elevated in the same direction. No one knows how much the price action goes higher after the breakout, but it is advisable to close your trade when the price action approach to the significant resistance level.

The image below represents the buying trade in the GBPAUD forex pair. The currency was in an uptrend, and after the pullback, it breaks above the most recent higher high. After the breakout, our buy stop order was triggered, and we choose to go for the brand new higher high.

USING THE SELL LIMIT ORDER TO TRADE THE BREAKDOWNS

The sell limit order is useful to trade the downtrend markets. Look for the downtrend markets, wait for the pullback to happen, and place the sell limit order below the most recent lower low. Wait for the prices to break the most recent lower low to activate your sell limit order. On the left side of the chart looks for the significant level to close your selling position. The stop-loss order should be above the most recent lower low.

The below image represents the downtrend on a GBPCAD forex pair. As you can see around the 22nd of May, we witnessed the lower low in the pair. As the price action pulled back enough, it starts to roll over again and breaks the most recent lower low. At the break of the lower low, we choose to put the sell limit order and sooner market triggered our order, and we witnessed the brand new lower low.

SELL LIMIT ORDER AND BEARISH TREND

Find out the trending lower asset, which keeps approaches the timeframe support area. At those stages of the market, you will witness that the selling trend has a hard time to print lower low because buying pressure of the main level affecting the prices, but overall sellers are still in control. After the number of corrective moves draws a downtrend line across this resistance line. Place the sell limit order at the downtrend line in anticipation for the price to roll over and continue its downtrend.

The image below represents the selling trades in the GBPCAD forex pair. The pair was firmly in a downtrend, and when the prices approached the major support area, we witnessed some strong buying moves. Each buying move was printing the lower high, and we used that lower high to activate our sell limit orders. In total, we took three trades with the stop loss above the trend line, and for booking profit, we choose the brand new lower low.

CONCLUSION

To trade above the market means to place the order at the desired price, which will trigger automatically. There are two types of above the market orders.

  1. BUY STOP – Buy the asset when the price action approached your desire price in an uptrend.
    2. SELL LIMIT – Sell the ASSET when the price action approached the desired price in a downtrend.

The above the market orders are beneficial and convenient ways for part and full-time traders. Even part-time traders use these orders to execute their trades. Align your trading strategies with the above the market type orders to make some serious money from the market.

Categories
Forex Basic Strategies

Trading the Forex Market Without Indicators and Still Profiting

Traders believe if they need to trade the forex market, they need to keep up with the – news, fundamental analysis, you must check the various reports, read the currency articles, and then finally use the technical analysis where all the type of indicators are available for you to master them then only start the trading. If you want to avoid these things, then there is another way for you. Price action trading is a simple and effective method you can use to trade the markets successfully. Here you don’t need to master the fundamentals or indicators, instead focus purely on what price action is saying.

Price action explains the market movements via the chart patterns, candlesticks, and by using the trend lines. The formations of the trading patterns are the direct result of how the collective traders thinking about particular situations, in short, the perceptions of the collective consciousness forming these patterns on the price chart. Each trading patterns have some meanings and traders who master these patterns use them for trading the market successfully.

PRICE ACTIONS TRADING TOOLS

DEFINING THE SUPPORT AND RESISTANCE LEVELS

The concepts of support and resistance are the highly discussed attributes of the technical analysis. Almost every trader around the globe knew about support and resistance trading. A support level tends to acts as a barrier to price action. It is a level where the price action can be expected to pause due to the demand. Most of the retailers use the support area to buy the asset. Support levels are mainly derived from the memories of the traders. For example, traders always check on the historical price data to find out the significant support levels. These are the levels from where the last time prices respond, and by using that level, they placed the buy orders with the expectations of the price reversals. The more closer the price action is to the support level, the bigger the demand will be. Always look for the significant support levels on the price charts to take trades; major support levels are where the higher timeframes gave reversals in the past.

On the other hand, resistance levels are useful to take the selling trades. The resistance level is also acting as a barrier to the uptrend. It is a level where all the traders take the selling trades in the past. The higher the timeframe is, the stronger the resistance area will be. The sixty-minute or four-hour chart doesn’t hold enough power to reverse the trend; it is the daily weekly resistance levels that can easily change the trend. If you are using the lower timeframe resistance levels, then use them for smaller trades, and if you desired to catch the full trend, then merely a higher timeframe is a good choice for you.

CHART PATTERNS

The price action traders use chart pattern trading. Over time professional traders find out the patterns on the price chart, which reflects the psychology of the buyers and sellers. These patterns become the most popular and leading way in the industry to trade the markets. All you need to do is to interpret these patterns very well to use them. Most traders made mistakes where they jump into the half-formed patterns and end up on the losing side. In the markets confirmations of the pattern is very crucial to make any trading decision.

FLAG PATTERN

A flag is a technical chart pattern that appears in a strong uptrend. It is a continuation pattern that consists of a long pole and a downside flag. It is named because of the way it reminds the viewer of a flag or a flagpole. The pattern is used to take the trade with the trend, or it is useful to time your trades. In an ongoing trend, wait for the prices to pull back enough, after that draw the two lines above and below the price action to draw the pattern. The bottom of the pattern should not exceed the midpoint of the flagpole and wait for the breakout to take the trade. In buying trade, stops should be below the entry and go for a brand new higher high.

TRIANGLE PATTERN

There are so many different types of triangle patterns in the market. The patterns are formed by crossovers of the support and resistance lines. Below are a few triangle patterns we mentioned.

  1. Ascending Triangle (It consists of a static resistance and ascending support) – It is a continuation pattern that appears in an uptrend. The entry should be taken at the breakout of the resistance level.
  2. Descending Triangle (It consists of static support and descending resistance) – This one is also a continuation pattern that appears in a downtrend. The price action moves slowly inside the pattern because both of the parties hold equal power. In contrast, the breakout of the pattern indicates the sellers overtake the show.
  3. Symmetrical Triangle (The support and resistance of the pattern converge at the one point.) This pattern represents the period of consolidation before the price is forced to move in one direction. The breakout marks the starting of the uptrend, whereas the breakdown of the lower line is an indication to go short. So this pattern is also known as a falling and rising wedge pattern.
  4. Expanding Triangle (Both the support and resistance lines are moving away from each other) this one is a very tricky pattern because price action makes new high and new low in each wave. It is very hard to know the direction of the market when the prices move inside the pattern, so always wait for the breakout or breakdown to take the trade.

All of the triangle patterns are only useful to trade after the breakdown or breakout. The price inside the patterns gave no signal of which side they are going to break, so it is better to wait for the breakout to make any trading decision.

CANDLESTICK CHART PATTERNS

ENGULFING PATTERN

Engulfing is a reversal pattern; there are two types of engulfing patterns. The first is bullish engulfing and the second one is bearish engulfing. Engulfing pattern consists of two candles where the first candle overtakes by the second candle. The bullish engulfing pattern appears at the end of the downtrend; the first candle is red, which completely overtakes the second candle, which is green in colour. The bearish engulfing pattern appears in an uptrend; the first candle is green in colour followed by the red candle, which engulfs the first one. The bearish engulfing signals the bears take over the bulls and expect the new downtrend, whereas the bullish engulfing pattern indicates the bulls take over the bears and expect the beginning of the brand new higher highs. The stop-loss order must be below the pattern in an uptrend formation, and the stops for the downtrend formation must be above the pattern, for booking profits choose the higher timeframe major levels.

SHOOTING STAR AND MORNING STAR

SHOOTING STAR

A shooting star is a bearish candlestick pattern that opens, advances throughout the day, and then closes near the open of the day. In short, it is a long upper shadow, the small body which indicates the selling trades. The pattern opens in an uptrend indicates the buyers are strong, goes higher but closes back at the opening price shows the sellers pressure.

MORNING STAR

A morning star is a three candlestick pattern that appears at the end of the downtrend. It is a reversal pattern that shows the buyers were first in control and the second candle was the fight between both parties and the third candle was green in colour which indicates the buyers won the battle and they are ready for the brand new higher high. Entry should be at the closing of the pattern and ride the uptrend until there are indications of another reversal.

 

DRAGONFLY PATTERN

Dragonfly is a bullish reversal pattern that indicates the beginning of an uptrend. The pattern consists of a long lower shadow, which means sellers tried to take the prices down, but the buyers came back and closed the prices the same as the opening price. The unique name “Dragon Fly” means the buyers are very aggressive, and now they are all set to print the brand new higher high. Traders should wait for the next candle to close above the lowest price of the previous candle to confirm the Dragonfly pattern. The stop loss should be below the candle, and for taking profit go for a brand new higher high. The pattern doesn’t occur frequently, but when it happens, it often ends up giving more significant buying trades.

FAKE BREAKOUT

A fake breakout happens when the price action breaks the major level and comes back again. When the fake breakout occurred, if you witness any candlestick pattern, then that’s a good sign for you to take the trade in the direction of the established trend.

CONCLUSION

Traders believe it’s not possible to trade the markets without the indicators. But it’s just another myth. There are so many different ways to trade the market, and using candlesticks, chart patterns, fake-outs are just another way. Every trader has its style of trading; some like to trade the indicators, some chart patterns, and another candlestick pattern. Choose whatever the way you want and trade the market. The above-explained ways are the leading technical tools; you can even pair the candlestick patterns with the chart formations to improve the odds in your favour. If you find the fake-out, the candlestick pattern then followed by chart pattern, then the trade even has a higher odds to perform. When the markets prints the guaranteed trades go big and always use the stop-loss orders.

Categories
Forex Basic Strategies

Trading the Forex Market Without Using the Stop-Loss Order

A stop loss is an order placed by a trader on any underlying asset, the order remains until the price action reaches that specific point, then it automatically executes a buy or sell order in the market. Trading the markets without a stop loss is dangerous. However, by placing the stop loss, traders can easily eliminate the emotions from their trading decisions. In your trading carrier, you will often hear about the traders who never use the stop-loss orders, and they continually make money in the market. They rely on the no-stop loss forex trading strategy, and some of the traders succeed, and some don’t. The traders who win consistently in the markets are emotionally intelligent; also, they spent an endless amount of hours on demo trading to master the strategy well. Another most critical skill they learn is Accurate Thinking, and they don’t see things the way they are, they see things the way things are.

Not Using The Stop Loss Have Some Advantages In The Market

In dead markets hours when none of the trading sessions is active, at that time, most of the forex brokers wider their spreads so that they can avoid the scalpers to move the market. In that time, if your strategy gives you the trading opportunity, a widening spread can easily trigger your stop loss. During the opening hours or the high political news events, markets are quite volatile, which sometimes prints unexpected spikes in the market that ends up closing your positions and markets happily moving in the directions you predicted.

No Stop-Loss Trading Strategy

Keep in mind that trading without the stop loss is only applicable for intraday trading only, and it is advisable that use this strategy only on the lower timeframes because markets are random and it’s risky to let your positions to run overnight in the market. Like a gambler, you need to keep watching your trades until your trades hit the take profit. If you are beginner traders, then we don’t recommend you to use this strategy to trade in the live market, first of all, spend two to three months on the demo account to master this strategy and then give it a try on live markets.

Trading The Markets With The Moving Average

From beginners to advanced to chartists to market movers, everyone uses the moving average once in their lifetime. Even chartists and professional traders use this indicator in their everyday market analysis. Moving average defines the current market trend, spot trend reversals; also, it indicates the buy and sell signals. When the indicator is above the price action, it means that the trend is down, and then the indicator goes below the price action, which shows that the trend is up. Many traders and chartists use some other form of technical analysis in conjunction with the moving average to identify the trading signals. You can pair it with other indicators; also, you can use the higher period average with the lower period average to find the best entries. This strategy only works in the trending market, and we suggest you avoid using it in the dead, volatile, and consolidation phases.

Buying Rules

  1. In an uptrend, go long when the 7 MA crosses the 14 MA to the upside.
  2. Exit your position when the red candle closes below the 14period MA.
  3. No need to place the stop loss.

As you can see in the below image of the USDCAD 15 minute forex chart, the markets were overall in an uptrend. Our strategy gives the first trading opportunity around the 27th of February, and exits were also the same day. Our early trade gives us 30+ pips profit. After our position exiting the market provides us with a trading opportunity in the US session, we took this example from the recent market conditions, so our second trade in still running. By now, our second trade is up by 100+ pips. By following the flow of the market, you can easily make money, without placing the stop loss. You can see in the below image that the market is not even dead and volatile; the markets were moving in a relaxed and calm manner, find these kinds of markets to spotlighting the outstanding trading opportunities.

Selling Rules

  1. In a downtrend, go short when the 7 MA crosses the 14 MA to the downside.
  2. Exit your position when the green candle closes above the 14period MA.
  3. No need to place the stop loss.

The below NZDCHF forex pair indicates the selling opportunities by using the Doube moving average. The markets were in a strong downtrend, and it gives us the first trading opportunity on the 25th of February around the London session. After our entry price action dropped immediately and printed the brand new lower low. The very next day market gives the second selling opportunity in the London session. On the same day, the opening of the New York session indicates us to close both buying positions when a green candle closes above the 24 periods MA. Both trades help us to milk 80+ pips in just two working trading days.

The below image represents the 3rd and 4th trading opportunities in the NZDCHF forex pair. We activate the 3rd trade in the New York session on the 27th of February, and the last trade was taken in the Asian session on the 28th of February. Both of these trades are running successfully, and we are in profits of nearly 200 pips. Now, all we need is to wait for the green candle to close above the 14 periods MA so that we can book profits. You can use this way to exit your position, or you can use the significant support resistance areas to book the profits. The MA lines also act as a dynamic support resistance to the price action, and the more, the higher the period we choose, the stronger the S/R will be. So when the price action crosses the 14 periods MA, it indicates our trading party loses its power, { buyers in buying side, sellers in selling side } so it’s the best time to close our position.

Conclusion

We believe that by now, you can understand that it is possible to trade the market without using the stop loss. All you need to do is to put in the extra work required to find one of the best trading opportunities to make some consistent money. In short, Activate your trades only in active trading hours, no trade in dead or volatile market conditions also avoid choppy or ranging market conditions. Find out the super smooth trend in any instrument and wait for the price action to meet the rules of strategy to take trades.

Keep Milking The Markets, Peace.

Categories
Forex Basic Strategies

Trading the Double Top and Double Bottom Patterns Using the Accelerator Indicator

Double top and Double Bottom is a reversal pattern that occurs when the underlying asset moves in a similar pattern of ‘M’ { Double Top } and letter ‘W’ { Double Bottom } This pattern are useful to find out the possible reversal areas to milk the upcoming trend.

DOUBLE TOP PATTERN

The Double Top pattern is an extremely bearish pattern which typically found on the candlestick, line, and bar chart. The double pattern prints the two consecutive peaks that are roughly the equal size within the market which indicates the strong selling market. In an underlying asset the market should be in an ongoing trend, and let the price for printing the first peak, most of the time you will notice the first peak near the major price levels or near to the resistance area. Most of the time, the momentum of the second peak is slower than the first one, and you can confirm this by checking the declining volume. The slower momentum is a good sign that the buyers are not much interested now and the sellers can easily take over the show. After the completion of the pattern, we still need to confirm the pattern by letting it to break below the higher low.

DOUBLE BOTTOM PATTERN

The double bottom pattern is a technical analysis chart pattern that describes the change in momentum and the trend of the ongoing trend. This pattern is opposite to the Double Top pattern; it prints the two consecutive bottoms that are roughly the equal size within the market, indicating the change in direction and momentum. The first trough marks the lowest point on the ongoing trend around any major level, and after the trough, the advance takes place that typically ranges from 10% to 20%. Volume is the essential tool in this pattern, the rising volume of buyers is an indication that the sellers are struggling now and soon expect the major rise in price action. The break above the lower high is an indication to go long.

ACCELERATOR INDICATOR

The Accelerator Oscillator is developed by the well-known analyst Bill Williams. According to Williams, the direction of the momentum always changes before the direction of the market. So in order to time the market, it is important to understand the momentum of the asset, this is the reason Bill William develop the Accelerator Indicator. The pattern consists of the centre line and the green and red bars. When the prices are above the zero line, it means the buyers are strong and the big the green bar is the stronger the momentum.

Conversely, when the prices are below the zero line, it means the sellers are in the game and the lower the selling bar stronger the momentum. The indicator is very useful to trade the market reversals. When the market is in a buying trend, and the indicator is above the zero keep printing the green bars, at that stage of the game if you witness the red bar it means the sellers are stepping and soon expect the downtrend.

TRADING STRATEGIES

FOR BUYING

The image below represents the uptrend in the USDCHF forex pair.

The image below represents our entry, exit, and stop loss in the USDCHF forex pair. As you can see, the pair was in an uptrend, and after the completion of the double top pattern, we choose to go short around the most recent lower high. After our entry price action smoothly goes down, and we witnessed the brand new lower low.

FOR SELLING

The image below represents the downtrend in the CHFJPY forex pair.

The image below represents the double bottom pattern on the CHFJPY forex pair. As you can see the currency was in a downtrend and when it prints the double bottom pattern as well the Accelerator indicator was also printing the longer green, it was a sign to go long in this currency.

TRADING THE PATTERN BEFORE THE COMPLETION

The image below represents the double bottom pattern in the USDCHF forex pair.

The image below represents the entry, exit, and stop-loss in the USDCHF forex pair. In this pair, we choose to take entry at the second bottom. For trading the pattern even before the completion, you need to do a deep analysis of the pattern. First of all, the trend must be down, and if the downtrend is way weaker then it is even a greater sign. In the image below, buyers and sellers both were holding equal power, which indicates the buyers have more chance to perform.

Furthermore, always compare the first sellers’ leg with the second sellers’ leg, and if the second leg is weaker as compared to the first, then it means we can take the buying entry. In the below image, the leg one sellers were strong, and then the buyers approached when the sellers tried they were way weaker than the buyers which means this would be a second bottom in the market. The Accelerator oscillator goes above the zero line, and the strong buying candle at the double bottom was a sign to go long in this pair.

CONCLUSION

Double top and the double bottom is a leading pattern in the industry which indicates the upcoming reversal in the market. It is very popular in the trading community, and all the type of trades uses this pattern to make consistent money. Pairing it with the accelerator oscillator gave the extra edge to the traders to trade the pattern, In the first strategy we shared how to time the pattern by using the indicator and how to filter out all the low probability pattern formations, and in the above trading strategy, we showed how to trade the second bottom even before the formation of the pattern, so that the traders can easily get the good risk to reward trades. By using these two trading strategies, anyone can master the pattern completely, and end up making a handsome amount of cash.

Categories
Forex Basic Strategies

Using the Donchian Indicator to Trade Price Channels

Trading is a game where one side makes money, and another loses; it’s the one bad decision of one trader that is a benefit for another trader. Trading is a game of all about making the decisions and sticks with them. The biggest problem traders ever face is deciding to buy or sell but often failed to pull the trigger. There is a cause behind this effect of failing to make a decision. Because traders don’t have a well-proven trading strategy, which class apart from them from the rest of traders, we will share our well-proven trading strategy to trade the markets in this article. Master this strategy well on demo to let go of the fear of taking action.

DONCHIAN CHANNEL

Donchian channel is a technical analysis tool created by Richard Donchian in the mid-twentieth century to identify the market trend. It is a moving average indicator that exactly looks like the Bollinger Bands. This indicator consists of three lines created by the calculations of the moving averages. The upper band of the indicator marks the highest point of an asset over the N period. In contrast, the lower band marks the lowest point of the asset over the N period; the area between the indicator is known as the Donchian channel. The upper line identifies the bullish energy highlighting the buyers’ price, and the lower line identifies the bearish energy highlighting the price achieved by the sellers. The median band indicates the buyers and seller energies trying to dominate the game on either one side.

PRICE CHANNEL

We witnessed the price channel on the chart when an asset’s prices become bounded between the two lines. You will witness the price channel in trending market conditions, and it is also termed as an ascending, descending channel. Traders often use price channels to gauge the market momentum and direction of the underlying security. When the prices approach the lower channel, it means the prices approached the major supply area and expect the price rise, and when the prices approached the upper demand area, it means the prices approached the demand area and expect the drop in prices.

TRADING STRATEGIES

The image below represents a couple of buying and selling trades using the price channel and Donchian Channel. The idea is simple, wait for the price action to touch the lower channel line and Donchian line to take buy and for taking the sell, let the prices touch the upper channel and Donchain upper line to go short. The below trades belong to the 240 charts, so each trade ends up milking more than 50 pips. Most traders use this strategy on a lower timeframe, but it is even more beneficial if you find it on a higher timeframe.

USING THE PRICE CHANNEL AND DONCHIAN INDICATOR TO TRADE WITH THE TREND

If you are not the aggressive one and you are a conservative trader, then simply this trading approach is beneficial for you. The idea is to let the prices resume inside the price channel and check the market trend. If it is down, then only look for selling trades and ignore the buying trades and whenever the market gave you the selling opportunity, scale your trades.

FOR SELLING

As you can see in the image below, the market was in a downtrend, and we took three selling trades. The first trade prices were inside the Donchian channel, and the price channel was also indicating the sell. We choose to scale our trade in the second trade, but it failed to print the brand new lower. The third trade was also the scaled one, which ends up printing the lower low. The stop-loss order for each entry should be above the price channel and for booking profit, always choose brand new lower low or when the market resumes the opposite trend.

FOR BUYING

The image below represents a couple of buying trades in the GBPAUD forex pair. The below image is a daily chart which was in an uptrend from the last couple of years. The price channel appears at the end of the market trend, a final phase of the ongoing trend. As you can see in the below image overall, we got the five buying trades in the market, and all of these trades end up giving us a good amount of profits. We choose to scale on each trade, and within the eight months, all of our trades end up milking nearly five thousand pips.

USING THE PRICE CHANNEL TO TRADE THE REVERSALS

As you know, channels appear at the end of the trend or are the final phase of the trend. When the price channel approaches near the higher timeframe resistance or support level, it is a time for you to get ready to trade the reversals. If the price channel’s momentum is completely choppy near the major resistance or support area, it is a clear sign of an upcoming reversal.

The image below represents the reversal trade. The purple line was the higher timeframe resistance area where sellers failed to go down, and buyers took the lead. When the prices approached the support area and the Donchian price channel, both indicated the buying trade. We took the first entry at the main level, and for the second entry, we let the price action break the channel. The hold above the channel line was a sign of buyers in the show, and long will be beneficial.

CONCLUSION

The purpose of creating the Donchian indicator is to identify the market trends and the price channels telling us the ongoing trend is soon going to end. By pairing these both tools, one can easily identify the trending market trades. There are so many different or complex ways to use these tools, and the above-shared strategies are one. We choose the simple approaches to use these tools because the goal is to make money, and some complex trading strategies are not easy to master.

Categories
Forex Basic Strategies

Timing Buying Entries Using Bullish Pennants and Awesome Oscillator

In this article, we paired the Bullish Pennant trading pattern with Awesome Indicator to identify the trading signals.

BULLISH PENNANT PATTERN

Bullish Pennant is a continuation trading pattern that appears in an ongoing uptrend which used by the traders to predict the upcoming market movements. The pattern is seen when the asset experiences large upward moves followed by a brief consolidation, before continuing to move in the direction of the ongoing trend.

Key Characteristics of the Bullish Pennant Pattern

A FLAGPOLE – The pattern always begins with a flagpole which is an indicator of a strong uptrend.

BREAKOUT LEVELS – You will witness the two breakouts level on the pattern, the first one is at the end of the flagpole and another one after the consolidation phase.

PENNANT ITSELF – It is a triangular pattern that appears when the market consolidates between the flagpole and the breakout.

THE IMAGE ABOVE REPRESENTS THE BULLISH PENNANT PATTERN

AWESOME OSCILLATOR 

Awesome is a momentum oscillator developed by the technical analyst Bill Williams to determine whether the buyers or bears are dominating the market. The indicator is used to gauge the market momentum and to affirm the ongoing trend; also, it is used to anticipate the upcoming reversals. Depending on your charting platform, the indicator most often appears in many different formats, but the most common format is the histogram. The indicator fluctuates between the positive and negative territory; A positive reading means the faster period is greater than, the slower ones, and the negative reading the fast is less than the slow.

The image below represents the Awesome oscillator on the price chart.

TRADING STRATEGIES

The image below represents the bullish trend and pennant pattern on the AUDUSD chart. This formation appears on the sixty-minute chart, which mostly used by traders for intraday trading. The awesome oscillator was already above the zero lines, which means the buying momentum is stronger, and the breakout of the pennant pattern was a sign to go long.

The image below represents the pennant pattern on the CADJPY 15 minute chart. This timeframe is also used by traders for intraday trading, in an ongoing uptrend the formation of Pennant and reversal of histogram lines above the zero line was an indication to go long.

Mostly scalpers book the profits with the small price movements, but if they can use the proper trading strategies for scalping, then they can hold their trades for the longer targets. In the image below on a three-minute chart, the prices were in an uptrend, and during the pullback phase we witnessed the pennant formation, and the reversal on the Awesome oscillator confirmed that the breakout is real. Here we book the profits of around the 30 pips in this pair, by just taking the proper trades on the three-minute chart. Sometimes scalpers have no trades in the market, so in these conditions, it is always advisable to follow the proper trading strategies to milk the market.

ENTERING IN A TRADE PRIOR TO THE FORMATION OF THE PENNANT PATTERN

The image below represents the pennant pattern on the sixty-minute chart.

Here in this strategy, we are using the lower line of the pennant pattern to time the market. The lower pennant line is an ascending line, so when the price action touches that line, it never came back to the same price again. In this way, if we bought at every touch of the lower pennant line, we can easily ilk the bigger profits.

In the image below, we mark the pattern on the sixty-minute chart and choose to take the entry on the 15-minute chart. The pair was in an uptrend, and when the price approaches the lower pennant line, at that stage of the market the awesome indicator lines were also declining which is a sign of sellers are no more interested in selling, and going long will be a good idea. Keep in mind in the first trade always risk less money; this is because the sellers are still the dominating force. When the prices failed to break below the pennant line, it means buyers are there, and going big on the second trade will be beneficial. When the second time prices approached the pennant line, the awesome oscillator showing no sign of any sellers even buyers were stepping in, this was the sign for us to go long in this currency. After our entry, we choose to go for a brand new high with the stops just below the first entry.

The image below represents the pennant pattern in the EURNZD forex pair.

The image below represents the buying trade in the EURNZD pair on the daily chart. As you can the currency was in an uptrend and during the pennant formation prices dropped below the lower pennant line with the declining histogram bars. The next green candle immediately came back, which means it was a faker, and there were buyers who exists in the game. We took the entry after the fakeout and were waiting for the prices to go higher once again to take another buying trade, but the price action holds at the lower line which means the buyers were building the order. This consolidation phase at the support level and the green histogram bars on the indicator motivated us to take another long trade. The very next day price action takes off, and we witnessed the brand new higher high.

CONCLUSION

Trading the markets in today’s world is an easy game for those who properly follow the rules and master the well-proven trading strategy. The Pennant is a leading trading tool that appears on all the trading timeframe, you can use the pattern alone but if you desired good risk-to-reward ratio trades then pairing this pattern with another indicator is always beneficial. Keep in mind, the Pennant is a continuation pattern, and it only appears in an uptrend, don’t try to trade the pattern everywhere in this way you will be not able to scale your trades, Instead trade the pattern only in the trending market and when the formation appears to scale your trades every time.

Categories
Forex Basic Strategies

Trading Trend Line Breakouts Using the TEMA Indicator

Trend line breakouts are a price action way to trade the markets. Trend line comes in a different variety of forms, and they can vary in length and significance.  Trend lines are used to get a quick idea of the underlying security direction; also, the traders use them to find out the ascending/descending support and resistance areas on the chart. From lower to higher timeframe trend lines are being used for trading with the trend, countering trend moves and even scalpers used it to scalp the markets.

TEMA INDICATOR

TEMA stands for Triple Exponential Moving Average, and it was developed by Patrick Mulloy, first published in 1994. Mulloy developed a unique composite of the single, double and triple exponential moving average to reduce the lag between the indicator and price action. The indicator is used to identify the trend direction, pullbacks, and short-term price direction. If the price action breaks the triple moving average, it means the trend is down now, and going short is a good idea and close all the long trades. Conversely, if the price action goes above the indicator, it means the trend is up, and going long is a better idea and closed all the short trades.

TRADING STRATEGIES

WITH TREND BREAKOUTS

The image below represents the Uptrend in the GBPJPY forex pair.

The image below represents the two buying trades in the GBPJPY forex pair. The GPYJPY was in an overall trend, and during the pullback phase, the price action breaks the trend line, and we witnessed the brand new higher high. In the first trade, the trend was strong, and when we witnessed enough pull back, the TEMA goes below the price action and the breakout of the trend line was a sign of the first trade. The second trade happened very next week of the first one, in that trade, the process was the same again where the pullback of the prices was a sign of sellers stepping in, and the breakout of the pullback and TEMA goes below the prices was a sign to go long. In both of the trades, we put the stops just below the closing of the most recent candle to ride the ongoing Uptrend. This one is one of the simplistic yet most effective trading approaches to trade the markets.

SELLING ENTRY

The image below represents the selling trend in the NZDUSD forex pair.

The image below represents the two selling trades in the NZDUSD forex pair. The currency was in an overall downtrend, and it was giving strong pullbacks. When the TEMA goes above the prices and the trend line breakout was a sign to go short. In the second trade, the pullback was also very strong, and the breakout candle gave the signal to take the sell trade. In the market you will witness all the types of pullbacks, some are long, some are short, some pullbacks take a lot of time, and some are intraday. The time of the pullback is depended on the trading timeframes, the lower timeframe moves faster, and the higher timeframes move slower.  So patience is the key, and let the prices break the trend line then only activate your trade.

TRADING COUNTER-TRENDS

The image below represents the trend line breakout in the NZDUSD forex pair.

The image below represents the downtrend first, and then the breakout of the downtrend is an indication of a trend reversal. At first, the TEMA goes below the prices, and the buyers struggle a little bit below the trend line support, but the breakout was a signal for us to go long. We took the entry on this daily chart, and after a couple of days the prices tried to go down, but the very next day, strong buyers came back and printed the brand new higher high. When the markets go against your trades, try not to exit your trade, instead have faith in your analysis and let the market to tell you what to do next. This trade is currently running, and it is the biggest winner for us. The buyers are losing the momentum a bit, but overall the currency is still healthy, and we are expecting the higher prices to book the profits.

SELLING TRADES

The image below represents the counter-trend breakout in the USDJPY daily chart.

The image below represents the entry, exit, and stop-loss in the USDJPY forex pair. As you can see the currency was in an uptrend on the daily chart and when the TEMA indicator goes above the price action, it was the sign of buyers losing the momentum and the breakout of the trend line was a sign of the buyers are no more in the game. The breakout confirms the selling entry, and on 3rd January the quick move based on the news affects the markets strongly. The profit booking at the most recent lower low wasn’t possible, so we choose to give it another try by holding our trade. Within a few months, we witnessed the TEMA again go above the prices, which means sooner we can expect the trend line breakout and the very next month breakout happened, and we took another selling trade. Within a few months, price action approached the most recent lower low, where we close both of our trades.

CONCLUSION

TEMA is a triple exponential moving average, and everyone knew the trend lines are the leading trading tools, both of these tools work effectively, and using the trend line with the TEMA indicator is a simple approach to trade the markets. Some traders even believe, to make money they need to apply some complex trading techniques, but this is no true. In reality, most of the professionals use simple trading approaches to win consistently. Simple strategies are even easier to master and use, so don’t assume the simple strategies didn’t work. Give it a try; you will be amazed at the results.

Categories
Forex Basic Strategies

Trading The ‘Diamond Pattern’ Can Be Extremely Profitable If Traded Correctly

For the years traders and market technicians often used some of the common and basic technical tools to analyze the market. These are some basic indicators, some common formations such as pennants, double bottoms, double top, flags are often used in the currency market. Some advanced traders use different ways to analyze the market, they focus on price action, Elliott waves, and the Diamond pattern which is not widely used by retailers, but is a quite popular and secret tool in the professional trader world.

In this article, we will show you everything you need to know about the diamond pattern to capitalize on the various trading opportunities. There is two types of diamond pattern the Bullish and Bearish Diamond pattern. The bullish diamond occurs at the end of the downtrend which indicates the buying trade and the bearish diamond pattern occurs at the top of the uptrend which gives the buying opportunities. By reading the previous line you understood that diamond is the reversal pattern and it never offers the trend continuation trades, so always use this pattern to trade the reversals.

The forex market has higher liquidity as compared to the stock market, so it is easier for the traders to identify this pattern than in the stock market where gaps in price action frequently occur. The Diamond pattern occurs on every timeframe and it offers plenty of trading opportunities to every type of trader or investor.

Identifying The Diamond Pattern On The Price Charts

First of all, identify an off-shoulder head and shoulders formation on any asset chart. Next, we draw the resistance trend line from the left shoulder to the most recent higher high of the price action {line A}. Then from the higher high {head} to the right shoulder {line B} The price action should not break above the right shoulder trend line, if it is, then the pattern is invalid. To draw the lower trend line which is {line C} find out the most recent bottom tail and connect it to the left shoulder. Connect the right side support trend line from the bottom tail to the right shoulder line {line D.} Trading the diamond top pattern isn’t much harder than the other trading formations; here you only wait for the breakout to happen to take a trade. When price action breaks the pattern it indicates the buyers finally lost their control and sellers take over the whole show and they are ready to print the brand new lower low or higher high {according to the circumstances}.

Diamond Pattern Trading Strategies

Trading The Bearish Diamond Pattern

The image below represents the Diamond pattern on the EURUSD daily chart.

The image below shows our entry and exit in the EURUSD forex chart. As you can see in the image below, when price action followed all the rules of the bearish diamond pattern, we took the sell entry in this pair. Price action blasts after the breakout and it prints the brand new lower low. The Diamond pattern is quite a powerful pattern in the market, and it holds the ability to completely reverse the direction of the trend, so don’t take this pattern lightly, follow all the rules and go for the bigger targets. Initially, we set the smaller take profit in this pair, but the stronger seller move, convince me to go for the bigger targets in this pair. When the market gives you the opportunity milk the market as much as you can and go big.

Trading The Bullish Diamond Pattern

The image below represents the bullish diamond pattern on the EURUSD daily chart.

Before printing the diamond pattern, price action was in a strong downtrend, which is a good sign for us. What most of the traders do is they don’t like to follow all the rules and they sometimes trade the bullish diamond pattern in an uptrend and they end up losing in the trade. It’s not about the pattern only, the key to successfully trade all the pattern is to find out the pattern at the location where it makes the sense to trade.

As you can see in the below image when the diamond pattern appears and it fulfilled all our rules we took the buy entry in this pair. After our entry price action prints the brand new higher high but we choose to close our position at the major resistance zone. The stop-loss order was just below line D, because line D is a breakout line and it acts as a major support to price action.

Conclusion

The diamond patterns are very rare to find out on the price chart, but when this pattern appears it often gives a good risk to reward ratios trades. If you are a beginner at this pattern, then first of all train your eyes to find this pattern on the price chart. As you gain experience you will automatically start spotting this pattern on the price chart. First of all, form the top resistance line by connecting the left shoulder to the higher high of the price action {line A}. Then connect the higher high to the right shoulder {line B}. Next draw the support trend line from the left shoulder to the tail {line C} and the tail to the right shoulder {line D}. Wait for the price action to break below or above the pattern {according to the market circumstances} to take the trade. For identifying the better and more opportunities, it is suggestible to find out this pattern in a highly liquid pair. It doesn’t matter which timeframe you trade this pattern appears everywhere and in every market, just simply take the advantage of the pattern by following the rules.

Categories
Forex Basic Strategies

Pairing Stochastic With The ‘Double Bottom’ Forex Chart Pattern

The double Bottom is a technical chart pattern, which helps to identify the change in the direction of the selling trend. The pattern looks like W in shape and it is quite a popular pattern among technical traders. In other words, double Bottom is a bullish reversal pattern. Most of the time double bottom reversals usually mark the long-term trend change in an instrument. In an ongoing downtrend, the price action drops to a floor, a significant support level before beginning the new uptrend. The pattern forms by two consecutive rounding bottoms with approx. Same heights. Most of the time, the momentum of the second Bottom is quite weak, which indicates that the weak selling momentum. Both of the round bottoms retrace until it finds the major resistance area that we call the Neckline. Overall, the pattern indicates that the professional traders, market movers booking the profits, and now the market are ready to print brand new higher high.

The image above represents the Double Bottom Chart Pattern on Price Chart.

Psychology Behind This Pattern

As by now you know that the double Bottom pattern occurs at the major support area, the pattern suggests that when the price action reaches the major support area, it means that the sellers are now afraid of the major support zone so they are booking their profits and as a result, the momentum of the market keeps dying. When price action prints the first Bottom, it indicates that some buyers try to buy; as a result, price action approaches the Neckline, and now at the Neckline, some sellers again try to hit the sell in order to print a brand new lower low. When price action reaches the major support area again, they failed to print a new lower low, and as a result, they booked the profit. Now the markets are entirely under the control of the buyers, and they are ready to print the brand new higher high.

Trading Strategies Using Double Bottom Pattern

Double Bottom Pattern + Bullish Candlestick Patterns

There are several bullish candlestick patterns that are widely used by technical traders in the market. You can use any bullish candlestick pattern to trade the market, some of the popular bullish candlestick patterns are Bullish Engulfing, Morning star, Gravestone Doji, Dragonfly Doji, Three white soldiers. These are widely used, and the most common candlestick patterns exist in the market.

The idea is to find out any bullish candlestick pattern at the second Bottom, when you find out any bullish pattern at the bottom area go long, put the stop loss below the support line, and the first take profit must be at the Neckline, second one should be double than the size of the pattern.

The below Image represents the double bottom pattern on the NZDUSD Forex pair.

As you can see in the below Image, the market prints the Double Bottom chart pattern, which indicates that the buying trade in this pair. Initially, when the price action approached the support area, at that time, the momentum of the downtrend was really weak, but after the first retracement to the Neckline, the sellers try hard to print brand new lower, but they failed to do it. When price action hits the Bottom second time, the market prints the bullish engulfing pattern, which indicates the buying trade in this pair.

The below Image represents our entry and exits in this forex pair. We took long when the market prints the bullish engulfing pattern, and the take profit was below the second Bottom, the major support line below acts as dynamic support to the price action. You can even go with a smaller stop loss because the line below is so strong that it stops the strong selling trend and even reverse it completely. So you can imagine how strong this line is. The take profit was at the Neckline, you can close your position at the Neckline, or you can hold it for the further target. It is advisable to book half of the profit at the Neckline.

Double Bottom Chart Pattern + Stochastic Indicator

In this strategy, we paired the Double Bottom pattern with the stochastic indicator to identify the trading signals. Stochastic is a quite popular oscillator that is developed by George C. Lane in the 1950s. Most of the traders think that just like other indicators, stochastic also follow the price and volume, but it is not true. In fact, stochastic follows the momentum and speed of price action. The stochastic indicator is used to identify the oversold and overbought buying conditions, and traders use overbought/oversold conditions to trade the market. The indicator also identifies the divergence, which helps the traders to identify the major market reversals.

The below Image represents the Double Bottom chart pattern on the Daily chart of the CADJPY forex pair.

The below Image represents our entry in this pair by using the stochastic indicator and double Bottom chart pattern.  As you can see that we took a long position when prices failed to go below the major support line. Most of the traders what they do is activate the buy trades when the price action hits the support line the second time. This is the wrong approach. Instead, let the price action holds and then activate your trade. As you can see, when prices hit the second Bottom at that time, crossover happened on the stochastic indicator, which indicates that the market is oversold and it is time to go long.

The below Image represents our entry and exits in this pair. We took long when the price action hits the second Bottom, also when the crossover happened on the stochastic indicator. Stop below the recent low, and the take profit was at the higher timeframe major resistance area.

Conclusion

The double Bottom is an extremely powerful chart pattern when it is interpreted correctly. If you interpret it incorrectly then it can damage your trading account. You can activate your trades when price action hits the second Bottom, or you can activate trades when price action crosses the Neckline and retests as support. It doesn’t matter where you activate your trade; both of the locations provide a good risk to reward ratio.

Categories
Forex Basic Strategies

Pivot Trading Strategy – Easiest Way To Trade Pivot Points

Pivot points are the significant levels used by the market technician to determine the future movement and the major support/resistance levels on the price chart. Pivot point takes the prior period high, low, and close to estimate the future support and resistance levels. Pivot points are the leading indicator, and once they are set on a price chart, it will remain the same throughout the day.

Timeframes

The pivot point of the 1, 5, 10, and 15-minute chart use the prior day high, low, and close. Whereas the pivot points for the 30, 60, and 240-minute chart use the last week high, low, and close to calculate the pivot points. Once the new week starts, the pivot point appears on the price chart until the end of the week.
The pivot point for the daily and chart use the prior month data, and the pivot point for the weekly and the monthly chart use the last year’s data. The new pivot point for the year ahead will be calculated on the 1st of January. These would be based on the high, low, and close of the last year’s pivot points.

There is a total of seven basics pivot levels on the price chart.

  1. Basic pivot level – It is the middle of the center pivot line.
  2. Resistance 1 (R1) It is the first pivot point above the centerline.
  3. Resistance 2 (R2) It is the second pivot level above resistance 1.
  4. Resistance 3 (R3) It is the third pivot level above resistance 2.
  5. Support 1 (S1) It is the first pivot level below the middle pivot line.
  6. Support 2 (S2) It is the second pivot level below support 1.
  7. Support 3 (S3) It is the third pivot level below support 2.

Trading Strategies Using Pivot Points

There are various pivot point trading strategies in the market; this one is especially we created for our fellow traders, our strategy is backtested on demo and even on trading simulation, so you no need to put the work required to find out the probability of this strategy—all we suggest you follow this strategy very well to make consistent money from the market.

Pivot points most often work very well in trending market conditions; some traders even use pivot points on lower timeframes to scalp the markets. The strategy is to find out the uptrend in any instrument and wait for the pivot point to go above the Pivot point centerline, and then wait for the pullback back to the pivot line to take buy entry. You can close your position at resistance one if the market momentum is choppy, and even in a strong trending market, you can also book the profit at resistance two or three.

The image below represents the uptrend in the GBPAUD forex pair.

The image below represents our buying entry in this pair.  Notice that the day before our entry price action breaks the pivot line and the very next price action pullback to the pivot line. Keep in mind that the pullback must hold at the pivot line then only it confirms the buy trade, never place the limit order at the pivot line. Let the price action test the support line take entry.

The image below represents our entry, exit, and take profit in the GBPAUD forex pair. When you follow so many steps to take an entry, it means that you are going for the precision in the market, and for the precision entries, always put the stop loss just below the entry price. In the image below, notice that our stop loss was just below the pivot line, and for the take profit, we go to the R1 of the next day, which was R2 for the previous day. Take profit is an art in the market, and when you use the pivot points, it’s even easier to book profit. If the price action immediately approaches the R1, then you can expect the price action to hit the R2 or even R3. If the price action shows you the struggle to hit the R1, then simply do not expect the deeper targets.

Pivot Points + Double Moving Average

Moving average is a widely used indicator in the market which smooths out the price action by filtering out the noise from the random short-term price fluctuations. There are an infinite amount of moving averages in the market, which helps the traders to identify the market trend, entry, and exit also the potential reversals. When the moving average goes above the price action, it means that the trend is down, and when it goes below the price action, it indicates the uptrend in the security. In this strategy, we used the 30 and 15-period average to trade the market.

The trading strategy is, first of all, to find out the downtrend in any pair and wait for the prices to close below the pivot line also check the crossover above the price action on a double moving average to take an entry.

The image below represents the downtrend in an NZDCAD forex pair.

As you can see in the below image of the NZDCAD forex pair, it indicates the selling entry in this pair. In a downtrend, when the price action holds below the pivot line, it shows that the prices respect the resistance area; also, the crossover on the MA indicates the market is ready to print a brand new lower low.

The below image represents our entry, exit, and take profit in this pair. As you can see, the entry was when prices hold below the pivot line, and the stops were just above the pivot line because the holds below show that the buyers hold no power to break above the pivot line. After our entry, price action strongly blasts to the north, which shows that we can expect our trade to travel even longer. Price action holds for some time at the S1, and then it immediately blasts to the S2 and prints the brand new lower low.

Conclusion

Pivot points are the leading indicator in the industry, which provides a glance at potential support and resistance level in the market. These levels are useful for taking an entry, or it can be useful for putting stop loss or for booking profit also. AS the leading indicator, you can use them all alone to trade the market, or you can pair them with some other indicator to trade the market. The critical benefit of pivot points is they work on all the financial markets also on all the trading timeframes. Try not to use this indicator in the ranging conditions and also avoid the use in the highly volatile markets.

Categories
Forex Basic Strategies

Using the MACD Oscillator to Trade the Ascending and Descending Triangle

The ascending triangle is known as the continuation pattern because the breakout occurs in the same direction as the trend that is in the place before the pattern forming. It is a bullish pattern that indicates the accumulation and some traders also called it a right-angle triangle. The pattern is first drawn by the horizontal line along with the swing highs and the rising trend line to be drawn at the swing lows. When these two lines met, it forms the ascending triangle pattern. The breakout on the pattern can occur on the upside or downside and if the breakout occurs downside, then the pattern invalid and if the breakout occurs on the upside then only take entry.

DESCENDING TRIANGLE

The descending triangle is also known as the continuation pattern, appears in an ongoing downtrend. The patterns show the demand for the underlying asset. The pattern is first drawn by the horizontal line along with the swing lows and the declining trend line to be drawn at the lower highs. When these two lines met, we witnessed the descending triangle pattern. The breakout of the pattern is a sign of the seller’s momentum is back into the show and going short is beneficial.

MACD OSCILLATOR

MACD stands for MOVING AVERAGE CONVERGENCE AND DIVERGENCE. MACD is one of the simplest and effective momentum oscillators developed by Gerald Appel in the late seventies. By subtracting the longer period average into the shorter period average, the MACD turned the two moving average, trend following indicator into the momentum oscillator. The MACD is an unbounded indicator that fluctuates above and below the zero line, generating the signal line crossovers, centerline crossovers, and divergences. Gerald Appel uses the values of 12, 26, and 9 as the default one, and the traders can change them according to their trading style.

THE IMAGE BELOW REPRESENTS THE ASCENDING AND DESCENDING TRIANGLE.

TRADING STRATEGIES

The image below represents the descending triangle in the EURJPY pair.

The image below represents the entry, exit, and stop-loss in the EURJPY forex pair. As you can see, the currency was in a downtrend on the 240 chart, and the breakout below the pattern also the reversal at the overbought area on the MACD was a signal of selling. We took the selling trade with the stops above the upper line of the pattern, and taking profit was based on the dying momentum of the price action.

The image below represents the Ascending triangle in the EURJPY pair.

The image below represents the entry, exit, and take profit on the EURJPY forex pair. As the price action printed the pattern the MACD oscillator was already moved, and it goes above the zero line, the indicator above the zero is a sign of the buyers gained the buying momentum. As we took the entry, the prices go strongly goes to the north, and we witnessed the brand the new higher high.

TIMING THE PATTERN BY USING THE MACD OSCILLATOR

The image below represents the uptrend in the GBPCAD forex pair.

Every time price action touches the lower line of the pattern; we witnessed the brand new higher low. The goal is to buy every time price action hits the lower line, but the MACD oscillator must confirm each entry. In the below image whenever the price action touches the lower line we choose to go long, each entry was confirmed by the MACD and during the last entry, MACD was above the zero line which means buyer momentum is already strong and going long will be beneficial. The best thing about this pattern is the lower highs, which makes it easier for us to catch the bottoms of the pullback, another interesting thing is most of the time price action never came back to these lower highs.

DESCENDING TRIANGLE

The image below represents the descending triangle in the GBPCHF forex pair.

The image below represents the entry, exit, and stop-loss in the GBPCHF pair. The pair was in a downtrend and in the pullback phase the price action prints the descending triangle pattern. Inside the pattern, we took the three selling trades, and the crossovers confirmed each trade happened on the MACD oscillator. When we witness the very first lower high on the chart, it was confirmed by the crossover above the zero line, and during the second trade the oscillator was moved below the zero line, and it gave the crossover.

During the third trade, the indicator was already below the zero line, which means the sellers were gaining momentum. We didn’t take the selling trade at the breakout this is because the entry didn’t confirm by the MACD oscillator and we were satisfied by the three trades only. Do not try to take so many trades in one pattern; your whole goal should be to take less trade and always try to go for the better price.

It Is advisable not to risk big money in the first trade this is because the buyer momentum is during before the appearance of the first higher low, and risk little more money in the second higher low and go big in the third higher low trade. The reason we are going big for the third entry is that the two previous lower highs, confirm the existence of the seller and in last the breakout entry should be way bigger than the previous entries.

CONCLUSION

Pattern trading is quite a popular way to trade the markets. There are so many trading tools, and some of the patterns are easy, and some are hard, some are leading, and some are laggards. In the end, your game completely depends on how well you master the set number of trading tools. Do not try to use everything in the market; this way is not going to work. Narrow down your approach in each category and pair one tool with another. Master them very well to mint the money from the markets. You should be so good at limited tools that no one around the globe should be able to beat you.

In this article we choose the tools different tools from two different categories, and we showed you the only two trading strategies, the limited your tools and strategies are the better it is, this is because each trading tool is made to generate the trading signal and if one day you choose one tool and another day you choose the second tool. In this way, you are simply gambling in the market. Simply follow the strategies above and master them very well on the demo to trade on the real account.

Categories
Forex Basic Strategies

Timing the Cup and Handle Pattern Using the Trix Indicator

Cup and Handle is a classical reversal chart pattern, defined by William J. O’Neil in his 1988 book “How to Make Money in Stocks”. As its name implies, there are two parts to the Pattern: The Cup and Handle. A cup forms when the prices failed to print the brand new lower and the cup looks like a bowl or rounding bottom. After the completion of the cup, a trading range develops o the right side, which is a handle portion and the handle portion never drops into the lower half of the cup. The break of the handle portion is a signal of the buying trend if the handle portion is too deep or stronger than the buyers of the cup portion then avoid trading the Pattern.

TRIX INDICATOR

TRIX stands for Tripe Exponential Moving Average. Jack Hutson develops the indicator in the early 1980s, and as the indicator name suggests, it shows the rate of change in a triple exponentially smoothed moving average. TRIX is momentum as well as an oscillator used to which used to gauge the momentum as well as overbought and oversold signals. The positive values of the TRIX are an indication of an uptrend, whereas the negative values of the indicator are a sign of the downtrend. Extreme positive values indicate the excessive supply and the extreme negative values are an indication of the excessive demand in the market. Bullish and Bearish divergence of the indicator is also useful to determine the upcoming reversals. Centerline crossovers, Bullish and Bearish reversals, and divergence is a major signal used by traders to trade the market.

TRADING STRATEGIES

FIRST TRADE

The image below represents the Cup and Handle Pattern on the AUDCAD forex pair.

The image below represents the entry, exit, and stop-loss in the AUDCAD forex pair. As you can, the currency was in a downtrend, but at the same time, buyers were also equally strong, which means we are witnessing the end of the downtrend. If you find the cup and handle Pattern in the weak market, then simply it’s a way better sign where we can expect the high-risk reward ratio trades. In the below image when the market printed the cup portion, we wait for the handle portion, and when the TRIX indicator goes above the zero line, it means the buyer is back, and we took the buying entry. The red dotted line on the price chart was the support area in which we choose to take an entry; it’s even better if you found the extra clues to confirm the entry.

SECOND TRADE

The image below represents the cup and handle Pattern in the EURAUD forex pair.

The image below represents the entry, exit, and stop-loss in the EURAUD forex pair. When the price action printed the cup phase of the Pattern, the handle phase took some time to complete its formation; this is because the overall selling trend on this daily chart was very strong. So when the prices approached the most recent higher low, sellers tried again to go down but when the TRIX goes above the zero line it was a sign of the reversal. Here we took the entry when the price action goes above the Pattern; this is because our indicator wasn’t in alignment with the Pattern. Once the indicator goes above the zero line, it means the buyer’s momentum is real and solid, and any buying entry is beneficial.

THIRD TRADE

The image below represents the cup and handle in the EURCAD forex pair.

In this article the whole focus is the TRIX indicator to take an entry, the idea is when we witnessed the cup and handle pattern, and the TRIX indicator goes above the zero line it is a sign to go long. As you can see above in the two examples, this approach worked very well, but if you some found some other clues which showing you now its time to take any entry, use those clues to time the market. In the below image, the TRIX indicator goes above the zero line even before the formation of the handle pattern, which means the indicator is saying that the buying momentum is established. Still, without the proper formation of the Pattern, we decided not to take an entry.

Furthermore, during the formation of the handle portion, we witnessed the price action was respecting the support area also the formation of the bullish engulfing Pattern was a sign of aggressive buyers are back into the show. The cup and handle formation was completed, the TRIX indicator already indicated the buying momentum is established, the price was respecting the support area and the appearance of the bullish engulfing pattern everything was aligned in one direction indicating the buyers are all set to take off, we took the buying entry with the stops just below the engulfing Pattern.

When you find these extra clues which support your edge, always use them to time the market. The below trade was the perfect trade any trader ever got; it is like the sure-shot where even the Wall Street trader would like to go big. In the end, price action blasts to the north, and we witnessed the brand new higher high.

INVERTED CUP AND HANDLE PATTERN

The image below represents the inverted cup and handle Pattern in the GBPCAD forex pair.

Conventional wisdom says to use the cup and handle pattern and ignore the inverted to trade the markets. Nowadays, most of the new traders rejecting old belief systems and trading new things in the market. In the image below, we showed the inverted cup and handle, there is nothing complicated in the market, or it’s not even hard to identify on the price chart. What you should do is to find out the uptrend and wait for the price action to challenge the most recent low and let the buyers at the higher low area fail to take the prices higher. When the price action approaches the most recent higher low, it means the cup portion is printed in the market, and the buyers failed to perform means the handle portion has appeared. The trade below is quite simple where we took the short entry after the indication from the TRIX indicator, this stop was just above the entry, and the aim was to look for the brand new lower low.

CONCLUSION

Trading is a lucrative business for those who knew how to play it, don’t just vaguely trade the markets, instead master the good trading strategy first then only trade the markets. In this article, we shared the technique to trade and time the cup and handle pattern. It is one of the most reliable patterns in the industry; you can find it on all the trading timeframes when the Pattern appears on the daily and weekly chart, it means for the next couple of years markets are going to be in a strong trend. You can use this Pattern to trade the reversals as well as with the trend also. On the lower timeframe look for the pullback and if the Pattern appears, use it to trade with the trend. The TRIX is a wonderful indicator that shows the momentum of the dominating party by pairing it with the Pattern one can easily recognize when the buyers are all set to explode to the north.

Categories
Forex Basic Strategies

Trading The High Low Breakout ‘Asian Forex Session’

The significant advantage of the forex market is it opens 24 hours a day, which provides a couple of trading opportunities to traders around the globe. There are four major trading sessions that exist, the first one of Asia, followed by Frankfurt, London, and New York. All of these are the significant sessions that allow investors to trade even in opening sessions or even in the middle of the night. But not all the trading sessions are equally volatile; for example, London and New York are the biggest sessions where a lot of volume traded, and on the other hand, traders believe that the Frankfurt and Asian sessions are the least traded session in the market.

So this mentality stops the traders from trading the Asian session. Another reason might be that when the Asian session opens, half of the world slept, that’s why the price action is less volatile in the market. In a less volatile market, simply it is difficult for the traders to seize the more significant gains, and even in less volatile conditions, traders hate to trade the markets, and if you are the one who is always looking to make quick bucks in the volatile conditions. In this article, we will show you the strategy we created, especially to take advantage of the Asian markets.

We believe you know that London is the most significant trading session in the market, which provides where most of the traders around the globe, bankers, and institutions trade the market. In the London market, most of the currencies show a lot of volatility, and you can trade all of it, but it is advisable to give preference to the GBP, CHF, USD, and EUROS.

Trading Strategy

First of all, we suggest you follow the link below and find out when the London session starts according to your country’s time.

https://forex.timezoneconverter.com/

After finding out the opening time of the London session according to your local time, the next step is to sit on your desk one hour prior to the London opening and find out which of the currencies performed better in the Asian session and mark the Asian session High and Low. The next step is to wait for the London opening and in London session when the price action breaks the Asian session high or low take trade in that direction. As you know, London is the biggest session, so always expect longer moves.  This strategy is specially created for intraday traders, so always trade the Asian high and lows on lower timeframes, such as 5, 15, or 30 minutes.

According to the GMT, the Asian session opens at Midnight and closes at Morning 08:00, and the London session also opened the morning at 8:00 AM, so before the London, opening finds out the Asian high low to take the trade. The image represents the opening, high, and close of the Asian session, the below image clearly represents that the GBPAUD forex pair, didn’t move much in the Asian session and even it turned into a range to give us trades in the London Session.

The major mistake most of the breakout traders made is they don’t wait to confirm the breakout, and sometimes price action came back into the range, and they end up losing side. So it is advisable to confirm the breakout first then only activate your trade. As you can see in the below image, when price action breakout the Asian high and low in the London session, it started holding below the breakout line, which confirms that the breakout is real.

The image below represents our entry, exit, and take profit in this forex pair; we took entry when the price action holds below the breakout line. The stop loss was just above the breakout; the reason for the smaller stops is that the holding below the breakout line confirms the stability of the breakout. Some traders like to trade only the London session, and they exit their positions as the London session closes. It is your personal preference. However, we recommend you hold your positions for the more extended targets because the London session overlaps with the US session, and the US is the biggest session in the industry, where the traders with deep pockets trade the markets. So just like London, if the markets allow you to hold your position for the US session, then go ahead and milk the market. The last green on the below image represents the London closing, but we decided to go for the deeper targets because the trend of the market was quite healthy, which is a sign for us to hold our winning position.

The image below represents the Asian, opening, high, low, and close on the GBPAUD forex pair.

The image below shows that the Asian session failed to make any move in this pair, and it just holds sideways because it was waiting for London to open so that the increased volatility moves the market. When London opens then price action immediately breakout the range, it started holding above the range, which was a confirmation to go long in this pair.

The below image represents our entry, exit, and take profit in this pair; we took entry when price action holds above the breakout line. The stops were just below the breakout, and for the take profit, we decided to lose our position at the major resistance line in the US session.

Conclusion

Asian session high low breakout is an intraday strategy; it helps you to trade all the sessions in the market. You can take data from the Asian session and use it in the London session to take an entry, and the volatility and strength of the US session help you to exit your position at more significant gains. This is the beauty of this strategy, which makes you active in all the sessions. The more you use this strategy, the better your trading will be, and the deeper understanding you will have of all the trading sessions.

Categories
Forex Basic Strategies Forex Trading Strategies

Algorithmic Trading 101

Algorithmic trading (also called automated trading, black-box trading, or algo-trading) uses a computer program that follows a defined set of instructions (an algorithm) to place a trade. The trade, in theory, can generate profits at a speed and frequency that is impossible for a human trader.

The defined sets of instructions are based on timing, price, quantity, or any mathematical model. Apart from profit opportunities for the trader, algo-trading renders markets more liquid and trading more systematic by ruling out the impact of human emotions on trading activities.

Algorithmic Trading in Practice

Suppose a trader follows these simple trade criteria:

  • Buy 50 shares of a stock when its 50-day moving average goes above the 200-day moving average. (A moving average is an average of past data points that smooths out day-to-day price fluctuations and thereby identifies trends.)  
  • Sell shares of the stock when its 50-day moving average goes below the 200-day moving average.

Using these two simple instructions, a computer program will automatically monitor the stock price (and the moving average indicators) and place the buy and sell orders when the defined conditions are met. The trader no longer needs to monitor live prices and graphs or put in the orders manually. The algorithmic trading system does this automatically by correctly identifying the trading opportunity.

Benefits of Algorithmic Trading

Algo-trading provides the following benefits:

  • Trades are executed at the best possible prices.
  • Trade order placement is instant and accurate (there is a high chance of execution at the desired levels).
  • Trades are timed correctly and instantly to avoid significant price changes.
  • Reduced transaction costs.
  • Simultaneous automated checks on multiple market conditions.
  • Reduced risk of manual errors when placing trades.
  • Algo-trading can be backtested using available historical and real-time data to see if it is a viable trading strategy.
  • Reduced the possibility of mistakes by human traders based on emotional and psychological factors.

    Algorithmic trading provides a more systematic approach to active trading than methods based on trader intuition or instinct.

    Algorithmic Trading Strategies

    Any strategy for algorithmic trading requires an identified opportunity that is profitable in terms of improved earnings or cost reduction. The following are common trading strategies used in algo-trading:

    Trend-following Strategies

    The most common algorithmic trading strategies follow trends in moving averages, channel breakouts, price level movements, and related technical indicators. These are the easiest and simplest strategies to implement through algorithmic trading because these strategies do not involve making any predictions or price forecasts. Trades are initiated based on the occurrence of desirable trends, which are easy and straightforward to implement through algorithms without getting into the complexity of predictive analysis. Using 50- and 200-day moving averages are a popular trend-following strategy.

    Arbitrage Opportunities

    Buying a dual-listed stock at a lower price in one market and simultaneously selling it at a higher price in another market offers the price differential as risk-free profit or arbitrage. The same operation can be replicated for stocks vs. futures instruments as price differentials do exist from time to time. Implementing an algorithm to identify such price differentials and placing the orders efficiently allows profitable opportunities.

    Index Fund Rebalancing

    Index funds have defined periods of rebalancing to bring their holdings to par with their respective benchmark indices. This creates profitable opportunities for algorithmic traders, who capitalize on expected trades that offer 20 to 80 basis points profits depending on the number of stocks in the index fund just before index fund rebalancing. Such trades are initiated via algorithmic trading systems for timely execution and the best prices.

    Mathematical Model-based Strategies

    Proven mathematical models, like the delta-neutral trading strategy, allow trading on a combination of options and the underlying security. (Delta neutral is a portfolio strategy consisting of multiple positions with offsetting positive and negative deltas—a ratio comparing the change in the price of an asset, usually a marketable security, to the corresponding change in the price of its derivative—so that the overall delta of the assets in question totals zero.)

    Trading Range (Mean Reversion)

    Mean reversion strategy is based on the concept that the high and low prices of an asset are a temporary phenomenon that reverts to their mean value (average value) periodically. Identifying and defining a price range and implementing an algorithm based on it allows trades to be placed automatically when the price of an asset breaks in and out of its defined range.

    Implementation Shortfall

    The implementation shortfall strategy aims at minimizing the execution cost of an order by trading off the real-time market, thereby saving on the cost of the order and benefiting from the opportunity cost of delayed execution. The strategy will increase the targeted participation rate when the stock price moves favorably and decrease it when the stock price moves adversely.

    Beyond the Usual Trading Algorithms

    There are a few special classes of algorithms that attempt to identify “happenings” on the other side. These “sniffing algorithms”—used, for example, by a sell-side market maker—have the built-in intelligence to identify the existence of any algorithms on the buying side of a large order. Such detection through algorithms will help the market maker identify large order opportunities and enable them to benefit by filling the orders at a higher price. This is sometimes identified as high-tech front-running.

    Categories
    Forex Basic Strategies Forex Education

    Detailed Instructions for How to Structure Your Forex Trades

    In this guide, I only intend to show you how I structure my trading by trading in the currency market. If you can give ideas or help in your process, the goal of this post will be more than fulfilled. What I want is to be as direct and clear as possible. I’ll go point by point.

    How to Trade: The Basics

    Focusing on the basics and making it simple. I mean, you don’t have to rely on hypercomplex strategies, use the software that packs it and put it on the server next to your broker. You also don’t have to be the best programmer, let alone dirty your platform’s graphics to make money on Forex.

    You need systems. Systems work. Companies and results-oriented work methods are system-based. You should start applying and creating systems because they will allow you:

    • Know what you can expect (return and risk) in results.
    • Measure what you do.
    • Knowing when what you are applying is no longer working.

    Yes, that of sitting in front of the computer, looking and saying “I think EUR/USD will go up” is the most common, but is that the normal thing here is to lose money. You need winning strategies to start the fight.

    Intraday or Swing Trading on Forex?

    This question is an interesting question and I make a small point if you’re starting. Swing trading involves trades that usually last several days and when we talk about intraday or day trading we mean trades that close on the same day.

    Well, then which one? Like everything in life, it depends (we are). You have to learn that there is no “best for everyone”. In my case, I combine both operations because I dedicate full time to this, but if you are starting or are of the people who stress with trading, I recommend that you focus on doing swing trading.

    As you consolidate here you can start to scale and seek to diversify doing intraday. But again, this is just something I recommend based on my own experience and people I’ve met over the years.

    Automatic or Manual Forex Trading

    Not all automated Forex trading systems are a panacea, and not all discretionary or manual trading systems are bad. Stop looking at it that way, we’re just talking about execution. That’s precisely why I’m going for automated execution. We are willing to talk a lot about this and other topics and if you find it interesting I can dedicate an article just to it. But think of automation as just how strategy is carried out. Whether it’s winning or losing is the basis of everything.

    Automating a losing strategy does not make it a winner, it is only about applying strategies that are profitable and ensuring that they are executed in the best way (in manual we always cheat alone).

    Is Analysis the Key to Trading?

    Many people think that technical analysis is the key to beating the market and defend them from the last consequences. The same thing happens to those who always think that the only way to make money in the currency market is through fundamental analysis.

    So what really works? It works that really gives results and you can check. What’s the point of telling me that this or that method is the best if you haven’t even sat down to figure out numbers. Many times it’s not with what, but how. I mean, they can be different methods if they’re done right. But to do that, you need statistics of what you’re doing.

    Learn to Create Robust Trading Strategies

    First, let’s see what a robust trading strategy is all about. As traders, we know what has happened in the past, but we don’t know what will happen in the market tomorrow. That is why we need systems that are well adapted to the changing circumstances of the market.

    How can we know systems are well adapted to spread alterations, prices.? Simulating those alterations, sort of simulating those conditions and seeing how they behave. There are different tests for this as they are: Walk Forward test, Monte Carlo and Multimercado.

    These tests give us information on how robust our trading system is and give us a reference. Beware, I have said reference, not absolute truth. Then we will test them, our goal is to leave as little space as possible to chance.

    Best Forex Trading Strategies

    You may have doubts about how you’re going to manage to create profitable strategies and start with all this. Calm down, there are tools for this, but the important thing here is to know that the strategies that are usually more stable over time and give better results are:

    Trading strategies with very simple entry and exit criteria: The opposite of what they might have told you. The simpler our Forex trading systems are, the more likely they are to continue to function over time. I have seen this and I know it firsthand.

    Also, what is more likely to stop working, a system based on six indicators or a system based on one or two? That six indicators continue to produce results over years and years is not easy. However, only one or two are more so. Still, trading systems must always be monitored.

    Systems with a low number of trades or trades: Sometimes, when we’re obsessed with being in the market constantly doing a zillion trades, we’re giving our broker money and taking it out of our pocket. More is not better in trading, better is better. This is about getting the most money with the least risk, not giving it to your broker.

    Strategies with a controlled return/risk: You see a strategy, you look at its benefit in the last few months and years, and you’re already thinking about connecting it. Error, always look at the return associated with drawdown. The drawdown of your system is, in short, the maximum consecutive drop you have had. Why is it important? Because if that fall has occurred in the past it can happen again (and bigger, believe me). Now you’re thinking, what if this happens to me?

    Establish Connection and Disconnection Rules

    All methods of trading sound great. The problem is when they start to lose. Some tell you that you have to follow, that the system is the system. But what if the system is not working anymore? After all, we live in a changing world and our money is not infinite.

    The truth is that most traders do not know when the system is failing or when this happens because they are applying it wrong. If you execute the strategies in an automated way you are already saving this, then what you need is a rule to disable your strategies at a certain point. To do this, simply monitor them with platforms such as bluefx or myfxbook to know what the performance of each one is.

    Credit: theforexguy.com

    Diversify Into Forex

    If we deactivate a Ruben strategy, we stop trading. Not if you activate another one that is doing well. It’s not that you run a Forex trading system or two, it’s that you have different systems: the best ones in real and a demo base created that you can include in your real account when you disable some because their performance has dropped.

    You can diversify by time frame (time frame), by assets (different currencies), or types of systems (trend, mean reversion). The goal of diversifying is to look for a more stable return, many people do this to introduce many systems without more, but if you do this you will get the opposite result, as you will be increasing the risk.

    Which Currencies to Trade

    I recommend that you focus on majors or major currency pairs, especially if your broker has a high spread, as these tend to be smaller. One of the advantages of automating is that you can scale your trade and do it in different currencies diversifying as I said before. Start by being profitable with a few (one or three assets) and as you evolve you can grow your portfolio.

    Why Invest (Only) In Forex?

    I won’t be the one telling you to invest in Forex and not in another market. Each is his father’s and mother’s and has his good and not-so-good things. Mind you, one thing is clear, wherever you do remember the power of specialization. There are traders who concentrate on one or two assets and are profitable. In the end that’s what it’s all about, isn’t it?

    This operation is extrapolated to different assets such as raw materials, indices, and cryptocurrencies. Yes, cryptocurrencies as well. In fact, my operation is mainly based on currencies and cryptocurrencies (at 85% the first group and 15% the second). But I have to say that cryptocurrency trading has given me a welcome surprise this year. Again, if you’re starting, don’t do it with a lot of assets or you’ll get saturated. Start step by step and you will diversify as you evolve. The one that covers a lot, little squeezes.

    Steps to Trading

    If you get here not be entirely clear to you how the fuck I do trading, then I’ll summarize it for you in steps:

    1. I create statistically profitable trading strategies and test that they are robust.
    2. I put them in a demo account to make sure they work perfectly.
    3. Once they meet the requirements I demand, I’ll move them to real.

    In a real account, I manage my systems by connecting and disconnecting them according to their performance (always under objective criteria).

    Categories
    Forex Basic Strategies Forex Trading Strategies

    Why You Should Spend More Time Working on Strategies

    Time, something that forex trading needs a lot of, and there are a lot of different things that you can be spending your time on. So much so that you are most likely leaving certain things out. For many, that thing would be the creation of their strategy. Either you are spending too much time on other things, or you simply just want to get started with your trading. Either way, you won’t be spending enough time on your strategy, getting it right and so this can lead to some negative results. Today, we are going to be looking at some of the reasons why you should be spending just a little more time on your strategy.

    Create It

    The first step for any strategy is to simply create it. Depending on the strategy it can take a different amount of time to create. Some will take a few hours, others may even take a few days to create. You need to look at what you are planning to trade, when you are planning to trade it, and also how much free time you have, as this will affect the type of strategy that you can use. You need to take your time when creating it, do not rush it, the last thing that you want is a half-complete strategy, you won’t get any success from that. So take as long as you need in order to ensure that your strategy is working and is suitable for the current trading conditions.

    Learn It Inside Out

    There is absolutely no point in only learning the bare bones of the strategy that you are planning on using. Instead, you need to learn everything that there is to know about it, for a number of different reasons. You need to know what the training rules are in order to know when you should be putting on trades and when you should be avoiding trades. Knowing which market conditions work well for it and which ones do not. You need to learn the limitations and what the strengths are of the strategy. Ensure that the first thing that you do is learn what there is to know about it before you even consider starting to put on trades.

    Learn How to Adapt It

    Let’s be honest, sometimes a strategy works brilliantly, the markets are working for you and each trade that you put on is doing well, but that isn’t going to last forever. It never will because the markets will always be changing. Due to this, you need to have a good understanding of how you can adapt the strategy that you are using. In order to do this, you will need to spend a little extra time looking at different contingencies. If you do not do this, then as soon as the markets change, you will struggle to make profitable trades as you do not know how to adapt the strategy and so stick to the older rules that were previously working before. So spend that extra time on your strategy to work out how you can make small and subtle changes to keep up with the ever-changing markets.

    Learn More Than One Strategy

    There will be times during our trading career when we believe that we have learned all that there is to learn when it comes to the strategy that we are using. That is great, but that doesn’t mean that there is nothing else for you to learn. Your strategy may work well in certain conditions, but it won’t work in all of them. So in order to combat this, we need to start thinking about learning a second strategy too. This will give you a lot more variation in your trading. It will give you better insights into how you can trade and will also let you trade when your other strategy would not work well. You never know, it may also help you to learn a little bit more about the strategy that you are already using or to look at it from a different point of view, giving you the opportunity to improve it further than you thought you could.

    Never Stop Learning

    We have covered this a little bit above, but the fact is that you will never actually stop learning about your strategy or even new strategies. You should never get into the mindset that you are always able to learn more and always able to improve. As soon as you begin to get complacent, that is where the problems often start. Never sit back and believe that you know it all, consider looking into new aspects of trading which could then give you better insight into your own strategies.

    Stay Vigilant

    You will need to remain vigilant on things like your trading rules. We have set those rules for a reason. They are there to give us an idea of when we should be trading, what we should be trading, and when we should be getting out of trades. The rules are there to be followed and so we should stick to them as much as we can. When we go against those rules then we are placing what would be considered bad trades. We need to spend that little extra time making sure that we are placing the right trade, it may add an extra few seconds or minutes to each trade but the overall results will be worth it, ember, those rules are there for a reason.

    Always Adapting

    Once your strategy has been created, that is not the end. You will always need to continue to adapt and change little parts of it. The market conditions will be constantly changing, and so you will need to adapt to it. Most strategies have the capabilities of working within different trading conditions, changing parts to better suit them. You will only be able to do this by knowing the strategy inside out and by spending a little extra time to work out what it is that you need to change in order to adapt it and how you can maintain the strategy’s profitability.

    So those are some of the reasons why you should be spending a little more time working on our strategies. You don’t have to stick to one once you believe you have mastered it, but you should also remember that you have never learned everything that there is to know about the strategy that you are using. Spend some time developing it, but then also make sure that you spend some time following it too.

    Categories
    Forex Assets Forex Basic Strategies Forex Trading Strategies

    Trading Strategy For the CAD/JPY Currency Pair

    In this article what I want to tell you is one of my strategies that is working well in real life using the CAD/JPY pair. Why this pair? I have chosen this pair as an example but will show you different trading systems using different currency pairs.

    What is the Strategy Based On?

    In a very simple system, you will know that my systems are characterized by that. The reason is that they tend to be the ones that last the longest and the most robust. You’d be amazed to see the simple systems that exist that have been producing good results for years and years.

    First of all, what I’m going to show you next is a profitable, not perfect Forex trading system. The curves without falls or volatility are left to the martingales and gurus.

    1.1 Criteria for entry

    We will enter the market by purchasing in the CAD/JPY pair when there is an upward turn in the Accumulation Distribution indicator and the price opens below the simple moving average of 19 periods. We will do the opposite (we will enter shorts in CAD/JPY) when the AD spin is down and the price opens above the average. As I write this article we are short on this pair indeed.

    1.2 Exit criteria

    We will close the position we have taken provided one of these conditions is met:

    1.2.1 Output per indicator

    We leave the buying position when the Williams Percent Range indicator falls below the marked level (59, you can see in the chart above). We will also close our short position when it passes this level.

    1.2.2 Exit by stop or profit

    If the indicator has not already given us a sign of closure, we will do so when our operation reaches the loss limit of 60 pips (stop loss) or we have reached our profit target (take profit) of 220 pips. The interesting thing here is that a winning operation compensates us for more than three losing trades since when we achieve 220 pips we can lose three out of 60 and still not have lost money.

    Statistics of the System

    With the well-defined rules of our trading system, let’s see how it has behaved in recent years and what the main features are. Note that this system has not been optimized.

    The stability in the balance line, as its name indicates, measures how the return curve behaves. Our goal is that it is as stable as possible and that there are no abrupt drops. The closer to 100 the better, so an 81.73 is good data. In addition, it is important to note that we have a sample of 300 trades so it is a significant sample. If I show you this strategy with 40 trades and it is winning, it can be a chance. Logic tells us that the larger the sample, the more reliable will be. Remember that we seek to minimize chance and bring statistics to our advantage.

    It’s very important to know that you have up to 11 consecutive losing trades, but considering that the risk-to-profit ratio is 1:3, it is acceptable. One of my favorite parameters when choosing a trading strategy is the profit factor or profit factor. A PF above 1.5 is good. This ratio tells us how much our system earns when it pays compared to how much it loses when it loses. Simply put, our system on average earns more when it wins than it loses when it loses. And we’re very interested in this.

    Another star point for me within a trading system is return/drawdown. Why? Because it is a yardstick to measure what has fallen the profit curve and that profit obtained. When you do real trading you don’t only care about the return, but you care about how to get that return and try to minimize these drops. A ratio of 7.48 is more than okay.

    What Can We Expect from this Strategy?

    Let’s see how this strategy behaves by comparing buying and short transactions. Not bad. Both when the CAD/JPY pair has maintained a trend and when the pair has steered without a clear direction the lengths and the shorts have remained stable. Now we see those falls as they are. There are no peaks too strong and they are also kept under control.

    Is It a Forever Strategy?

    This strategy is not the only strategy I apply and it will not last forever. It is a strategy of a portfolio of systems that I apply in an automated way in Forex. It is a portfolio that rotates with rules of connection and disconnection of systems depending on their behavior.

    You must understand that there are trading systems whose statistical advantage disappears and that you must therefore stop trading. This is nothing else that stops being profitable because a certain pattern is no longer profitable. This happens on a day-to-day basis with some businesses, with trading also happening, for example, when a large number of traders exploit a method. The advantage disappears, therefore.

    Instead of applying or learning the foolproof method of trading on Forex or any other asset, learn to measure what you are going to apply before, during, and after. If you can measure, you can improve, but above all, you can make informed decisions.

    Is This the Best Strategy Ever?

    The goal of this article is not to remove the arsenal. But it is a system that I have been applying in real life with good results. The important thing is that you understand that a simple strategy can work very well over time, that you need data to evaluate it and criteria to manage it. And that this is all just a work plan.

    Categories
    Forex Basic Strategies Forex Trading Strategies

    Advantages and Disadvantages of Scalping Strategies

    Scalping strategies on Forex are quite popular among beginner traders, although it is not really fully justified. High-frequency trading (keeping the market position for a very short time) allows quick real-time gains and avoidance of swaps. In short periods it is difficult to make an accurate forecast. The scalping training in a demo account allows the beginner trader to improve the speed of being able to react and learn how important it is to understand intuitively the behavior of all members of the financial markets. However, it is better to open real operations in longer periods. From this summary, you will learn what is scalping, what are its advantages and disadvantages of high-frequency trading, and also you will know practical examples of strategies.

    Scalping for Beginners

    Scalping is a high-frequency operation that provides earnings on a set of trades in a short period of time. For traders just starting to trade, this trading strategy is considered dangerous because the trend is chaotic in short-term charts (the so-called price noise effect) and therefore can hardly be predicted. On the contrary, I think a beginner should train scalping before dealing with medium and long-term trading strategies. Scalping helps train attention, reaction speed, and visually shows gliding problems. Although you should be highly focused and emotionally stable when using scalping, if you have understood the theory, the strategy is an excellent simulator for practicing these skills.

    What is Scalping?

    What is scalping in Forex trading? The perception is that this is a type of trading where A scalping trader performs many operations in a very short time and closes them in minutes. Actually, this is not a very accurate definition. Scalping suggests placing orders a short distance from the opening point. The trader leaves the trade in a short time, as soon as the price changes at least a few points, including the spread. Even an open transaction based on this principle already refers to scalping. Logically, to make a profit, a trader must make dozens of such transactions in one day, but their number is not that important. One of the conditions for successful scalping is to pick up a good time in relation to predictable volatility.

    Types of Scalping

    Scalping in the news. At the time of departure of important news or the publication of economic data, there is a very significant increase in volume and volatility that can last from a few minutes to a few hours. This is the best time for scalpers. There are two ways to operate:

    Placing opposite pending orders a few minutes before publishing statistics and removing the order that does not work after publishing. The opening of several short-term trades for directly correlated pairs in the first few minutes after the publication of news in the main trend direction. Making money using such a strategy is quite difficult. Both methods are not perfect and have their advantages and disadvantages, read more about them in this summary.

    Types of scalping depending on the time frame chosen:

    Pipsing: It is called the most profitable and risky strategy (in terms of profit, the issue is very controversial). Trading takes place in the M1 interval, transactions are carried out in the market for a few minutes. It happens that 1-2 points are enough for the scalper since maximum leverage is used (sometimes up to 1:1000).

    Medium-term scalping: Suggests a relatively fewer number of open trades, the duration of which is 5-15 minutes. The range is M5. The size of the leverage is determined by the trader.

    Conservative scalping: Transactions can last up to 30 minutes, the time frame is M15.

    Types of scalping according to technical strategies:

    Scalping with analysis of various time frames. Such a strategy is applied when negotiating with the short-term trend. It is possible to invest at virtually any time, so classic trend negotiation strategies for time frames per hour will not work there. Such a trend may arise, for example, during a brief pause before the news release, which is quite controversial, judging by the forecasts. Or you can start during a temporary balance of bulls and bears. The essence of the strategy: this type suggests that you identify the beginning of a trend in the H1-H4 range by means of a trend indicator or a confirmation oscillator. Then, analyze the market and look for signals in the M5 timeframe. I will detail later with an example about this particular strategy.

    Trading based on major currency pairs. The main pair is the pair, through which the scalper makes trading decisions, but carries trading on a correlated pair that is a bit behind. For example, the EUR/USD pair reacts immediately to the publication of US statistics. If EUR/USD and USD/JPY are increasing, then EUR/JPY will also increase.

    Intuitive scalping. Considering that a scalper has little time to make decisions, there is a category of traders that use their intuition. They can interpret the market in a very intuitive way and for that reason, they do not need technical indicators.

    I will not describe the subdivision by the type of indicator (graph, level analysis, etc.) as it is logical. The rating can be expanded, and I would appreciate it if you, my dear readers, would help me by offering your scalping strategies variants in the comments located at the end of the article.

    Rules for Successful Scalping

    There should be no restrictions by the broker to employ such strategies. There should be no restrictions on the offer with respect to the number of open trades and the minimum waiting time.

    Instantaneous execution of orders: It depends largely on the broker, liquidity providers, the Internet connection, and the trading platform itself.

    Great financial leverage: Professional scalpers work with leverage of 1:500-1:1000, but according to European regulators’ standards, maximum leverage is reduced to 1:50. The instrument should have the best liquidity.

    So what is scalping in trading? I think is clear. Let’s move on to the advantages and disadvantages of strategy.

    Advantages of Scalping Strategies

    It is trading based on fundamental analysis. Technical indicators are rather used as complementary tools due to price noise in shorter time frames. Although it is not recommended to beginners to negotiate with news, in terms of training and use of simulators, this can be easier and more interesting than technical analysis. It’s all subjective, but I’d say this is a benefit of scalping.

    Gives you the real chance to make a considerable profit. Everything is questionable, but before a professional, high-frequency trading can generate higher returns compared to daily trading strategies. In scalping, a trader manages to win on almost all price changes in both directions, on the contrary, in intraday trading, a significant part of the profit is “lost” due to setbacks and corrections. Besides, it doesn’t depend on the trend.

    Scalping allows for profit when the market is traded unchanged. There are no swap costs (to keep the position open until the next day). I’d say the biggest advantage is training to negotiate scalping. With high-frequency trading, the trader has the ability to learn to understand much better the market inputs and outputs, the nature of the market, and self-development of intuition. After mastering scalping which is much more complex, intraday and long-term strategies will seem easier.

    Disadvantages of Scalping Strategies

    Spread: No matter how long your position stays open, the difference will be the same. A scalper takes most of the benefits.

    Technical problems: Slippages, delay in execution of orders, platform failure, etc. In scalping, only a second is sometimes important, and a delay can result in a loss that can exceed a small gain. In scalping, only a second is sometimes important, and a delay can result in a loss that can exceed a small gain.

    Market noise: Random price changes, insignificant for long-term periods, can close the order with a stop in short-term periods.

    Limited choice: Only liquid currency pairs with moderate volatility are suitable for Forex scalping trading. Exotic pairs are not appropriate. The problem of precise quotations and broker restrictions. Some companies prohibit scalping or there is a restriction on the minimum waiting time for negotiation.

    Emotional stress means the need to be focused on the small details. You must control your operations all the time and make your decisions quickly. At some point, a reseller will feel emotional exhaustion and lose their target. This problematic situation can be resolved through the use of robots and scripts.

    In order to obtain the greatest benefits in scalping, it is very necessary to use fairly high leverage, and clearly, this circumstance significantly increases the risks. But even so, despite all the downsides of scalping trading, scalping is, in the first place, satisfaction and excitement. That’s why many traders like it a lot.

    Conclusion

    Scalping is one of the currency trading strategies suitable for both currency pairs and other asset CFDs. Scalping is convenient in flat trading and when the market is not trending. Some people consider it highly profitable, others say it is very risky. In any case, before trading with a scalping, any scalping strategy needs to be practiced and enhanced in a demo account. My wish is that this article might have helped you respond to the questions you had.

    Categories
    Forex Basic Strategies Forex Trading Strategies

    Beginners’ Tabula Rasa Advantage: Simple Moving Averages Strategy

    We want you to have new ideas popping out about how you can trade different strategies or apply them directly, and that is exactly what we present in this article. The provided examples of successful trading, or more precisely how to use the most popular strategies without hassle, are all about the best practice of indicators and most successful setups.

    Beginner traders fail even with the simplest of strategies, and this is not only because of the psychological strains and traps. Experienced traders went through all the real trading hassle and extracted the pros and cons of these strategies so you do not have to. The foundations in the following examples are a great base to look out for new components and improve on these trading concepts. 

    Before we begin, know no strategy is a holy grail as traders like to call their ideal system, there are market conditions that produce winners most of the time and when it is mostly losers. Also, different currency pairs or assets make them better or worse, depending on the price action specifics. 

    When you start trading, you lack knowledge about strategies and their components but more importantly, you lack the mental to hold them up. Truth be known, some indicators can be used in a different way than they are intended to, some creative traders even use them to a better success rate. One such example is the Williams %R indicator we wrote about. Back to the point, using an indicator or a strategy by their manuals is not always good for you, despite if you are a beginner. When you do not hold too much information then you do not have a bias. This bias can make you close up to certain trading techniques because you read several times it is not good or it can make you accept a general opinion that could be wrong for you.

    Keep an open mind, what is bad for most does not mean it is for you too. Be curious and inspect. Take a look at the strategy original design first, then, try to trade it that way and think how it could become better. Now, by knowing more indicators, other trading theories, and even the math behind it, you know what to look for. As a beginner trader, you have to explore it all. Unfortunately, nothing or no one can just upload this to your mind like in the Matrix trilogy. Nevertheless, it is still better to walk and experience than to take the shortcut. 

    A classic used by many traders for a reason. It is simple and effective. Moving averages are lagging, trend indicative tools, but when they give you a signal, trends keep running. They are like big crude swords, slow hitting and requiring skill to master. The signals usually dig deep into the trend with great continuation positions. Here is our strategy with two Simple MAs set to Fibonacci periods. The faster one is set to 21 while the slower one is set to 55. It looks like this:

    We can notice moving averages can show short and long-term trends depending on the settings. 21 and 55 periods are not obligatory, you can set any but make sure one is slower so together they can create an obvious distance between them. This distance is one of the key components of this MA strategy, not only the MAs. 

    Moving Averages show you great entry and exit points but they are terrible when the market is flat. To cope with this, it is great to combine MAs with market energy measurements. Trends form when we have a driver that moves the price further. When there is none then the market is in equilibrium, moving averages are not pointing anywhere, they have no slope. In the next picture we have a recent flat period on the EUR chart, notice how two moving averages cross frequently and cannot determine a trend. Volatility dropped and remained low, an easy measure for the energy of the market. No energy – no trends.

    Another way we can determine low energy is the mentioned distance between the MAs. The lower it is the less probability the trend will continue. On the other side, when this zone is wider there is an increasing probability the trend will slow down. Traders pay attention to this angle when looking to exit a trade or scale-out. 

    The MA zone is dynamic but does not exactly tell us when to exit or enter. For that, we need to have events that usually give us the best entry places. You can first start to observe what happens often that also proves to be good entries and exits. Then backtest your rules. In our example, we have set these events to be the price crossing the faster MA. When the price crosses into the zone, it is our exit point, if it bounces off the slower and back into the trend direction, it is our entry or continuation. 

    To increase the odds we add in a rule. To make sure the trend is really moving on or a new one is emerging, the price high outside the MA zone has to be higher than the previous high. It is a breakout. 

    Moving average crosses are not necessarily the best entry points. Observe if there is another way, for any strategy. What we have noticed is that price crossing the MA is the best compromise between entering too late, as in some cases when we wait for a crossover and entering too early. The price closing above or below both MAs, using the volatility, and the price action high/low breakouts is a winning combo.

    Pullbacks into the MA zone are common and actually a good re-entry opportunity. The next picture is a good example of reentry after a pullback in a bullish overall trend, but only after the previous high has been broken (white horizontal line):

    Credit: The Secret Mindset

    Now, you can also combine candlestick patterns to determine a breakout, sometimes the breakouts using the previous high or low fail, so we want to have one more rule to eliminate losses. As with any strategy type, we can backtest and see what trades are losers we want to eliminate first. Aiming only to find good entries is not going to help us at one point, there is a limit to how much we can boost the win rate. Cutting losers is as effective as finding new winning rules, even if it means some winners are filtered too. 

    Risk management or where you put your Stop Loss is relatively easy to determine. One way to do it is by using the width of the MA zone to translate the Stop Loss distance the other way, below/above the slow MA. Then place Take Profit 1,5 times further to fulfill the preferable risk to reward ratio (better than 1:1). Here is one more example where a trader has found a continuation trade:

    As the last interesting proposal, pay attention to the slow MA slope. When it is flat, do not try to trade and when it has a relatively strong slope, then do not enter any trades in the opposite direction. Trading reversals is tricky and does not provide better outcomes. 

    In the next article of the series, we are about to present a beginner-friendly strategy using the Heikin Ashi candlesticks which are especially beneficial for traders that react to the Price Action noise. If you often make trades that end quickly without much profit, check out the next article.

    Categories
    Forex Basic Strategies Forex Trading Strategies

    Heikin Ashi Pure Trading: HA With Williams %R Spin

    Heikin Ashi is a chart modification that transforms how candles are presented so a trader can see a trend more clearly. Noise reduction is the primary purpose of HA however strategies that use it are many. Our following example of using Ha does not mix anything else just pure HA trading. Of course, you can improve on it with rules and other indicators, still, we leave that up to you. HA interpretation is subjective and here is how we like to use it. 

    Reading Heikin Ashi candles is similar to the regular ones except these have clear patterns. HA candles color tell the trend however, they also have a wick that actually gives info about the trend momentum. HA candle with a wick on one side is a good indication a trend will move on. Uptrend candles have usually green-colored bodies if not customized and have a wick above. The opposite is for red bearish trend candles. Once the trend starts to slow or consolidate wicks on both sides will appear. A good signal a trend is over is two or more HA candles resembling a Doji as shown in the next picture:

    Big candles with a long wick on one side is a strong indication of a good trend momentum, however, pay attention to the sequence. HA filters noise so expect to see more series of candles of the same color. If you see small bodies with wicks on both sides then this is definitely a flat market you do not want to be trading, especially if you cannot count more than 2 same-colored bodies in a row. When building a system with HA you can set this up as a rule to avoid losers. 

    Our HA strategy incorporates one more aspect of trading which is not obvious yet commonly used by experienced traders. It is the higher time frame alignment. If you are trading the daily chart, then consider weekly and monthly, two higher time frames. When you see a good momentum HA candle with one wick on all three time frames, this is a high probability trade. Trends tend to keep trending, some are steep and fast others are slow and long with many corrections but generally, trend following strategies are considered the best. Aligning all three higher time frames you consider trends that are older and bigger than what you see on the lower timeframe. Like this, we add up all probabilities from these trends into one. Applying the higher timeframe alignment rule implies we will have fewer signals to trade but these trades will have a better win rate and better yield. A rule that manages to eliminate 2 losers and one winner is a good one and makes the P/L line look much better. 

    If you need more confirmations a trend is emerging you could incorporate a rule to enter a trade only if two consecutive strong trend HA candles appear. Test this rule out and if you have eliminated some fake signals, try with 3. Making too many short-lived trades could also be an issue. Consider a similar exit rule in such scenarios by waiting for two or three candles of the opposite color. It is important to keep trying new things on the same backtesting sample to know if you have improved the strategy. Also, try to sample various currency pairs for the same period and aggregately see if improvements are made. 

    The above strategy is pure HA that produces good results and is one of the best practices on how to use HA. Of course, it could be better if we add more tools to it, but not any tool. Williams %R is one indicator that we like to use differently than intended. For example, we set the Willimas %R to 14 periods on a daily timeframe or you can go lower time frames, it will still work great. Whenever we see the line crossing the 50 value, we see it as an additional confirmation of a trend. In combination with the HA, this strategy gives great results. Here is the picture of a few trades in a difficult market environment:

    Even though market conditions are not so favorable, we managed to have only one loser, can you guess which one?

    Ichimoku is a trend following composite indicators but could it be improved by using another Japanese tool like the HA? We will use only the Kumo cloud and it will serve us as the trade direction filter. We will use the default settings. Whenever the HA candle pierces the cloud we only trade that direction trades. So if the price is below the Kumo we only sell and if above we only buy. Here is how it looks like:

    Credit: The Secret Mindset

    So we avoid trading corrections since they are against the trend and likely losers. However, we notice the first trades that break out of the Kumo are not the best ones and these play the biggest negative balance changer. We can incorporate a simple rule here to avoid this – skip the first trade signal and enter only consecutive obeying the Kumo direction rule. We still want to see HA candles with only one wick and not too far from the Kumo to confirm it is a trend continuation. 

    The cons of the HA is that it eliminates the information from the classic Japanese candlesticks, such as the high and lows. This means HA cannot be used for Price Action, one of the most used analysis methods. Smoothed HA does not modify how you see the chart candles but instead plots a moving average-like line. The result is that you can use both styles in one strategy:

    Smoothed HA acts more as a moving average that is bast used as the trade direction filter, like a regular MA, use it as trend exhaustion or reversal when the price breaks through it or use it to confirm trends with the candle color change. You get the idea there are many other interpretations but these are best practices. Smoothed HA intended to use it alongside Price Action patterns and lines. Lower settings of the indicator are used for scalping strategies and trailing stops, typical for these strategies is the 5,5 setting on both integrated MAs of the smoothed HA. 10 and 10 periods can serve as a general use trend following support line where price bounce off it to resume trending or signal an exit on price cross. 20, 20-period settings make Smoothed Heikin Ashi good for pullbacks during unstable trends. Forex is a place of choice for such settings. Longer periods are also good for “buy the dip” strategies but trends that extend for a long time typically found in stocks or indices. 

    Combining two Smoothed HA use is similar to the two moving averages however you can create different scenarios with the Smoothed HA bars and wicks. The most successful one is using the faster one for exits while the slower one is good for gauging trend direction and rebounds.

    Our best trading practices in the next article will involve a very rare setup that consists of indicators that also measure an important market characteristic – volume. Customized yet simple, and very powerful for trend trading. 

    Categories
    Forex Basic Strategies Forex Trading Strategies

    Chaikin Money Flow Custom Trading

    Customized strategies usually have rigid structures that are not performing well on other currency pairs or markets. This one we represent in this article of the series could be applied to all 28 major currency pairs on forex, and with some adjustments, it could also be used in other markets. For this reason, it is our choice of best trading system examples. 

    Chaikin money flow is a confirmation indicator from the volume category. This might not mean much to a beginner trader but to remind you, trends need momentum to continue and CMF combines measures of market energy (volume) and price direction. Indicators that have these aspects in their formula tend to do very well for trend-following strategies. CMF, to be precise, measures how the price moved before the candle closed, it’s high and low, and then compares those with the closing price. Volume part increases how sensitive CMF will be to that price change, it will move when it matters, and that is what traders want to avoid fake signaling. So if you look out for good trend confirmation indicators, formulas like this are promising you to have something that works. 

    CMF could be considered too choppy by default settings (20 periods) depending on your trading preferences and timeframe. You may abide by the Fibonacci sequence or just forget about it, use the setting that is best according to your testing. Here is how we believe is the best fit for different strategies.

    • On 21 CMF is rather quick and best used for active scalping on any timeframe, however, higher time frames have fewer absurd candles. Expect some false signals here. 
    • Increased period to 30 has beneficial effects because we had fewer false signals but still managed to get early enough to get some pips. For more lagging, “sure-thing” style check the 50. 
    • The below 20 setting makes CMF too choppy for trend confirmations, but maybe you would like some levels that are not used by default design. You can set “oversold” or “overbought” zones and use them as you would RSI. This transforms the indicator not to be trend confirmation but probably trend reversal, pullback rebuy, or as an exit signal.

    Our strategy builds around this zero-cross indicator and we will add new tools to make it better. Every time a signal line crosses the zero does not mean it is a new signal to enter, it has to be confirmed or filtered. The default of 21 periods settings will generate false signals when the trend is consolidating or accumulating for a new jump. Because of this, CMF could be regarded as neither a lagging nor predictive indicator, a trader can decide to put a small filter zone below/above the zero line. Also, they can use CMF as a no-entry or exit signal whenever it is close to zero. 

    CMF can also be a good breakout confirmation indicator. When the price action dictates a ranging market, CMF easily picks moments when PA breaks out. This is a recent EUR/USD chart with PA support and resistance lines placed. CMF confirmed the breakout for a solid gain from a bullish trend continuation on a daily timeframe. 

    Some traders may complain about CMF not being able to cope with the gaps. Gaps could form in forex after the weekends but considerable gaps are more common in equities and the commodity market. CMF would react to gaps too much making it useless for a few candles until it settles down. 

    CMF value reading can be separated into zones so each zone represents a certain market condition. We have mentioned that a zone between 0.05 and -0.05 is no man’s land and that you should not trade here. A value between 0.05 and 0.25 is considered a bullish trend zone where the trend is about to unleash. Once it breaches values of 0.25 and up to 0.4 it is considered the bulls are a dominating side of the sentiment. Everything more than 0.4 means a very strong trend but it also means you probably missed a good point of entry. Symmetrically applies for a bear sentiment and it looks like this:

    We have pimped up our CMF but we can still do more. Let’s leave this for later, now we want the strategy to get better by cutting the losers generated by the CMF choppy action still present around the – +0.05 zone. We do this by adding a baseline. Our first baseline of choice is the Kijun-Sen from the Ichimoku indicator using the default setting of 26. The baseline rule says we only trade short trades when the price is below the Kijun and only long when it is above. This way we follow the general trend, you can even call it a higher grade trend. 

    Believe it or not, we can make this concept even better using the Kumo cloud too from the Ichimoku indicator. This is our second best choice. Instead of the Kijun-Sen, we can plot a 20 EMA on the CMF window itself as our baseline! This trick can be done with most indicators in Metatrader platforms or TradingView (in MT4, select to apply an MA to “first indicator data”). When all combine this strategy setup should look like this:

    We have marked long and short trades signals (vertical lines). Now, depending on your exit indicator, you could probably have a good win rate, smaller losers, and bigger winners. Needless to say, traders should avoid trading inside the CMF – + 0.05 zone and also avoid trading inside the Kumo cloud. This is the difference between the Kijun-Sen and the Kumo, Kijun does not have a no-trade zone. 

    The main drawback of this strategy is when the market is not trending. Even with all the filters, some will slip by. Adding more filters will probably just diminish the number of trades and the P/L line, not necessarily the win rate

    Trading different time frames require settings adjustment for each component of the strategy. Of course, this concept will work with different filtering methods such as higher timeframe CMF or even two CMF indicators with lower and higher settings. When they all align we can have some certainty it is not a false signal

    Understand the strategy has many ways to be improved, however, avoid adding too many tools or rules, more is not better. Strategies should remain simple and more importantly followed to the letter, even if you had a losing streak. There is no way to filter all the false signals, what you can do is to notice when the market is choppy or flat. You can do this just by looking at the chart or incorporating a volatility/volume indicator instead of the zone lines we have added to CMF. The example above should be regarded more as a thinking process when you build a strategy – cut the losses with the right tools and rules, and test it with new settings. 

    If this CMF strategy construction made you excited to make one for yourself, then our goal is complete, you are on the right track to becoming a pro. If you need more we still have 2 more successful trading ideas to show. Pull up your sleeves and see you in part 4 of the series!

    Categories
    Forex Basic Strategies Forex Trading Strategies

    Renko Charts Trading Strategy

    The following strategy example is similar to our previous Heikin Ashi strategy, however, this one is more radical in noise reduction. It is the Renko chart strategy. Besides, it is made for scalpers. Without further ado, let us dive into what is so special about this one that made it on our list of successful trading examples. 

    This tool that transforms the classic chart view is not very popular since it cannot be used for Price Action analysis, at least not in a classical way. It is the ultimate solution to noise reduction and it will also make plan following easier for a beginner trader. It does not mean it is a less effective tool, just not well understood, and therefore underrated. 

    Renko chart looks like a digitalized, low-resolution classic candlestick chart, making small price waves blend into one brick. The bricks are all of the same shape and height forming up and downtrends at the same angle. Renko does not have a defined timeframe but a pip dependency when a brick will form, meaning until the price moves a certain amount of pipis up or down a new brick will not be formed. It is up to the trader to set the range for the brick size and ultimately traders will rarely see a flat period with Renko. Renko could be considered as the pure trend charting, and this is great since trend trading is proven to be one of the best ways to trade. 

    Setting the Renko box or brick size depends on your trading style, some traders who like to swing trade will use a 10-pip box setting, more active traders will like a 5-pip resolution, but Renko will serve equally well on all if you balance all strategy tools to work in tandem. Of course, optimization will require a lot of testing. 

    Here are a few hints on how to set up a box size, it is the only setting for the Renko. 

    • Fixed box size is a classic way to adjust Renko’s strategy. It can also be in cents or ticks units, not only pips if you want other assets besides forex currency pairs. For scalping, intraday, action-packed trading use smaller sizes such as below 5 pips. Trading on a longer-term, a comparison to the daily timeframe and higher in classic charts, 10-pip box size settings is recommended. The settings you set here have the biggest impact on how your strategy will work out. Just remember Renko is a noise canceller, setting it too low will just make it a pointless tool. The ideal box size is hard to find, however, once you find it your work on optimization will be 90% done. 
    • ATR box size setting might be superior to the standard fixed box setting since volatility is counted in. Average True Range measures volatility for 14 periods by default and it is measured in pips. This pip value is your box size setting. Now, on smaller time frames, ATR is lower and vice versa, but consider daily chart ATR value first for swing trading. 

    Some traders do not like ATR adjustments to the box size, simply because Renko brick stamping and chippiness can change during the day and volatile periods. You can try both ways and see if it makes any difference. Note that the daily ATR chart is not changing too much that it disrupts the flow of Renko movements while smaller time frames can change 20% in just a minute.

    Renko boxes tend to resist the trend change. To explain, if you set the box size to 5 pips any trend-changing box will appear only when 10 pips move in the opposite direction. 9 pips will not be enough for a correction brick. If you see a drawdown that is not reflected on a Renko, this is why. To give this drawdown information back to Renko, you can enable wicks that reflect this price action. Of course, by doing this you allow some noise back in. Since we want Renko to fulfill its purpose we do not use wicks. 

    Price Action style analysis can still be applied, but now it will be much clearer with Renko. Note the Support and Resistance lines will be on a higher grade, meaning anything analyzed zoomed-in cannot be precise enough, so use Price Action only to see the bigger picture, not based on 10 or even 20 bricks alone. Pivot points, higher high, lower lows make it easy to plot trend lines and patterns with increased reliability than with classic charts, they just require more past data. This is especially true with Support/Resistance lines since Renko boxes will not form on flat markets thus effectively marking pointy markers for lines. Even if you do not want to use Renko for trading decisions, it will help you on finding key levels on classical charts. The picture below explains how to find supply zones with alternating Renko bricks on the same price level:

    Credit: The Secret Mindset

    Now that we know the best practical examples of how to set up and use Renko, let’s see how we can use it to enter and exit positions. Trends are easy to spot with Renko, any two consecutive Renko bricks in the same direction could be a trend. Of course, if you managed to get most of the noise out with optimal box size setting and filter only trends that have a high probability to trigger your first Take Profit, then you would not need any additional trend confirmation indicators, it may only be a distraction. Our example still uses an MA to eliminate beginner traders’ problems. 

    We will keep it simple – apply a rule when you consider something trending, is it two consecutive boxes, 3, 5? In our experience, exiting on a single changing brick out of the trend might not be a good idea, a scale-in could be a better option. All this depends on the price action levels. We typically set Renko so it does not filter trend corrections since we want to get back into the trend. 

    Exit point rule can be based on the PA levels, on a first changing brick, but only when the price is very close to support or resistance zone. Sometimes this rule might force you to wait for some time if the market is not trending, therefore consider using Renko on volatile currency pairs, indices, crypto, or trending stocks. 

    Adding a Moving Average as a trailing stop is a great fool-proof solution with Renko if you do not want to rely on Support/Resistance zones. Beginner traders that have trouble with exit points can plug in any MA that does not stick to the price too much (not too sensitive). Understand the MA uses Renko bars for calculation, not the ordinary chart. Moving Averages are doing the same thing as Renko, they give filtered trend information. Consequently, you do not need a slow-moving one. Also regarding MA on Renko, our best practice is not to use MA crossovers but Renko brick crossing for an entry signal. Entering a trade once the MA and the entry rule gives a green light is simple and effective. Finally, our strategy template will look like this:

    If you analyze the picture above you will also notice the limitations of this strategy. Unless you trade on stable trending assets or markets you will not benefit much. Exit points might be too late or entries false. Now, our attempt to fix this is counting consecutive bricks to get the picture of trend quality/choppiness. 6 consecutive bricks in a few rows might be enough for a strategy to be at break-even, and all above is a good market to trade. After a while traders do not have to count and spot a good ground for this Renko strategy right away. 

    Categories
    Forex Basic Strategies Forex Trading Strategies

    Chandelier Exit and Donchain Channel Strategies

    In the final article of our five strategy series, we will present one of the most successful strategies containing two not-so-popular indicators. Whatsmore, these two indicators are role-specific and could be implemented in other strategies. What makes them our pick as the most successful example is the fact they completely solve the decision-making process when to enter and when to exit a trade, closely related to risk management.

    Chandelier Exit Strategy

    We will start with the indicator designed to tell you when to exit. It is called Chandelier Exit. If you are wondering why we start with an indicator for exits before entries, it is because entries can even be random, but you need to know how not to turn your profits into losses, and how to keep your losses limited. This is how Chandelier Exit looks like on S&P 500 2020 bull resume run on a daily time frame (blue line):

    One of the most important aspects of trading is knowing where to put Stop Loss and Take Profit orders. These two limiting orders are the backbone of money management that could be realized using this indicator. Notice how the indicator blue line acts as a support for this bull run. In June the price nearly pierced the line, further supporting the trend until it really is the right time to consider long positions in September when the price closed below Chandelier Exit. On the other side, this is a form of a trailing stop that also acts as a profit taker – it closes the long position when the trend is likely over. This way you avoid the pressure when the price is testing the support and avoid letting profits shrink too much. The balance of getting out too early and too late is what this indicator does great by default settings. Additionally, it puts you in a firm seat once the trend is rolling, and emotions at bay. Even though this example is for the bullish trend, the same applies to shorting. 

    The secret of this indicator that creates this balance is the volatility component in its code. To measure volatility, Chandelier Exit uses ATR, the same indicator we use for money management as explained in our previous articles. Highest High and the Lowest Low range in 22 periods (default) is used in the calculus. If you are wondering why 22, it is because a month has 22 trading days. 

    Does it mean you should use it on a daily time frame? The best answer would be to adapt it to your strategy for the best possible outcome. Here is a simple optimization method that could be applied to any indicator: 

    • Backtest a fast setting and then a slow one. Choose the better option and then try 50% slower and faster settings. If the results are better for the slower then keep decreasing the periods until the results stop getting better. Make sure that you have a good trading sample, have at least 100 trades in the first runs or you might not get valid results. Specifically for the Chandelier Exit, try to change the ATR factor first.

    Chandelier Exit acts as a support/resistance line despite its name that sounds as it is for exits only. As the markets are different in volatility, the indicator needs adjustments. For a quick fit, traders eyeball the best entries and exits for obvious trends and then play with the period setting around that number. Volatile markets will require more than default setting while calmer will require shorter. Forex major currency pairs are not volatile as some indices, stocks, or crypto. 

    The picture below shows how the default value of the Chandelier Exit settings is not adequate to the market volatility.

    Credit: The Secret Mindset

    Donchain Channel Strategy

    This indicator measures higher highs and lower lows for the set period (default is 20). It forms a channel similar to the popular Bollinger Bands but it has special properties that are very useful to set up money management. Volatility is the core of what these channels represent, they are expanding when the volatility increases and contract when it is calming down. Now, while it may sound the same as the Bollinger Bands, it is actually the primary element of the famous Turtles Strategy and not a reversal idea stemming from the Bollinger Bands. 

    This strategy follows the breakout principle where the price is breaking through the Donchain channels, meaning the channels are representing support and resistance lines. Whenever the price closes outside the channel it is a signal to enter a trade. If you wonder where to exit, that would be when the price pierces the other side of the channel, signaling an entry just in the opposite way. Now, beginners may question how to find a signal since the channel lines are adapting to the new price lows or highs for the specified period. The answer lies in the line extension. Simply just draw or imagine an extended horizontal line covering the channel wall before the latest candle and see if the price has closed outside the channel. If it is then that is your entry or exit signal. Just do not consider these breakouts as the oversold or overbought areas. 

    The Donchain Channel is very closely tied with the simple Support And Resistance PA trading to the point it is just a facilitator so you can see the lines. As with the S/R trading, previous resistance that was violated becomes support and vice versa. As for money management, Stop Loss acts as the profit taker and as the loss limiter. Placing the Stop loss on the chain lines is actually a trailing stop that you can move manually or you can set up a custom one that follows 2xATR value in 20 periods which is also the default for the Donchain Channel. 

    Another option for money management is to use the midpoint of the channel as the exit line. Some traders use this type for more active trading where the exit is more aggressive to capture profits. However, entries then should also be more frequent since long trend following is likely to be interrupted with shallow exits at the midpoint. One more option that is often overlooked is to use the midpoint as the first Take Profit point and then moving the Stop Loss to breakeven. The remaining half of the position might continue if the trend resumes thus giving you the potential of the long trend while the risk is nullified. Most traders consider this option as the best since it blends the best of the two worlds, following long trends and having some profits while the risk is open only until the first Take Profit. 

    How you set up money management rules should be closely related to the win rate and the Stop Loss/Take Profit distance. If you have a high win rate then consider expanding up the Take Profit distance to capture more gains from a trending market. While the risk amount is up to you, experienced traders do not risk more than 5% per trade of the total balance. 

    You may notice both strategy examples are trend following on mid to long term timeframes, they are not designed for smaller time frames. There is too much noise and sudden high-intensity candles that trigger false signals regardless of the settings. If you still consider using smaller time frames, use the Donchain and the Chandelier Exit with a higher timeframe filter for gauging general trends. This way you ensure a higher probability for a winning trade in that direction. 

    As this is the final example of the series, try to use something out of each strategy to make up your unique setup. Keep perfecting it, even if the effort does not bear winning results, know you have so much more experience that will serve you permanently. 

    Categories
    Forex Basic Strategies

    Trading the Stock Exchange Using the Livermore Method

    Although I’m a trader of Forex, you have to admit there is likely to be more money to be earned on stocks than on Forex, even though it is only a matter of degree. Absolutely, one of the most successful stock traders in history has been Jesse Livermore. He explained his commercial rules basically in two books, but since there were discrepancies between the two publications, there is much confusion about exactly what his system was. After many studies of his writings, I will summarize in this article the general methods he used and which even today can still be used to get spectacular gains.

    First a word of warning: when Livermore was trading on the stock market as a serious professional, it bought and sold its own shares by a margin of 10%. This is very different from most online brokers today that allow trading individual shares. To do this properly and without having to pay too much in fees and commissions, you really need to start with a five-digit sum and one of the highest-ranking brokers.

    There’s probably more money to be made in stocks than in Forex…

    Here’s what Livermore did:

    Step 1 – Determine if the Market is Bullish or Bearish

    Livermore explained that he did not begin to become a real professional until he learned to anticipate big moves in the market. One of the advantages of trading shares is that you can use larger business cycles and conditions to predict whether it is more likely to rise or fall in general terms.

    There are several statistical references of a bullish market or a bear market. Traders can also observe the economic fundamentals to confirm whether there is a bullish or a bearish cycle. Quite safely the simplest system is to use a little simple technical analysis of the main stock indices, with the most important of all the world stock indices being the S&P 500. Moving averages are the most used reference: for example, if the simple moving average of 50 days is above the simple moving average of 200 days, we can talk about the bullish market, and otherwise, we have a bearish market. On the other hand, you may want to analyze whether two consecutive months close above or below the simple moving average of 12 months to determine the same.

    When trading on a stock exchange using the Livermore method, it will only go long on a bullish market and short on a bear market.

    Step 2 – Prepare to Open New Positions 

    Livermore indicated that the job of a stockbroker began with the purchase of shares right at the beginning of a bullish market and then had to endure until the bullish market was over, or short start selling stocks right at the beginning of a bear market, and hold out until the bear market was over. He also said that on some occasions a financial market is not very bullish or bearish, which would indicate the time to close existing positions, but not the time to open new ones in the opposite direction.

    Step 3A – Sector Selection

    The moment the trader is ready to start going short or long, he must decide what stocks to buy. Stock indices can be bought, but the gains can be maximized by taking the shares of the next cycle. This is best achieved through a top-down approach that shows industry indices that are published by several financial services companies. Of course, a study of the economic situation in that sector may also be useful. Theoretically, you have the possibility to see the prices of the sectoral indices and see if they also show up as the largest market index, which is an important confirmation that you are looking at the right sector.

    Step 3B – Selection of Actions

    Livermore negotiated the two most active shares in each selected sector where he wanted to be. Once again, you can use a simple technical method to see which actions are making new highs or lows stronger, in addition to studying companies’ financial data, market share, products, etc. There are two main advantages of being in the two most active values of a sector: firstly, the benefit of diversification, and secondly, Livermore saw that if one of the shares started to behave significantly worse than the other action, This was a clue that indicated that something was probably wrong with that company and when that happened it had to come out of that value.

    An important part of trading shares using the Livermore method focuses on the major companies that are at the forefront of the technological changes that are emerging and of the customer requirements. During the first part of his career, Livermore focused heavily on sugar, steel, and railways, which were key components of economic changes during the 19th century. During the current bullish cycle, he would surely be buying Apple shares in the same way he bought sugar when he was developing new technology to make sugar affordable to the masses.

    Step 4 – Setting the Position

    Livermore liked to buy on the rebounds bullies and sell on the breaks under. It also always increased its new positions and not in equal sizes of positions. I can illustrate this with an example.

    Think for a moment that you’ve managed to identify the beginning of a bullish market. You are interested in shares A and B within sector C. The A makes a new maximum price, higher than those seen for several weeks or months. Livermore would then buy shares immediately, but with only a quarter of the total amount of shares in that market that it would eventually buy. He then waited to see how the operation would turn out. If I continued to climb strongly and make new highs, I would buy again: half of the remaining three-quarters, and then wait a little longer. If the pattern repeated itself, then he bought the rest of the shares he wanted. He said you could use a 1% increase in price as a signal to add positions, but probably used your own criteria rather than a set percentage.

    If at any moment the climb seemed to lose strength, Livermore would leave. As the position gradually increased, he protected himself from more serious losses when he was “wrong” about the momentum of the movement. When he was wrong, he waited patiently until everything seemed right again and tried the operation again.

    Livermore did not use a hard stop loss. It simply left the market when it judged that it had made a mistake.

    Step 5 – Play Tight

    One of Livermore’s most famous dates is “I made more money playing tight than I ever did to be right.” What I meant by that was that no one could foresee every market swing, so go in at first and don’t come out until the whole market has finished its movement. In this way, it is possible to buy a share for 10 dollars and sell two years later at the end of a bullish market for 210 dollars and get big profits. He specifically warned about selling on setbacks for fear that the market was changing and then trying to buy the shares back later. Livermore suffered from this in its early years of trading.

    Conclusion

    Here is a summary of the method of trading shares of a man who was probably the largest stockbroker of all time. One last word of warning: Livermore went bankrupt several times, and this is mainly due to his poor money management skills. He simply risked too much capital in his positions. Be careful with this in this area and do not follow his example.

    Categories
    Forex Basic Strategies

    How to Trade Your Way From 500€ Up to $1 Million

    If we refer to Dan Zanger, Rob Booker, among others, we can say that yes, that they have achieved high returns from relatively small accounts. The secret of both the same: a lot of effort and a lot of perseverance. Obviously, virtually no one is considering achieving high returns from such a small base, but I will prove, at least mathematically, that the fact is possible.

    Step One

    Have the account in micro-lots. The benefits of the accounts in micro-lots allow us to adjust up to the last euro, our monetary management. Being able to add a micro lot more in each operation will make us enter with the right capital, not much, not little, which if we had a standard account, the least we could adjust, would be with hundreds of euros. 0.1 lots = 100€/$ (depending on the currency of the account itself).

    By the time we have a large enough account, it will be time to move to an ECN account. The main advantage that we will have is the drastic reduction of spreads (in many cases, they are below a pip), so it will be easier to get positive trades.

    Step Two

    Have a system, obviously with positive mathematical hope. During the creation of the system, it would be good, at least in my opinion, to look for systems with high success rates. What are the advantages of a system that makes 90% of hits compared to one that makes 50%? Consistency. The probability that the former will make 5 consecutive losing trades amounts to 0.001% while the one that has 50%, make 5 bad trades, is 3.13%. Much more likely.

    If in the first system, we lose 5 consecutive times, we have to worry, since it is very likely that the system has expired at least temporarily, while in the second, we should wait until operation 13.

    Step Three

    Risk. This point can raise blisters among our readers. Here we must read very carefully, and have very clear consequences that can have. An error in understanding can leave us with nothing. Now you see why he wanted a system with a high percentage of hits.

    Let’s start. Let’s deduct: the higher the risk, the higher the profitability, and with this, the faster to get that million euros/dollars. We have a system with a 90% hit, with a Take Profits of 30 pips and a Stop Loss of 120 pips. 1:4 ratio. Matematica Hope 0.13%.

    What number of operations should we do to get to 1,000,000?

    Logically, at greater risk, fewer operations are needed to achieve our goal. The next step we should consider is knowing how many trades we have before we lose all the capital in our account. If at most we want to keep 50€ of the initial 500€, at most we want to lose: (50-500)/500 = -90% of our account.

     

    Therefore, if we have a system that hits 90% of the time, the probability of failing 5 consecutive operations amounts to 1:100,000. Virtually impossible. As we can see, the maximum risk that can be assumed should not exceed 35%, because if we see that the system loses that fifth operation, we will know for sure that the system has abandoned us.

    Suppose now that we have found a system like Tim’s, with 95% of hits. The probability of failing 4 operations amounts to 1:160,000, therefore, we could already reach risk of 40%. In order to reach 50% risk, we should find the system with 98% of hits. If instead, we have a system that is 50% correct, we should wait until operation 17, to know with great certainty that the system has stopped working (probability 1:131.072). Therefore, we could not risk more than 10% per operation.

    Conclusion

    To reach 1.000.000€ we can do it through two routes:

    The traditional route, little risk, little by little, waiting for some 6000 and peak operations (doing one operation a day, and that the system does not fail us halfway, are approximately, about 25 years (one operation a day, during the 52 weeks of a year). The venture capital route, that is, if we lose all our capital, “nothing” happens. In this case, we just have to look for probability, mathematical hope on our side.

    The number of operations according to risk will vary according to the mathematical hope. The system I have proposed has a very low hope. With higher hopes, fewer operations will be needed. The truth is I highly doubt that anyone in their right mind can do a high-risk strategy (more than 10% per trade) by doing manual trading. It is most likely that such “suicidal” strategies can only be done consistently through automatic trading.

    Categories
    Forex Basic Strategies

    Two Ways To Trade The ‘Descending Top’ Chart Pattern Like A Pro

    Introduction

    The Descending Top is a technical chart pattern that frequently appears on the Forex price charts. Each peak of the price in this pattern is lower than its previous peak. The descending top chart pattern’s appearance indicates a downtrend in the market, and we must only look for sell trades at that point.

    This pattern can be recognized when the first peak is lower than the second peak and the second peak is lower than the third peak. For instance, if the first peak is at 88.00, and the price drops down to 83.00, then the second peak at 85.00, and drop to 80.00, and if the next peak is below 85.00, we can see the descending top pattern forming on the chart, and we should then looks out for selling trade in an underlying asset.

    If the next peak is higher than the previous peak, instead of being lower, the pattern gets invalidated, and the market goes up, or it will consolidate. We will often witness the descending top pattern on lower timeframes, and we should not be expecting this pattern to form on the higher timeframes. The reason is that in a higher timeframe, the pullback is very less, and even the trend soon comes to an end.

    To identify the pattern, we must spot two tops on the price chart, which are descending, and then we must draw a line to connect these tops.

    Descending Tops – Trading Strategies

    Now that we know what a descending top pattern is, we will see how to combine it with other technical tools to trade this pattern.

    Channel Trading

    The first step is to identify the descending top pattern on the price chart. After that, identify the bottom between the two tops and draw a horizontal support line. Then wait for the break below the support line to enter a trade. Place the stop loss below the second top of the pattern and ride the trade. As we know, we cannot stay in a trade forever. We have to close our trade at some point. To close the trade, wait for the price to break the channel.

    Example 1

    As you can see in the image below, we have identified the descending top pattern in the EUR/USD 5 minute chart.

    As you can see, when price action printed the pattern, we started preparing to take sell trades, and when the price broke below the most recent support area, it was a sure sign for us to go short. As we took the sell trade, the price immediately came back to retest the support area. Here, we choose to scale our trade at the support line and go for the brand new lower low.

    Initially, our trade goes to a 1.1255 area, and we were looking for more profit in the trade. The trade failed to print the lower low furthermore, and it broke above the channel at around 1.274. Here, we choose to close our trade as that was a sign of the trend getting reversed. The Forex market is all about probabilities. We cannot expect the price to do what we want it to do. Instead, follow the rules of the game. When the market gives less profit, accept it, and don’t try to break the rules.

    Descending Top Breakout Trading Strategy

    As we know, the descending top is a pattern that gives the selling trades. But in this strategy, we will show you how to use it to take the buy trades. To enter a buying trade, we should wait for the price action to break above the descending top trend line. Your stop-loss order must be placed below the last bottom of the chart. Stay in the trade as long as price action prints the brand new higher high and exit your whole position when the prices break below the upper trend line.

    The image below represents the descending top pattern on the price chart, and also it represents our entry, exit, and stop-loss in this pair. As you can see, when the price action prints the descending top pattern, it immediately goes down, and it prints the lower low.

    In this one, we were looking for the breakout above the descending top chart pattern, and when the breakout happened, we were all set to take the buy trade. After our buy entry, price action prints a brand new higher high aggressively. When it gave the reversal signal, we choose to close our whole position, and the stops below the entry should be good enough.

    Strategy Roundup

    The descending top is a chart pattern that gave us potential selling trades. Trading this pattern is quite reliable, and when it gives the trading opportunity, we must trust it and go big. To identify this pattern, we must spot a price top, followed by a lower top. Take an entry below the most recent higher low and go for the brand new lower low and place the stop loss just above the entry. If you desire a safe trade, choose to place the stop loss above the first top.

    We hope you find this educational article informative.  Let us know if you have any questions in the comments below. Cheers!

    Categories
    Forex Basic Strategies

    Trading The Forex Market Effectively Using ‘Renko’ Charts

    Introduction

    If you are a Forex trader, you can agree-many winning strategies exist out there. And Renko charts are among the handy weapons you can deploy to your advantage. This write-up will help you grasp handy tips to get your feet wet, as well as scaling your trading into a profitable trajectory.

    Renko charts are not very popular as bars or candlesticks among traders. However, they can be very profitable when a trader uses them correctly. Renko chart trading is a robust way to analyze price trends, and even superb when you combine it with another tool to confirm entry and exit positions.

    What Is Unique With Renko?

    Well, Renko charts only show you the price movements of an underlying asset without factoring in time and volume. The formation of a Renko bar or body is in one direction. And it forms only when prices move by a predefined amount in pips. You can adjust the number of pips per block to suit your needs or trading strategy.

    Also, a subsequent Renko bar can only form either adobe or below a previous one. It’s that model that shows you the price direction with unique preciseness.

    Their naming arises from Japanese “Renga,” which means brick. Therefore, Renko charting arises from a series of blocks. In the light of Forex trading, the charting of the blocks moves up or down with prices.

    Advantages of Trading Forex using Renko charts

    1. Renko charts are simple in both ease of interpretation and use.
    2. Great for determining the levels of support and resistance.
    3. Traders can adjust the block sizes to suit their trading needs.
    4. Renko charts are great at signaling price breakout or reversal.
    5. Ideally, Renko charts only show you how prices are moving.

    Overall, Renko charts give traders an edge with overly volatile commodities like Oil and Gold. The charting digs deeper into the pricing histories. The charting model behind Renko builds on plotting price on the -Y-axis Vis a Vis time.

    Renko beats conventional price-charting by removing insignificant price movements.

    There are three metrics that Renko shades off from ordinary price action. And they are:

    • Any false price breakouts
    • The candle-wicks
    • The price volatility

    Ideally, it pays attention to the critical metrics: support, resistance, and the trend.

    Whenever prices move, Renko converts that into a commensurate block on the chart. And every block forms after price confirmations. The reality is, Renko charts do not work with partial blocks. They have to be wholesome and in line with the set numbers per single block.

    As a trader, it makes great sense if you’re able to sift out short-term fluctuations out of a price chart. Beauty is Renko charting is a great tool at that. Price volatility is the greatest enemy for many traders, especially if you can only bring in a small trading margin.

    While most traders can establish trends from normal price- charting, Renko charting is another wholesome set of trading tools to help you sharpen your decisions while trading.

    More Pointers with Renko Charts

    As indicated earlier, Renko charting creates blocks after by concurrently establishing the closing positions of a previous block. Next, subsequent blocks can only form either below or above a previous one.

    Using the precedence above, Renko charting brings you a precise tool into your trading arsenal to help you view trends more clearly. Along with that, it’s also important to calculate the most appropriate block size – in line with the asset you target to trade.

    Calculation of Renko blocks

    There are two documented methods for the determination of the optimal sizes of Renko blocks.

    First is the ATR or Average True Range. It relies on the ART indicator to determine the height of an ordinary candlestick.

    Second is the model where a trader provides a predefined value for the size of a block.

    So, new blocks only form when price movements meet the minimum value set for a block.

    Sniffing a Buy Opportunity with Renko Charts

    Image credits: best-trading-platforms.com

    Renko charts help traders spot trend directions very clearly. And there are two ways to spot an opportunity to go long. Using the image above, a monthly view of a stock’s prices is visible. Simple, green bricks signify uptrends, while the ref ones signify the downtrend.

    Primarily, the years 2017 and 2019 are trends – good opportunities to go long (buy). Towards the end of 2018, there’s a trend reversal (bricks turn red- the opportunity for buyers to exit and pocket profits)

    Also, the same trend reversal creates an opportunity for traders to go short and also take profits. Look at 2019 also; the green bricks signify the continuity of the uptrend.

    Image Credits: best-trading-platforms.com

    Look at the figure above, the EUR/USD pair oscillations ranging from 1.0500 – 1.1500 from 2015 through to -2016. Also, notice the uptrend starting from 2017 but with a reversal along the way. Uptrends are opportunities to go long, while downtrends are opportunities to go short.

    Pro Tip: If you are looking to upscale your trading success, Renko charts greatly help. However, ensure that aside from mastering them, it’s excellent to confirm the trends, support, and resistance levels using one or more indicators.

    Keep in mind that trading success arises from careful analysis of entry and exit positions. Upfront, it may seem cumbersome – taking time to do the due diligence in the analysis. Utmost, do not trade with emotions. Renko charts and many other tools will help you sharpen your analysis.

    The preciseness and effectiveness of a strategy arise from long spells of practical use. Renko is a super-tool for scalping when you compare it to classical price charting or bar or candlesticks.

    Other handy trade signal tools to combine with Renko Charts

    • Simple Moving Averages -SME Enter trades with three bars in the direction of the trend and 10 SME sloping downwards or upwards. (This will help you avoid false breaks in a reversal against the trend)
    • On Balance Volume –OBV Enter trades when you confirm the trend and SME as tally that with OBV indicator’s direction.

    Parting Shot

    Renko charting brings in more preciseness for your trend confirmation in line with price action and the trend. It helps you filter out the noise with volume and time and leaves you with price direction only. For successful scalping, incorporating Renko is a better way to go about it. Renko charts help you keep the focus on the trend for position trades and note it’s the reversal in good time to exit.

    Categories
    Forex Basic Strategies

    The Most Reliable 5-Minute Forex Scalping Strategy

    Introduction

    Scalping is a type of trading that involves placing many trades in a single day to profit from minor price changes in the Forex market. Traders who use this strategy are known as scalpers. It is crucial to have a robust exit strategy for scalpers to earn large gains from small market moves.

    Scalping strategies are mostly applied to the intraday markets, and the trade holding duration can vary from a few seconds to minutes. For novice Forex traders, this type of trading is not recommended as scalping involves a fast-paced activity that requires precision in timing and execution.

    We must always use a smaller timeframe such as a 5-min or 1-min for scalping the Forex market. We can use various reliable indicators for scalping, but in this article, we’ll learn how to scalp the 5-minute timeframe using Bollinger Bands.

    Why Bollinger Bands?

    Bollinger Bands is a technical analysis tool that was developed by John Bollinger. This indicator is composed of three lines as follows – A Simple Moving Average, which is the Middle band, the Upper Band & the Lower Band. The usage of Bollinger Bands indicator goes like this – the closer the price action moves to the upper band, the more overbought the market. Likewise, the closer the price moves to the lower band, the more oversold the market. The bands in this indicator widen and contract based on the market volatility. They expand when the market activity is increased and contract in choppy or less volatile markets. Let’s use this indicator in the 5-min timeframe to identify potential trading opportunities.

    Scalp Trading With Bollinger Bands

    We must go long when the price hits the lower band and look out for short-selling opportunities when prices hit the upper band. This is the traditional way of trading the market using Bollinger bands which is still being used by scalp traders across the world. The reason why this strategy is famous is because of its ease of usage and its ability to milk quick buck from the market.

    Scalping Ranges – Example 1

    In the below price chart, you can see that we have taken five buying and four selling trades in the EUR/NZD Forex pair. In this example, we have applied this strategy in a ranging market. When the price approached the support line, and when it also hit the upper Bollinger band, it is an indication for us to go long. Similarly, when the price goes near the resistance line in a range, it is an indication for us to close our long positions and look for selling opportunities.

    By doing this, we have been continuously engaged in the market and made some consistent profits overall.

    Example 2

    Below is another example of scalp trading the Forex market when it is in the consolidation phase. Typically in a range, both the parties have equal strength. Also, it is a known fact that it is comparatively hard to trade the consolidation markets than the ranging markets. However, using this strategy, we have managed to take five buying and three selling trades in the GBPJPY Forex pair.

    Scalpers typically go long or short when the price approaches the upper or lower range lines. This is the right approach, but by pairing that strategy with an indicator like Bollinger band can drastically increase the probability of those trades. The USP of the Bollinger band indicator is that it works well in all the types of market situations. It really doesn’t matter whether you scalp the ranges, channels, or even trends; this strategy will always provide reliable trading opportunities.

    Example 3

    In the below price chart, the price was dragging towards the upside, indicating a buying momentum, but it ended up forming a channel. In a channel, both parties hold equal power and us being scalpers; it is easy to make money from both sides. Below we can notice that if we go either long or short, we can make an equal amount of money if we are right. This is the major benefit of using Bollinger bands in channel conditions.

    Scalping Trends – Example 1

    Below is the price chart of the AUD/JPY currency pair in an uptrend. As you can see, during the pullback phase, the market gave us the first buy trade. When the price action approached the upper Bollinger band, the price immediately moved in the opposite direction. As a scalper, prepare your mind for these kinds of quick moves. Follow the rules of the strategy to the point, and if any trade goes three to four pips against you, immediately exit and wait for the next opportunity.

    Our third buy trade also performed, but it didn’t go for bigger targets. Instead, the price action immediately reversed, which end up generating a sell signal. The next buy trade was also ended u with minor profits. For scalpers, even a profit of 8 to 10 pips can be considered good in a single trade.

    Example 2

    Below is an example of buying and selling trades in an uptrend in the AUD/JPY pair. We are saying this pair is an uptrend after analyzing its higher time frame. In the lower timeframe, the market may seem to be ranging, but since we know that this pair is up-trending overall, we must consider buying opportunities over sell signals.

    The markets gave us five buying and three selling trades in this pair. Even though we have identifies many sell signals, we recommend not to enter those unless you have confirmation. Always remember that trend is your friend and trade according to the trend. This is the essence of scalp trading the trending markets. Therefore, when scalping trends, always go for bigger targets by following the trend. Also, expect less accuracy on counter-trend trades.

    Conclusion

    It requires a lot of practice to master scalping. Since the time frame is small, you must be quick in everything you do while scalping. Also, talking additional confirmations is not possible in this form of trading because of its swift nature. Please practice these strategies on a demo account before you apply them on the live markets. All the best. Cheers!

    Categories
    Forex Basic Strategies

    Ever Heard Of The Andrew’s Pitchfork Forex Trading Strategy?

    Introduction

    Pitchfork is a technical indicator developed by Alan Andrews. This indicator consists of three parallel lines- These three lines help us identify the possible support and resistance levels. They also do help us in recognizing potential breakout and breakdown levels. With this, we can identify possible trading opportunities in the Forex market. Long term investors use this indicator to identify and gauge the overall cycles that affect the activity of the underlying currency pair.

    Three lines of Andrew’s pitchfork tool are as follows. The first one is the median trend line in the center, and the two equidistant trend lines on each side. Moving from left to right of the chart, these lines are drawn by selecting the three points, which are usually a reaction of highs and lows. As long as price action holds inside the Andrew pitchfork tool, it indicates that the trend is in place. Reversals occur when the price breaks the pitchfork.

    Andrew’s pitchfork indicator can be used on all the timeframes, and it works on every single chart. Note that this indicator works very well on all types of securities, such as stocks, cryptocurrencies, futures, or the Forex market.

    Picking The Three Points

    The first step to know before using Andrew’s pitchfork tool is to select the three points for drawing the trend lines. The first point that we chose must be either a high or low that occurs on the price chart. Once that point is chosen, we must identify the trough and peak to the right and left sides of this point. This must be a pullback, which is opposite in the direction of the ongoing trend. Once these points have been isolated, the indicator is placed on the price chart. The two prongs formed by the peak and trough serves as a support and resistance of the trend as shown below.

    Trading Strategies Using The Andrew Pitchfork Tool

    Mini Median Method

    This one is the most basic and popular strategy used by the traders to trade the market using the Pitchfork indicator. We must place the Andrew Pitchfork tool in a strong ongoing trend and look for the buy/sell opportunities.

    In the below image, we marked a few trading opportunities presented by this indicator.  We can see that when the price hits the lower line of the tool, we went long. Likewise, we have activated sell trades when the price action hits the median line. This strategy is basic, but it provides a good risk to reward ratio trades in a strong trending market.

    In case of a buy entry, exit your position when the price hits the median line. Conversely, take sell when price reverses at the median line, and we can book our profit at the lower line. Place the stop loss a few pips above your entry and ride the move.

    This approach works best for aggressive traders who prefer to pull the trigger when prices reach any significant level. So, if you are an aggressive trader, you can go with this approach. But if you are a conservative/confirmation trader, follow the next strategy.

    For Conservative Traders

    Most conservative traders do not prefer taking many trades in a single day because they tend to seek extra confirmation before pulling the trigger. This Pitchfork strategy is for them.

    When the price action approaches the lower line of the indicator, wait for the price action to hold there to take entry. The holding confirms that the price action respects the dynamic support line, and going long from here will be a good idea.

    As you can see in the below price-chart, the USDJPY was in a strong uptrend. We have identified three opportunities to go long, but out of three, only two trades were held at the lower support line to confirm the entry. Both of our trades worked very well, and they went on to make a brand-new higher high.

    By using this approach, we can safely trade the market. We must always go for smaller stops because the holding at any significant area confirms the power of buyers.

    Breakout Trading

    Breakout trading is a popular way to trade the markets. Most of the highly successful traders, market technicians, chartists, banks, hedge fund managers use this approach to trade the Forex market. In this strategy, let’s understand trading the breakouts successfully by using the Andrew Pitchfork tool.

    The idea is to find a strong trending market first and wait for the price to pullback. When the price gives enough pullback, place the Andrew pitchfork tool on price action and wait for the breakout in the ongoing trend direction. When the breakout happens, take the trade in the direction of the ongoing trend.

    As you can see in the below image, the USDJPY was in an uptrend, giving quite deeper pullbacks. When we got enough pullback, we applied the tool on the price action, and when the breakout happened, we went long. Look for the breakouts only in the direction of the ongoing trend.

    The chart below represents our buy entry and risk management in this pair. We went long when the breakout happened, and the stop-loss order was placed just below the breakout line.

    There are several ways to book our profits. We can use indicators like RSI and Stochastic to confirm our exits. Here we have used the pitchfork itself to book our profit in the above-discussed trade. When we activate a trade at the breakout, the first thing we must do is to apply the Andrew Pitchfork tool in the direction of our trade and wait for the price action to break the tool to book the profits.

    In the below image, we applied the tool when our trade took off, and at around 109.60, the price strongly broke the Andrew pitchfork tool. This is an indication for us to close our whole buying position. Also, you can notice that after our exit, the price action blasted to the south.

    Conclusion

    Just like other trading tools, Andrew pitchfork is not perfect. We need to have strong knowledge of the money management techniques in place before using this tool on live markets. If you are a novice trader, it is advisable to gain experience by experimenting with this tool on the demo account. Using this tool first hand, we are sure that you will discover various ways of using this tool. This will enhance your ability to understand the market better. Cheers!

    Categories
    Forex Basic Strategies

    Successfully Scalp Forex Pairs with these Two Tools

    Introduction

    Scalping is a short term trading style, and it is quite popular among professional Forex traders. This type of trading is more concise than day trading, which involves traders placing buy/sell orders throughout the trading day. But Scalping is different. Scalpers believe that making money from the small price action moves is easier than waiting for the considerable moves.

    For scalping, our focus should be mostly on technical analysis rather than fundamentals.  By using technical analysis, traders use historical price information to predict the future price movement. To be successful in scalping, traders must have live feeds, direct access to the broker, and have the stamina & patience to sit in front of the computer and place as many trades as possible in smaller time frames to make money.

    Scalping typically requires smaller timeframes such as a 5-minute, 15-minute, or even 1-minute charts. Some traders also use the tick chart or 30-seconds chart to scalp the Forex market. However, it requires an advanced skill set to be successful at this because the lower the timeframe is, the faster it moves. In this article, Let’s learn how to scalp the 1-minute Forex charts using Pin bars and Trend lines.

    Pin Bars

    Pin Bar is a candlestick pattern that consists of only one candle, which represents a sharp reversal. There are two types of Pin Bar.

    1. The Bullish Pin Bar’s closing price is higher than the candle’s opening price, and the candle’s wick must be two to three times longer than the real body.
    2. The Bearish Pin Bar’s closing price is lower than the candle’s opening price, and the tail of the candle must be two to three times longer than the real body.

    Trend Lines

    Trend lines act as an essential tool for analysts while performing technical analysis. These lines are a visual representation of support and resistance levels in any trading timeframe. Traders apply these trend lines on the price charts to get a clear picture of the ongoing trend to make an accurate trading decision. Also, the trend lines on the highs and lows of the price chart create a channel.

    Trading Strategy – Pin Bars + Trendlines

    The one-minute trading timeframe volatiles a lot, and this small timeframe never moves in a single trend. We will always see the transitions from buy trend to sell and sell trend to buy in less than a couple of minutes. This is the essence of trading the lower timeframes. Therefore, before trading the one-minute timeframe, it is advisable to let go of all of your rigid trading beliefs.

    Most of the scalpers fall into their ego and deny to close their losing positions. If you fall into this trap, then scalping is not for you. You must have a strong mindset and follow the rules like world-class traders to scalp the Forex market successfully.

    Buy Examples

    As you can see in the below image of the GBP/CHF Forex pair, the price was in an uptrend. Whenever the price approached the trend line, buyers immediately came back and printed a Pin bar candle, which is an indication to go long.

    In this example, the market gives us three buying opportunities, and all the three trades performed well. When you take an entry at the pin bar formation, and the very next candle goes against you and closes below the pin bar, it is an indication for you to close your positions and wait for the next signal. On a one-minute time frame, always go for 2-3 pip stop loss and 6-7 pip targets only.

    Below is another buying example in the GBP/AUD Forex pair. Here, the market gave us only one trading opportunity. As the price chart implies, the buyers were in complete control, and the price action is moving calmly. This means that there is a very less chance of spikes or fake outs. It is always advisable to find the less volatile currencies and try not to scalp the opening hours of the market.

    Sell Examples

    In the below USD/CHF 1-minute Forex chart, the overall trend was down. We can see the price printing the pin bars twice in a downtrend, which indicates us to go short. There are various ways to close your positions. We can choose any significant support/resistance area to book profit or close our positions when the price action starts to lose its momentum.

    Some scalpers prefer to ride longer moves based on the market circumstances, while some like to close their positions after making 5 to 6 pips. So exiting completely depends on your trading style.

    Below is another selling example of this strategy in the USD/CHF Forex pair. When price approached the trend line in a downtrend, we can see the market printing Pin Bars. This shows that the price action is ready to print brand new lower lows. Activate your trade when the market gives both the signals. In healthy market conditions, expect brand new lower lows or higher highs, and please avoid trading choppy market conditions.

    Conclusion

    Scalping proved to be a great way to make profits in a very short time. Make sure to understand that it requires a lot of hard work, patience, and dedication to master trading the lower timeframes. The more the trades you get into, the more the amount of money you will make. Scalping can be very difficult in the beginning, but with some practice and a right strategy, you will get the hang of it.

    It is hard to scalp the 1-minute chart by using price action alone. Most of the highly successful scalpers use some indicators and candlestick patterns to confirm the market trend. Using the pin bars and trend lines on the 1-minute chart will help you filter out the bad trading signals, and this will drastically enhance the odds of your trades. Cheers!

    Categories
    Forex Basic Strategies

    Top 3 Terrific Ways To Trade Price Channels Like A Pro

    Introduction

    A price channel is a state of the market that slopes up or down bounded by a trendline above and below the asset’s price. The upper trend line acts as a resistance to the price, while the lower trend line acts as support. The price channel helps traders maintain the focus on the price alone, unlike the other trading tools, which are plotted directly over the price chart. In an uptrend, as long as the price advances and moves within the channel, the underlying asset trend is considered bullish. The break below the channel line is a sign of the trend being reversed. Two main components of the price channel are the Main Trend Line & the Channel Line.

    Main Trend Line – It takes a minimum of two to three points on the price chart to draw the trend line. The line sets the tone for the price slop as well as the trend. To draw a bearish trend line, we need at least three reaction points at the highs. To draw a bullish trend line, we also need two to three reaction lows on the price chart.

    Channel Line – After drawing the main trend line, we draw the channel line parallel to the main trend line. For drawing the channel line, we also need two to three reaction highs and reaction lows in accordance with the trend. This channel line also acts as a support in an uptrend and resistance in a downtrend.