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Forex Trading Strategies

STRATEGY 5: Market context + KEY levels

Foreword

All our strategies are based on input setups that have a prior market reading context, which is equal to, or more important than the pattern itself. We recommend learning with Forex Academy traders to contextualise the market, so we always know what situation we are in.

With this being said we are going to see what this strategy consists of and how we apply it to the market.

The strategy

This is one of our favourite setups. The first step is to identify the KEY market levels, i.e., price levels where historically the price reacted either by reversing, or at least by slowing down and prior price behaviour at these levels can leave clues for future price behaviour. There are many different ways to identify these levels and to apply them in trading. KEY levels can be identifiable turning points, areas of congestion or psychological levels.

The higher the timeframe, the more relevant the levels become.

When we have a price where two or three KEY levels come together, that price becomes an excellent trading zone.

We can see the setup in the following chart (click on the image to enlarge):

In this example, we can see the FDAX chart in a 1-minute timeframe. We have a bearish context: Short channel with a distribution phase in top and Elliot structure. Obviously, this is impossible to explain on a folio, the vital thing to understand is: when is the proper time to enter the market.

The first signal appears in the confluence between the top of the channel and the blue resistance. We mark it with a red arrow. You have to know that in a bearish context we will look for resistance levels to sell and vice versa in the opposite case.

The next arrow shows how the price breaks a support level, and then makes the ABC correction (pullback) leaving a selling opportunity.

The last arrow is again a classic pullback to a resistance level. In that case, to the green channel. The methodology is the same as on the previous occasion.

KEY levels: Supports and resistances / Bullish and bearish guidelines / trend channel / Fibonacci levels / SMA 200 / High Volume.

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Forex Trading Strategies

STRATEGY 3: CONTEXT PLUS “MINI B”

Forewords

All these strategies are based on input setups that have a prior market reading context, which is equal to or more important than the pattern itself. So, we recommend learning with Forex Academy traders to contextualize the market to know always on which situation we are in.

That said we are going to see what this strategy consists of and how we apply it to the market.

The Strategy

We know that the market moves by impulses and setbacks and that many of these setbacks are in 3 waves, the so-called. A and C are corrective waves, while B is impulsive. Knowing this behavior, and that the B often reaches the F62 of A, we can try to catch the C wave.

We can use graphics to make this explanation clearer.

In the center of the graph, we see how the price is falling and leaves us with a candle of climatic volume. As we already know, these candles are usually not followed, so we expect a correction. We know that the most usual corrections ABC patterns, so when B arrives at F62 of A, you can try the length to search for C. Remember that context is essential, in this case, the climax helps us.

Let’s go with another example:

Now we are looking at the graph of the DAX in the 15-minute time frame. We see how the price is in a bearish trend, and according to Elliott’s count, we are doing wave 4, and then doing the last bearish leg or wave 5. This wave 4 is a correction of the bearish trend, and as we have already said, the corrections are often in ABC. The context tells us that when the B reaches the F62 of A, it is a good area to look for a length and take the C.

We remind you that you must always combine context with setup, and in this case, it is understood that this pattern is not worth much without a proper context behind it. This is what happens with everyone, but we believe that with this example, it is shown clearer

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Forex Trading Strategies

STRATEGY 2: CONTEXT PLUS CLIMAX

Forewords

All these strategies are based on a series of input setups that have a prior market reading context, which is just as important or even more important than the pattern itself. We recommend learning with Forex Academy traders to contextualize the market, so we are always aware of the present situation.

That said, we are going to recap the basis of this strategy and how it can be applied to the market.

The Strategy

A climax is nothing more than a candle that we see at the end of a trend. Whether bullish or bearish, it has a lot of range, a large volume, and typically closes far from maximums in case of a bullish candle, or far from minimums in the case of a bearish candle. These are candles that mark a stop in continuation, and, for expert traders who know how to analyze them, they produce very good results.

Let’s see an example so that we can see the facts:

This is a graph of the DAX-30 1-minute chart, buy logically, these patterns are valid for any timeframe and market. When we have a candle with climatic volume at the end of a trend, we understand that a climax could happen, which means a pattern of no continuation. It is a very typical movement to finalize trends and create a market reversal, or at least to correct the current trend.

A simple way to trade climaxes is to look for volume discrepancies when the price falls (or rises) back towards the area of large volume.

In the example of a sale climax, we see how the price falls again, making a double bottom with volume divergence, hinting that the test to the offer to make up the bullish rally was right.

A bit further to the right in the graph, it shows a buying climax. Here the price moves to test the area (f62) with much less volume, implying that the demand test to begin the bearish rally is valid.

Categories
Forex Trading Strategies

STRATEGY 1: CONTEXT PLUS DOUBLE CONFLUENCES

Forewords

All these strategies are based on setups that have prior market reading knowledge, which is just as important as the pattern itself. We recommend you to learn using Forex Academy’s educational articles and videos to contextualize the market, so you are always aware of the present situation.

That said, let’s see what this strategy consists of and how we apply it to the market.

The Strategy

A confluence is nothing more than a price level where two or more key levels converge that act as support or resistance. If you are in a Bull market context, and you see that the price falls back to an area where two or more supports come together, you will have a pattern to enter the market long.

We are going to see some real examples in the graphs so that we can understand better what we are showing.


On this chart, we see the Dow Jones index in the 60-minute timeframe. A few days ago, the price had decreasing highs, which allowed us to draw a bearish trendline. That trendline was broken with an upward momentum, which turned the old resistance into a possible future support zone if the price were to pull back on it.

Looking at the short term, we also observe that the latest market lows were increasing, a situation that always calls for a bullish trendline. We see on the chart that there is an exact place where these two guidelines converge and that the price comes to a support level near this figure. This gives us a very good area to enter a long position, protected by two supports. Also, in the graph, we can see that the 200-period Moving Average is moving just below it, which provides even more value to the area.

Let’s see another example, but with resistance in this case.

In this image, we can see the 1-minute DAX index chart. We observe how the price is producing decreasing highs, which allows us to draw a bearish trendline.

In the first half of the current session, the price opened with a bearish gap and closed with bullish momentum. Then the market turned down to a bearish momentum that ended with a false dilation of the lows. If we draw the Fibonacci retracements on that bearish momentum, we can see how the Fibo-62 guideline converges in the same area, creating an important resistance where the price is likely to rebound. The red arrow would show the short-entry zone in this case.

In these two examples, there is no indication of whether we have a context for or against because that requires a much more in-depth analysis of various times frames. But as we have already mentioned, to learn how to assess the context, you will need to study on live markets with the help of experienced traders.

If you combine a favorable context, that is, a setting showing you the likely direction of the market, and a zone of confluences where the market can support and continue to favor the context, you would be able to build very powerful setups.

 

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