Category: Forex Basic Strategies

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.

 

 

 

 

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.

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.

 

 

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.

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.

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.

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.

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.

2. 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.

3. 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.

 

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

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.

 

2. 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.
3. A SUPER FAST PLATFORM – Your 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.

4. 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.

2. 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.

3. 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.

4. 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.

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.

2. 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.

3. 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.

4. 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.

5. 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.

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.

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.

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.

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.

 

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.