Tag: take profit

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Forex Basic Strategies

Pairing Stochastic With The ‘Double Bottom’ Forex Chart Pattern

The double Bottom is a technical chart pattern, which helps to identify the change in the direction of the selling trend. The pattern looks like W in shape and it is quite a popular pattern among technical traders. In other words, double Bottom is a bullish reversal pattern. Most of the time double bottom reversals […]

The double Bottom is a technical chart pattern, which helps to identify the change in the direction of the selling trend. The pattern looks like W in shape and it is quite a popular pattern among technical traders. In other words, double Bottom is a bullish reversal pattern. Most of the time double bottom reversals […]

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

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

Psychology Behind This Pattern

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

Trading Strategies Using Double Bottom Pattern

Double Bottom Pattern + Bullish Candlestick Patterns

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

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

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

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

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

Double Bottom Chart Pattern + Stochastic Indicator

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

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

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

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

Conclusion

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

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Forex Course

147. How To Detect A Fakeout like a professional Forex trader?

Introduction

Introduction

Introduction

It is a general perception among Forex traders that the fakeouts are caused by the banks and large institutional players to stop retail traders players from moving the market in their desired directions. Although there is no evidence to prove this theory, we believe it is true. The manipulation is done by the big players. A fakeout is simply a failed breakout, and most of the time, they occur at significant areas like support, resistance, trend lines, Fibonacci retracement levels, and chart patterns, etc.

Typically, fakeouts are the result of a battle between both the parties on the price chart. So if you are witnessing a range and if we see both the parties printing aggressive candles, we can expect more fakeouts. The same applies to the trending markets as well. The aggressive battle between the buyers and sellers for domination leads to frequent fakeouts.

Trading Fakeouts

It is a common perception that it is impossible to trade these fakeouts, but that is not true. We can trade fakeouts, but a lot of market understanding is required to do so.

#1 Strategy

The image below indicates a fakeout followed by an actual breakout in the EUR/GBP Forex pair.

As we can see below, when the price breaks above the breakout line, it started to hold there. If it didn’t hold, it means that the price goes above and came back into the range. So in our case, hold above the breakout line confirms that the price is not going to fake out, and riding the buy trade from here will be a good idea.

#2 Strategy 
Buy Example

The image below indicates a false breakout in this Forex pair.

As you can see below, we choose to enter a buy trade after the price action fakes below the major support area. We can see that it is eventually coming back and holding at the support area. This holding support clarifies that the sellers failed to move the market.

Now buyers are coming back and holding the market to go for a brand new higher high. We can see that price action respecting the trendline for a while, but then it breaks above the line, printing a brand new higher high.

Sell Example

The image below indicates the appearance of a faker on the EURGBP sixty-minute chart.

The image below represents our entry, exit, and stop-loss in this Forex pair. The pair was in an uptrend, and as it tries to go above the resistance line, it immediately came back and stated holding below the resistance line. This confirms the faker, and after our entry, prices go back to the most recent lower low.

That’s about identifying Fakeouts and how to trade them. Please be sure to trade these fakeouts only when you are absolutely sure about them. All the best.

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Forex Basic Strategies

Trading The Forex Market Using ‘Price Action With Context’ Strategy

Introduction

Introduction

Introduction

Price action with context is a process to predict a currency pair’s movement by reading the chart. The key price driver of a currency pair is fundamental events, but we can predict the future movement based on the present and past activity of the chart.

Central banks and financial institutes drive the forex market. Therefore, when they make the price move, they left some signs of their activity. As a price action trader, we will read their activity and anticipate what they might do in the future.

What is Price Action?

Price action is a process to inquiry about a currency pair’s price development. The main aim of the price action trading is to understand buyers’ and sellers’ sentiment in the price and predict future movement based on these. The price action trading is based on the combination of several trading indicators and price behaviors. Therefore, you might have to use multiple trading tools as a price action weapon.

The price of a currency pair moves based on the sentiment of buyers’ and sellers’. Therefore, using price action is logical that can provide accurate trading signals. In the price action with context trading strategy, we will identify a market direction by reading the chart and then enter a trade from the correction to get the maximum return with a minimum risk.

What are Price Action Weapons?

There are many parts in the price action trading that a trader should know, like- candlestick, support and resistance, trend, market flow, event level, key Level, and market context.

Candlestick

Candlestick represents the price movement of a currency pair for a specific timeframe. The four major parts of candlestick trading are- opening price, closing price, high price, and low price. Candlestick represents both continuation and reversal price direction based on the opening, closing, high and low. There are many candlestick patterns in the market, but in this trading strategy, we will focus on reversal candlesticks only.

Example of reversal candlestick – Pinbar, Engulfing Bar, and Two Bar, etc.

Support & Resistance

Support and resistance are a price zone from where the price is likely to change the direction. When the price is moving up, it will reverse as soon as it finds resistance. On the other hand, the price will stop moving down as soon as it finds a support level. There is more to know about the support and resistance in this trading strategy-

Event Level – Event level is a price zone that works as both support and resistance. It is the most important Level as both buyers and sellers put attention to it.

Key Level – key levels are a significant level in the daily or weekly timeframe to understand the price’s top and bottom.

Dynamic Level – Dynamic levels move with the price rather than a specific horizontal zone. In this trading strategy, we will use 20 Exponential Moving Average as the dynamic Level.

Market Context

Market context is a process to identify the nature of a trend. It has four elements:

Impulsive – When the price aggressively creates new highs and lows, it is considered as an impulsive trend. It indicates that the price will continue the current trend.

Corrective – In a corrective market structure, price barely creates new higher highs or lower lows. It is an indication of market reversal.

Volatile Trend – In volatile trends, the market follows the corrective structure and indicates a market reversal.

Non Volatile Trend – Non-volatile trend appears with the impulsive market momentum when the price tries to continue the current movement.

Bullish Price Action Trade Setups

Find the market in an impulsive bullish pressure in H4 or daily timeframe. Identify the Key support level and consider buy trades only as soon as the price is trading above it.

Entry

To enter the trade, you have to wait until the price comes down towards an event level with a corrective structure in 1 Hour timeframe. Enter the trade as soon as the price rejects and closes above the event level with a reversal candlestick.

Stop Loss

Put the stop loss below the recent swing low with 10-15 pips buffer. Here the buffer means you should put the stop loss 15 pips below the swing low.

Take Profit

The primary target of the take profit would be the next event level. However, if the bullish trend remains impulsive, you can extend the take profit. On the other hand, you can close earlier if the price barely creates new higher highs.

In the example below, we can see a visual representation of how to take the entry with stop loss and take profit level.

Bearish Price Action Trade Setups

Find the market in an impulsive bearish pressure in H4 or daily timeframe. Identify the key resistance level and consider sell trades only as soon as the price is trading below it.

Entry

To enter the trade, you have to wait until the price comes down towards an event level with a corrective structure in 1 Hour timeframe. Enter the trade as soon as the price rejects and closes below the event level with a bullish reversal candlestick.

Stop Loss & Take Profit

Put the stop loss above the recent swing high with 10-15 pips buffer. Here the buffer means you should put the stop loss 15 pips above the swing high.

The primary target of the take profit would be the next event level. However, if the bearish trend remains impulsive, you extend the take profit. On the other hand, you can close earlier if the price barely creates new Lower lows.

In the example below, we can see a visual representation of how to take the sell entry with stop loss and take profit level.

Final Thoughts – Trade Management Idea

In the above section, we have seen how to trade using the price action with context. In this trading strategy, buy and sell trades come after filtering out unusual market movements from the volatile market conditions.

However, no forex trading strategy in the world can guarantee a 100% profit, so your trades might go wrong even if you strictly followed all rules. If you want to grow your account with a consistent profit, you should follow strong trade management tools, as mentioned below:

  • Ensure that you are not taking over a 2% risk per trade of your trading balance.
  • Move your stop loss at breakeven as soon as the price creates a new higher high or lower low.
  • If you face a 3 or 4 consecutive losses, take a break and observe the market until it follows the trend accurately.
  • Make sure to keep your mind free from any bias while you are analyzing the market.

Overall, price action is the core element of trading that every trader should know. There are many trading strategies combining price action and other trading tools. The strategy we have seen above has a good history of providing profitable trades. Therefore, if you can implement it properly, you can consistently grow your trading account.

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Forex Basic Strategies

The Most Simple Yet Effective Scalping Strategies You Must Know In 2020

Introduction

Introduction

Introduction

The Forex market consists of are several types of traders. They are broadly classified based on the time frame traded. For example, swing traders use time frames like 1H or 4H, while positional traders analyze the 1D or 1W time frame. Similarly, there are “scalpers” who trade the 1-minute and the 5-minute time frames. Note that scalpers are different from day traders, as they do not consider the 15-minute or 1H time frame for their analysis.

What is Scalping in Forex?

Scalping is a type of real-time technical analysis, where traders make several trades in a small period. Scalping involves entering and exiting from the market within a few minutes and moving on with the subsequent trade. This type of traders aims for tiny profits rather than home runs.

Scalping is usually most popular among forex traders than those trading stocks and commodities. This is because the FX market is the most liquid and volatile market. Thus, traders make use of this benefit by extracting 10-20 from the market in a short time. Since scalping involves making of few pips on a trade, they are traded with big volumes.

Getting Started with Scalping in Forex

Now that we know the basics of Forex scalping, let’s discuss the analytical side of it and then understand some powerful scalping strategies as well.

Timeframe

The ideal time frame to the scalp is either 1-min or 5-mins. However, some traders get an outlook from the 15-min time frame too.

Take Profit and Stop Loss

The most critical part of scalping is to have a take profit and stop loss on every trade. Since you will be using the 1-min time frame, the profit or loss level should be within 5-10 pips. It is risky to keep the TP and SL greater than ten pips when the analysis is based on the 1-min time frame.

Volatility and Liquid

Volatility and liquidity are other vital points of consideration before scalping any market. Forex is indeed the best market to the scalp as it offers the needed volatility and liquidity. However, you must select the right pair to trade because not all currency pairs offer enough market volatility. There are pairs that barely move on the 1-min time frame, and thus traders must end up waiting several minutes on a trade. Hence, it is recommended to trade only major pairs and a few minor pairs.

Spread

Spread plays a major role in scalping as it greatly affects the P/L of the trade. For instance, let’s say the spread on EUR/USD is two pips. The pip value of the pair is $10. If one lot is traded, the expense of the trade would be $20. Now, if a trade yields you four pips, then the net profit would be $40 – $20 = $20. We infer that 50% of the profit gets deducted as a fee. Thus, scalpers always have an eye on the spread.

Forex Scalping Strategies

Scalping strategies are unlike strategies used by swing and positional traders. Scalpers do not wait for several confirmations before entering a trade. Instead, they aggressively enter after a couple of confirmations. Here are some scalping strategies made for non-conservative traders.

Scalping using Moving Average

This scalping strategy, two moving averages – the 5-period MA and the 20-period MA is used applied onto the 3-min charts. Let us understand the strategy with a couple of examples.

Firstly, we must have a look at the overall direction of the market. Note that this strategy is only for trending markets, not ranging markets. In the below chart of AUD/USD on the 3-minute time frame, we see that the market is in a clear downtrend.

Secondly, the five period MA must be below the 20-period MA. When the price action tries to break above five-period MA (yet below the 20-period MA) and falls back into MA, we can open short positions.

The stop-loss must be placed above the high of the candle that broke below five-period MA. One must exit the trade when the price reaches up to 1:1 risk-reward or at a profit of 5 pips.

Scalping using price-volume charts

Indicators are not a must to scalp in forex. Scalping is possible solely using price action concepts. And here is a strategy for the same. This strategy works on a small time frame used on any currency pair. However, we’ll be sticking to the 3-min time frame for all the strategies.

Below is the chart of AUD/USD on the 3-minute time frame. According to the strategy, we can take entry when the market breakthrough a range strongly with high volume. In the below example, we see that the price fiercely broke above the range with high volume too. This is a confirmation that the big buyer is back into the market. Thus, we can take a long position right after the candle closes above the range.

The stop-loss can be placed below the low of the candle that broke through the range and places the take profit at a 1RR ratio. Note that, the stop-loss and take profit must exceed above 10-12 pips.

Scalping using Support and Resistance

Scalping at support and resistance levels is the most popular technique in the forex industry. Yet most traders apply it illogically. Even though the textbook says to buy at the support and sell at resistance, it cannot be applied practically incorporated in the market as there is a pinch of psychology in it. According to this strategy, one must buy at support and sell at resistance only if there is a false breakout prior to it.

Consider the below chart of NZD/CAD on the 3-minute time frame. The gray ray represents the support level. It is seen that the price broke below the support thrice and came right back above it. Thus, one can enter when the price is holding above the resistance post the fake-out. The stop-loss and take-profit for all such trades much be a maximum of 5 pips.

We hope you found these strategies interesting and helpful. If you are an aggressive trader, do try them out and let us know the results in the comment section below.

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Forex Basic Strategies

Heard Of The ‘Piranha’ Forex Trading Strategy?

Introduction

Introduction

Introduction

The forex market is mostly seen to move in a trend or a range. In the previous article, we discussed the rapid-fire strategy, which works best in a trend. The piranha strategy that we are going to discuss is used in a ranging market.

Everyone would have heard of piranhas. They typically take small bites frequently off their prey until it is totally devoured. A single bite may not cause much harm, but it is the frequency of bites that causes the attack to be deadly. In the same way, the piranha strategy was developed to allow scalpers to bite the market and chew off small profits each time.

This strategy is specifically designed for the GBP/USD currency pair, where it is applied to the 5-minutes time frame chart. On average, one can find over 15 trades in a day using the piranha strategy.

Time Frame

The piranha strategy is useful for trading on the 5-minutes time frame. This means each candlestick on the chart represents 5 minutes of price movement.

Indicators

For this strategy, we use the Bollinger band technical indicator with the following settings.

  1. Period 12, Shift 0
  2. Deviation 2

When prices approach the upper band, the market is considered to be overbought, and when prices approach the lower band, markets tend to consolidate. By setting a higher deviation value, the price volatility will be magnified, and we geta a Bollinger band with wider upper and lower bands.

Currency Pairs

The strategy is designed for the GBP/USD currency pair, which is also referred to as The Cable. However, some other currency pairs in which the strategy can be used include EUR/USD, USD/JPY, and GBP/JPY. Since the strategy takes place in short timeframes it is advisable on highly liquid pairs.

Strategy Concept

We will use the Bollinger band indicator to identify the trading range of GBP/USD, after which we will mimic the nature of the piranhas by defining objective entries for long and short positions. Long trades are initiated when market prices touch the bottom of the band, and short trades are taken when prices touch the upper band.

Piranhas are active in rivers and ponds but not in the rough seas with strong currents and waves. In a somewhat similar way, we avoid trading this strategy at times of major news announcements during the U.S. or London sessions, as such environments reflect rough seas with strong currents and waves. We will analyze the GBP/USD currency pair on the 5-minutes chart to look for long and short trades.

Trade Setup

Step 1

The first step of the strategy is to first look for a range on the chart of GBP/USD. The range can be identified using the Bollinger band strategy. However, we need to apply the concepts of price action for the identification of the range. The essential criterion for a range is that the price should respect the support and resistance levels at least twice. After we have identified the range, we will apply our strategy at the extreme ends of the range to take a suitable position in the pair.

The below image shows an example of the kind range that is required for the strategy.

Step 2

The next step is to wait for the market to hit the lower band of the indicator or upper band of the indicator. At the lower band, we will look for buy opportunities, and likewise, if the price at the upper band, we will look for sell trades.

In this example, we see that the price has approached the lower band, which means there is a high chance that buyers will take the price higher from this point.

Step 3

One should not enter the market soon after the price touches the lower or upper band, which carries a huge risk. We need confirmation from the market before we can take a suitable position. In this step, we look for that confirmation. Once the price closes above the middle line of the Bollinger band indicator, it is a confirmation that the support is respected this time and that the price is heading at least till the range’s resistance.

Step 4

In this step, we determine the take-profit and stop-loss levels for the strategy. We have two take-profit levels – the first take-profit is set at the upper side of the range, a typical place for booking profits. Another method is to hold on to the trades until the market shows signs of reversals, which is when the price falls below the middle line of the Bollinger band.

The stop-loss for this strategy is placed below the support of the range or below the lower band. The trade offers a risk to reward ratio of around 1 to 1.5, which is not bad.

Strategy roundup

In the beginning, we mentioned that the piranhas hunt their prey until it is completely devoured. In a similar way, once the trade hits our stop loss, it means there is nothing left, and we need to look for a new setup.

The triggering of stop loss is an indication that the market is no longer trading in that band, and it has started a new trend. In such cases, wait until the market halts and starts moving in a range. The only difference will be that we will be looking for a trade in the opposite direction with the same rules.

This is an important point and a trick that one can use to navigate themselves in trending markets. As the strategy is developed to trade in a range, one will find few opportunities when the market goes into a strong trend.

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Forex Basic Strategies

Trading The Forex Market Using The ‘Bladerunner Strategy’

Introduction

Introduction

Introduction

Moving averages are an important piece in analyzing the charts. Some traders simply use to determine the direction of the market, while others have solid trading strategies. The Bladerunner strategy is a powerful trading strategy based on the 20-period Exponential Moving Average (EMA). The best part about the strategy is that it can be applied to any time frame and currency pair. This strategy is given the term “Bladerunner” because the 20-period EMA cuts the price action like a blade.

What is the Bladerunner Forex Trading Strategy?

A market trading above the 20-period EMA indicates a bullish bias, while a bearish bias if it is trading below the 20-period EMA. If the price retests the EMA, traders look to long or short.

If the price is trading above the EMA, one can prepare to buy the currency pair once the drops and tests the EMA line and bounces back up. That said, if the market breaks below the 20-EMA, it can be comprehended as the market has switched directions – uptrend to a downtrend. Thus, traders can look for shorting opportunities.

On the flip side, if the price action is evidently below the EMA, traders may consider short selling the pair after the price retraces up to the EMA. However, if the market manages to break through the 20-EMA, it signifies that the buyers have taken charge of the market, and a potential reversal could happen. Thus, traders can catch the new trend after a proper test to the EMA line.

Criteria to trade the Bladerunner Strategy

Before taking an entry using the Bladerunner strategy, two criteria must be satisfied:

  1. Before entering based on the strategy, the price must breakout from a range or should already be in a strong trend.
  2. After the first criterion is satisfied, the price must successfully retest the 20-EMA. If the market is trading above the EMA, the test should be such that the price drops to the EMA, touches it, and reverses in the predominant trend. Finally, if the candle closes above the EMA, it is an indication that the uptrend is still active and intact. A similar concept applies to a downtrend as well.

These two points are vital to consider before attempting to trigger the order. Besides, traders who require more confirmation may trade those setups where the price bouncing off from the EMA is also a strong Support and Resistance level or a pivot point.

Trading the Bladerunner Forex Trading Strategy

The Bladerunner strategy can be traded in several ways, given the concept applied remains the same. Novice traders enter solely based on the EMA, while more professional traders combine this idea with their analysis and then execute their trade. Here are a couple of Bladerunner strategies designed for traders of all suites.

Buy Example

Below is the price chart of GBP/NZD on the Daily time frame with the 20-period EMA applied to it.

Reading the chart from left-most, it is observed that the market has been moving sideways in a range. During mid-May, the market finally broke above the top of the range. Also, the breakout happened such that the price was well above the 20-period EMA.

At the beginning of June, the market pulled back down to the EMA and left two tails at the bottom. This is an indication that the market is preparing to go north. Thus, a trader can go long as the holds for a couple of candles above the EMA.

Placements

Stop loss

The stop-loss must be placed few pips below the top of the range such that it is below the EMA as well.

Take Profit

There is no fixed take profit point for this strategy. However, the trade can be closed when the price drops below the 20-period EMA.

Sell Example

Below is the price chart of EUR/USD on the 4H time frame. Initially, the market was ranging, but later it was pushed down by the sellers. After the breakout, the price retraced and tested the EMA as well as the S&R. When the sellers pushed the market down yet again, it is an indication that the downtrend is going to continue.  Thus, one can prepare to go short at these levels.

Placements

Stop loss

The stop loss can be placed safely above the Support and Resistance and the bottom of the range.

Take Profit

Since there is no reference to the left, there is no fixed take profit. However, traders must liquidate their positions once the market crosses above the 20-period EMA.

Bonus Example

Consider the below price chart of AUD/USD on the Daily timeframe. We see that the overall trend of the market is down. The level 0.68745 represents the most recent Support and Resistance area.

To trade this market, we wait for the price to retrace up to the S&R level (grey ray) before entering the trade. Below is the same chart of AUD/USD on the 4H time frame. The pullback for the massive downtrend began in September. Observe that the price action of the retracement is above the 20-period EMA.

Once the price approaches the Daily S&R, it begins to consolidate, yet above the EMA. Later, as the market slows down, the price aggressively drops below the 20-period EMA. The price then retests the EMA, tries to go above it, but gets drawn down by a bearish candle. Thus, when another bearish candle appears, one can short sell the pair.

Placements

Stop loss

Since the market took a turnaround at the S&R level, the stop loss can be placed right above this level. Besides, one should ensure that the stop loss is above the EMA.

Take Profit

This strategy is basically a trend pullback trade that incorporates the Bladerunner strategy. Thus, the take profit can be placed at the recent lows.

The Bladerunner is a great strategy and helpful to several traders because it blends with any other strategy. Do try this strategy by combining it with your primary strategy and level up your trading skill. Cheers!

Categories
Forex Price Action

How Market Tests You and What You May Learn from It

In today’s lesson, we are going to demonstrate an example of a daily-H4 chart combination trading, which has a good lesson to give us. Usually, daily-H4 combination traders look for a strong reversal candle in the daily chart. Then, they flip over to the H4 chart to trigger entry upon consolidation and a signal candle. We get all these in our today’s example, but the price acts a bit differently after triggering the entry. Let us proceed to find out what happens there.

In today’s lesson, we are going to demonstrate an example of a daily-H4 chart combination trading, which has a good lesson to give us. Usually, daily-H4 combination traders look for a strong reversal candle in the daily chart. Then, they flip over to the H4 chart to trigger entry upon consolidation and a signal candle. We get all these in our today’s example, but the price acts a bit differently after triggering the entry. Let us proceed to find out what happens there.

In today’s lesson, we are going to demonstrate an example of a daily-H4 chart combination trading, which has a good lesson to give us. Usually, daily-H4 combination traders look for a strong reversal candle in the daily chart. Then, they flip over to the H4 chart to trigger entry upon consolidation and a signal candle. We get all these in our today’s example, but the price acts a bit differently after triggering the entry. Let us proceed to find out what happens there.

It is the daily chart. The chart shows that the price produces a bullish engulfing candle at a level of support where the price bounces several times. The combination traders may flip over to the H4 chart now and wait for the price to consolidate and produce a bullish reversal candle.

This is how the H4 chart looks. It looks very bullish. The last candle comes out as a bullish candle closing within a level, where the price gets rejection twice. The pair may consolidate here.

The pair produces a bearish engulfing candle. This is a strong bearish reversal candle. However, the H4 buyers must not lose their hope since the last daily candle comes out as a bullish candle. They must wait with hope.

The next candle comes out as a bullish engulfing candle closing above the level of resistance. The buyers may go trigger a long entry right after the last candle closes by setting stop loss below consolidation support and by setting take profit with 1R. Typically, this is an ideal price action to go long for the daily-H4 chart combination traders. Let us proceed to the next chart to find out what happens next.

The next candle comes out as a bullish pin bar. Look at the lower shadow. The price is about to hit the stop loss. However, if the stop loss is set here accordingly, the entry is safe. Nevertheless, the last candle comes out as a surprise for the buyers. It has three lessons to give us. We will learn them in the conclusion. Meanwhile, let us find out how the entry goes.

The price then heads towards the North with a moderate pace and hits the target. The combination traders make some profit out of the trade. It is good. Let us now find out what those three lessons are.

  1. Look at the daily chart again. See the price consolidates within two horizontal levels. There are two resistances. It means the price does not have enough space to travel towards the North as far as the daily chart is concerned. It may have held some buyers in the H4 chart back to go long in the pair.
  2. Set your stop loss accordingly with some safety pips as well.
  3. Be patient. If a trade does not go according to your expectation, do not panic.

 

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Forex Course

125. Trading The ‘Crab’ Pattern Like A Pro

Introduction

Introduction

Introduction

Crab is the last pattern that we are going to discuss in the harmonic group. Just like other patterns, the Carb is also identified and traded using the Fibonacci levels in order to determine the precise turning points. The Crab is a reversal pattern and is composed of four legs – XA, AB, BC, and C-D. Let’s understand them in detail below.

The Four Legs Of Crab Pattern

XA – In its bullish version, the first leg forms when the price action rises sharply from the point X to point A.

AB – The AB move goes against the actual market direction and retraces between 38.2% to 61.8% of the distance covered by the XA leg.

BC – In the BC leg, the price action resumes its original direction and retraces between 38.2% to 88.6% of the distance covered by the AB leg.

CD – The CD is the final leg that confirms the formation of the Crab pattern. Place the sell order when the CD leg reaches the 161.8% Fibs extension of the AB leg.

Trading The Crab Pattern

Bullish Crab Pattern

In the below GBP/USD Forex pair, we have identified the formation of the Crab pattern. The first movement XA can be considered any random bullish move. The second leg AB was a counter-trend, and it reached the 61.8% Fib leg of the XA leg. For the third move, price action goes up, and it retraces 38.2% of the XA leg. The last leg was the CD move, which 161.8% of the AB leg. The fourth leg confirms the pattern formation on the price chart.

We activated our trade at point D with stops below point D and taking profit at point A.

Bearish Crab Pattern

The price chart below represents the formation of a bearish crab pattern on the price chart. The first leg XA was the random move, and second leg AB goes up, and it retraces at 38.2% of the XA leg. The next third leg was the BC move, and it retraces 88.6% of the AB move. The last leg CD was the decision-making move, and it closes at 161.8% of the AB leg.

The trade activation was at point D, and the stop was a bit above the trade, and to book profits, we opted out for the most recent lower low.

Conclusion

The Crab pattern rarely appears on the price chart, but when it does, it provides excellent risk to reward ratio trades. If you are new to harmonic trading, practice trading this pattern on a demo account first and only then trade on the live account. Always remember to trade the Bearish Crab pattern in an uptrend, and Bullish Crab patterns in a downtrend only. Cheers!

Categories
Forex Daily Topic Forex Price Action

The H1-15M Combination Trading in a Bearish Market

In today’s lesson, we are going to demonstrate an example of the H1-15M combination trading strategy offering a short entry. In one of our previous lessons, we demonstrated an example of a long entry. Let us see how it ends up offering us the entry.

In today’s lesson, we are going to demonstrate an example of the H1-15M combination trading strategy offering a short entry. In one of our previous lessons, we demonstrated an example of a long entry. Let us see how it ends up offering us the entry.

In today’s lesson, we are going to demonstrate an example of the H1-15M combination trading strategy offering a short entry. In one of our previous lessons, we demonstrated an example of a long entry. Let us see how it ends up offering us the entry.

This is an H1 chart. The chart shows that the price gets caught within two horizontal levels. The chart shows that the price after getting the last rejection has been heading towards the South. The sellers are to wait for a bearish breakout to go short in the pair.

Here it comes. The last candle breaches the level of support closing well below it. The H1-15M combination traders may flip over to the 15M chart to get a bearish reversal candle for triggering a short entry. Let us flip over to the 15M chart.

This is how the 15M chart looks. As expected, the last candle comes out as a bearish candle. If the next 15M candle comes out as a bearish candle closing below the last candle, the sellers may trigger a short entry. If the chart consolidates, the sellers are to wait for a 15M bearish reversal candle to take the entry. Let us find out what happens here.

The chart produces a bullish corrective candle. The sellers are to wait for a bearish reversal candle to go short in the pair. Usually, if the price makes a correction, it goes towards the breakout level and produces a reversal candle there. Let us find out where it produces a bearish reversal candle for the sellers.

The chart produces a bearish engulfing candle closing below consolidation support. The sellers may trigger a short entry right after the last candle closes. Stop Loss and Take Profit are to be set according to the H1 chart. Stop Loss is to be set above H1 horizontal resistance before the breakout, and Take Profit is to be set with 1R. Let us now find out how the entry goes.

This is the H1 chart. We see that the price heads towards the South with good bearish momentum and hits the target of 1R with ease. After producing the 15M bearish reversal candle, the price never looks back but goes towards the trend’s direction. This is what usually happens in the H1-15M combination trading. The price heads towards the trend’s direction without wasting time.

Do a lot of backtesting in your trading chart to find out some entries based on the H1-15M chart. Then, do some demo trading with the strategy before going live. It will help you be a better trader.

 

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Forex Basic Strategies

How To Trade The ‘Double Top’ Chart Pattern Like A Pro

Introduction

Introduction

Introduction

There are some patterns in the market that are widely used by traders across the world, and the Double Top is one of them. It is a simple and straightforward method of identifying the potential selling trades in any given Forex pair. Most of the novice traders who trade this pattern tend to face problems as they do not know how to use it correctly. Hence, for those types of traders, we are putting this piece together. By the time you finish reading this article, you will exactly know to identify and maximize gains using the Double Top chart pattern.

Double Top Pattern

The Double Top is a bearish reversal pattern that is usually formed at the end of a bullish trend. The two consecutive rounding tops complete this pattern with approximately the same highs. The first rounding top should be formed at a significant resistance area. Most of the time, the momentum of the second round top is quite weak, and this indicates the buyers are getting exhausted.

This eventually means that the sellers are now going to take control. Both the round tops retrace at a significant support area, which we call the neckline. The identification of this pattern can be comprehended as the professional traders and investors trying to obtain the profits from the bullish trend. And now, the markets are ready to publish a new selling trend.

Psychology Behind The Double Top Pattern

We know that the Double Top pattern occurs at the major resistance area. This pattern indicates when the price action reaches a significant resistance area, the buyers are now afraid to buy because of resistance. On the other hand, the sellers are hitting the sell orders at the same resistance area.

At this point, when the price action is pulled back to a significant support area, which we called the neckline, it shows that the buyers are now buying again at major support areas to print brand new higher high. However, when the price action reaches the resistance area again, buyers fail to print a brand new higher high. As a result, they start to book the orders, and now the sellers are gaining control. Hence the price action tends to move in the opposite direction.

Double Top Pattern – Trading Strategies 

There are several ways to trade the Double Top chart pattern. But the strategies we are going to share here are well-proven methods. Also, we have backtested these strategies time and again to make sure they are accurate.

Double Top Pattern + Bearish Candlestick Patterns

There are various bearish candlestick patterns that are widely used by the traders in the market. For this strategy, you can use any of the bearish candlestick patterns. Some of the most commonly used bearish candlestick patterns are Bearish Engulfing, Evening Star, Shooting Star, Hanging Man, Three Black Crows, etc.

The idea is to identify any of the above mentioned bearish candlestick patterns near the second peak. If you find any of these patterns, you can go short. Make sure to place the stop-loss above the resistance line. We can place two or more TP orders. First, take-profit must be at the neckline, whereas the second one can be placed two times above the size of the pattern formed.

Identifying the Pattern

In the below EUR/JPY chart, we have identified the formation of a Double Top pattern.

Entry

As we can see in the below chart, the price action prints a Bearish Engulfing candlestick pattern right after the second top. This indicates that the sellers have completely absorbed the buyers, and now it’s time to go short in this pair. We took a sell entry at the close of the Bearish Engulfing candle.

Stop-Loss & Take-Profit Placements

As we can see, we have entered the market at the closing of the Bearish Engulfing candle and placed the stop-loss just above the resistance line. This pattern has the highest odds of working in our favor; hence we can go with smaller stop-loss. Because, whenever this set-up is found, the price action has a very little chance to spike.

As discussed, the first take-profit was placed at the neckline of the pattern, and the second take-profit was placed double the size of the complete pattern. But, please decide the placement of TP according to your trading style. Remember that you can close your position wherever you want.

Double Top Pattern + RSI

In this strategy, we have paired the Double Top pattern with the RSI indicator to identify accurate shorting signals. As you might have probably known, RSI stands for the Relative Strength Index. It is a momentum indicator developed by the J. Welles Wilder Jr. in 1978. This indicator oscillates between the traditional levels of 70 and 30. When this indicator reaches the 70 level, it indicates that the market is in an overbought condition, and it indicates the market is oversold when the indicator reaches the 30 level.

Here, the strategy is simple. When the price action hits the second peak and starts to struggle, see if is the RSI is at the overbought market conditions. If it is, then it can be considered a potential sell signal.

Identifying the Pattern

We have identified a Double Top chart pattern in the below GBP/CHF Forex pair.

Entry

In the below chart, we can see the first peak and second peak of the pattern being quite strong. When the price action approached the second peak, it dropped immediately. This shows that the buyers are exhausted, and sellers took over the show. At the same time, we can also see the RSI giving a sharp reversal in the overbought area. Hence we can confidently go short in this pair.

Stop-Loss & Take-Profit

We went short when the criteria are fulfilled and placed the stop-loss just above the entry. Take-profit was placed at the higher timeframe’s support area. Overall, it was a 100+ pip trade. If there is no significant support area for you to exit your positions, you can close them when the RSI reaches the oversold area.

Conclusion

Pattern trading is the easiest way to make more profits in the market. Some patterns provide a great risk to reward trades, and some do not. The Double Top is one such pattern that offers some of the best risk-reward entries. This pattern works well on all the trading timeframes. Make sure to know the logic behind this pattern before trading so that any potential mistakes can be avoided. All the very best!

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Forex Course

67. Using Fibonacci Extensions To Place Accurate Take-Profit Orders

Introduction

Introduction

Introduction

We have discussed the many applications of the Fibonacci levels in our previous course lessons. Now its time to explore the scope of these levels in the most integral part of trading, which is money management. We are all familiar with the ‘take-profit’ order and also know how crucial it is to determine the same before entering a trade.

There are numerous ways to determine the ‘take-profit‘ levels to maximize our profits, but the Fibonacci levels are said to be extremely accurate. In this article, we will validate the accuracy of the Fibonacci indicator in determining the ‘take-profit’ levels.

Placing Accurate Take-Profit Order Using Fib Levels

To find a trade, we need first to establish a significant trend. The primary trend could either be a continuation of a previous trend or beginning of a new trend after a market reversal. In the below chart, we can observe the market reversal to the upside. We must wait for its retracement; if the retracement follows all the rules of our Fibonacci strategy (discussed in the Fibonacci article), we can proceed to take the trade.

In the below image, we can notice a pullback coming in from the swing high. We will be evaluating this swing high using the Fibonacci levels. The Fibonacci levels used in this particular strategy for determining the accurate ‘take-profit’ placement are different from the usual Fibonacci levels we used in all the previous articles.

We are going to use ‘Fibonacci Extensions’ instead of retracements here. These extensions can be plotted on to the charts by using an indicator that can be found in most of the trading platforms. We use the Tradingview platform for our charting purpose, and this indicator can be found on the drawing panel of TradingView. It is available in the sub-menu of the Fibonacci tool folder and named as ‘Trend-Based Fib Extension.

To plot Fibonacci extension on the chart, first, click on a significant low, then drag the cursor and click on the recent high. Finally, drag the cursor back to the swing low. We can also highlight the Fib ratios by clicking on the retracement levels. Don’t forget to include the Fib ratios on the chart that are above 100%, as our take-profit methodology is based on those ratios.

The below chart shows how the Fibonacci Extensions are plotted on the chart using the swing low and swing high. We also see from the chart that the retracement is exactly reacting from the 50% Fib levels, which could a sign of trend continuation. But to be sure, it is prominent to have a confirmation candle at this place.

We get a bullish confirmation candle in the direction of the dominant trend, after which a potential trade entry can be made to the ‘buy’ side.

Right after entry, it is essential to determine our take-profit and stop-loss areas. Here is the part where we will be using our Fibonacci Extensions. The strategy is to take some profits at 127%, and then at 141% and remaining profits at 161%.

The take-profit points are clearly shown in the below chart. One can see that the market falls exactly after touching the respective Fib extension levels. By following this method, one can maximize their gains by taking profits at every subsequent point. The risk to reward ratio in this trade is also outstanding.

The below chart shows that the market continues to take support at the 50% fib level and eventually breaks out above our final take-profit order. The trend has completely reversed from a downtrend to an uptrend.

Conclusion

The Fibonacci tool can be used to find potential exit points in a trade with a great degree of accuracy. Hence, rather than taking a simple approach to determining the target points of the trade, we must make use of Fibonacci Extention levels to maximize our grains. Please remember that these extensions are not guaranteed levels too. So it is important not to depend upon them completely. Cheers!

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Categories
Forex Price-Action Strategies

Trading on the Daily Chart: The Inside Bar May Disappoint You More Often

In today’s article, we are going to demonstrate an example of price action trading on the daily chart. In price action trading, a reversal candle or reversal pattern means a lot. Usually, the engulfing candle, track rail, morning start, or evening star are considered strong reversal candles or patterns in price action trading. On the […]

In today’s article, we are going to demonstrate an example of price action trading on the daily chart. In price action trading, a reversal candle or reversal pattern means a lot. Usually, the engulfing candle, track rail, morning start, or evening star are considered strong reversal candles or patterns in price action trading. On the […]

In today’s article, we are going to demonstrate an example of price action trading on the daily chart. In price action trading, a reversal candle or reversal pattern means a lot. Usually, the engulfing candle, track rail, morning start, or evening star are considered strong reversal candles or patterns in price action trading. On the other hand, the inside bar is not considered a strong bearish reversal candle. In the daily-H4 chart combination trading, an inside bar still may offer a good entry since traders take their final decision depending on the H4 chart. To trade on the daily chart, it may be a different case in most cases. Let us have a demonstration of this.

After being bullish for several daily candles, the chart produces an inside bar at a resistance zone. To trade on the daily chart, traders wait for the price to produce a corrective candle followed by another candle towards the trend’s direction. Over here, traders are to wait for a bullish corrective candle followed by a bearish reversal candle closing below the level of support to offer a short entry.

The chart produces a bullish inside bar. Things are going according to the sellers’ expectations. If the chart produces a bearish engulfing candle closing below the last candle’s lowest low, the sellers may trigger a short entry. Let us proceed to the next chart.

The last candle comes out as a bearish engulfing candle closing well below the level of support. The nearest swing low is far enough, which offers an excellent risk-reward. The sellers may trigger a short entry right after the last candle closes.

Things are not going according to the sellers’ expectations. Anyway, the sellers must be patient with the position. Let us proceed to the next chart and find out what the price does next.

The price consolidates for several candles. The last two candles look good for the sellers. However, the level of consolidation support is still held. Do not forget the point that the sellers have been holding the position for the last five trading days.

It makes the sellers wait longer and heads towards the North to hit the stop loss. Taking a loss or getting the stop loss hit is a usual incident in the Forex trading. However, if we dig into this case study, we find that apart from the trend-initiating candle, everything gets A+. In trading on the daily chart, an inside bar may get us a profit on many occasions. However, if we compare it with other strong reversal pattern or candle, the winning percentage may not impress us.

 

Categories
Forex Daily Topic Forex Price-Action Strategies

Trading on the Daily Chart More Rewarding Than It Looks

Trading on the daily chart is very rewarding as well as hassle-free comparing to intraday trading. Trade management is different since it allows enough time for the traders to make a decision about their positions. This often allows the traders to earn more pips. In today’s article, we are going to demonstrate an example of price action trading on the daily chart, which allows the traders to hunt some extra pips. We find out how traders do it.

Trading on the daily chart is very rewarding as well as hassle-free comparing to intraday trading. Trade management is different since it allows enough time for the traders to make a decision about their positions. This often allows the traders to earn more pips. In today’s article, we are going to demonstrate an example of price action trading on the daily chart, which allows the traders to hunt some extra pips. We find out how traders do it.

Trading on the daily chart is very rewarding as well as hassle-free comparing to intraday trading. Trade management is different since it allows enough time for the traders to make a decision about their positions. This often allows the traders to earn more pips. In today’s article, we are going to demonstrate an example of price action trading on the daily chart, which allows the traders to hunt some extra pips. We find out how traders do it.

This is a daily chart. It shows that after being bullish for seven trading days, it produces a bearish engulfing candle. The Bearish engulfing pattern is one of the strongest bearish reversal patterns. The sellers are to wait for the price to consolidate and give them a level of resistance where they set Stop Loss above to ensure better risk-reward.

This is what the sellers want to see. The chart produces a bullish inside bar, which states that the sellers may take over the control upon getting another bearish engulfing candle closing below the level of support.

Look at the last candle. It comes out as a bearish engulfing candle closing below the level of consolidation support. The sellers may trigger a short entry right after the candle closes by setting the stop loss above the highest high of the signal candle. To set take profit, some traders may close the trade manually upon getting a bullish reversal candle; some may set at 1:1 risk-reward; some may set at the last significant lowest low. It depends on traders’ psychology and with the strategy (in terms of taking profit) they feel comfortable with.

The price consolidates with one more candle after triggering the entry. However, the price hits the target, which is set at the level of the significant lowest low. As mentioned, some traders may keep holding the position since the price is still with the bear. Let us proceed to the next chart and find out what the price does in the next candle.

It makes a breakout as well. The sellers holding the position may dream big. It seems the price may keep heading towards the South further. This is the good thing about trading on the daily chart. Traders get enough time to decide about their positions. They get 1:1 risk-reward in almost every trade. If they understand daily price action well and get well acquainted with daily trading, it usually gets them very lucrative risk-reward. Imagine, if traders want to manage trade like this on the H4 or the H1 chart, how painful it could be. Moreover, the H4 or the H1 chart is not as consistent as the daily chart. In our fore coming articles, we will demonstrate more examples of how we can maximize our profit by trading on the daily chart. Stay tuned.

Categories
Forex Basic Strategies

Identify Reliable Trading Signals Using ‘Piercing Line’ Candlestick Pattern

Introduction

Introduction

Introduction

The Piercing Line is a simple and effective candlestick pattern, and it is used to trade the bullish reversals in the market. This pattern typically appears in a downtrend. Also, when it appears in a significant support area, we can consider it more reliable. Piercing Line is a two candlestick pattern where the sellers influence the first candle, and the second candle is responded by enthusiastic buyers. Piercing Line essentially indicates the bears losing control, and bulls taking over the market.

  1. First of all, in a downtrend, the first candle of the pattern should be bearish.
  2. The second candle should be bullish, and it should open lower than the closing of the previous candle, and it must close above the midpoint of the bearish candle.

This indicates that buyers now overwhelmed the sellers. In terms of supply-demand, this pattern shows that the supply is depleted somewhere, and the demand for buying has increased. Remember not to trade this pattern alone. Always use it in conjunction with some credible indicators or other trading tools to further enhance the probability of winning.

Piercing Line Pattern Trading Strategies

Piercing Line Pattern + Percentage Price Oscillator

In this strategy, we have paired the Piercing Line pattern with the Percentage Price Oscillator to generate credible trading signals. The Percentage Price Oscillator is a momentum indicator. It consists of a centerline, histogram, and the two moving averages. Just like the MACD indicator, the PPO also represents the convergence and divergence in price action. This indicator gives a crossover at the overbought and oversold market conditions.

When price action crosses the centerline, it means that the bullish or bearish momentum is super strong. We want to let you know that PPO is not that popular in the industry. Also, it is not available in the MT4 terminal. However, you can download this indicator from this link and add it to your MT4 terminal. If you are a Tradingview user, search the PPO indicator in the indicators tab, and you should be able to find it.

Step 1 – Find out the Piercing Line pattern in a downtrend.

Step 2 – Once you find the Piercing Line pattern, the next step is to wait for the reversal to happen on the PPO indicator at the oversold market conditions.

In the below CHFJPY chart, the market was in an overall downtrend. We can see the market printing Piercing Line pattern, and that is an indication of a trend reversal. We can also see the PPO indicator giving crossover in the overbought area at the same time. Both of these clues indicate a clear buy signal in this pair. We can also see the price action showing divergence, which is another clue to go long. If we are able to find all of these clues on a single price chart, we shouldn’t mind placing bigger trades.

Step 3 – Stop-loss and Take Profit

PPO indicator quite often gives high probability trading signals. So when we take trades of that kind, most of the time, we must place the stop loss just below the first candle of the Piercing Line indicator.

There are several ways to book profits. For this particular strategy, we can close our position when the PPO reversed at the overbought area or when the market starts printing the opposite pattern. If you plan to make more money in a single trade with extra risk, it is advisable to book the profit at the higher timeframe’s major resistance area.

In the below chart, we can see that we have closed our whole position at the major resistance area and the stop-loss order was just below the recent low.

Piercing Line Pattern + Double Moving Average

In this strategy, we have paired the Piercing Line pattern with the Double Moving Average. Moving Average is a very well-known indicator in the industry. Many average indicators are available in the market. If you are using the lower period average, expect more trading signals. Contrarily, if you are using the higher period average, expect fewer but accurate signals.

Step 1 – First of all, find out the Piercing Line pattern in a downtrend.

Step 2 – Activate the buy trade when the lower period MA crosses the higher period MA. In the below EURAUD Forex chart, the price action was in a downtrend, and around the 22nd of December, the market prints the Piercing Line pattern. This means that the sellers now have a hard time to go lower, and buyers took over the market. Furthermore, when a lower period moving average crosses the higher period moving average, it is a clear indication to go long. After our entry, price action immediately prints a brand new higher high.

Step3 – Stop-loss and Take Profit

If you are an aggressive trader, use the recent low for stop loss. But if you are a conservative trader, make sure to place wider stop losses. If you plan to ride the longer moves, wait for the price action to hit the daily support area. But if you plan to go for intraday trades only, we suggest you exit your position when the double MA gives the opposite signal.

In the below chart, we can see that we have closed our full positions at the higher timeframe major resistance area, and stop-loss was just below the recent low. Overall, it was a 3R trade.

Bottom Line

Piercing Line pattern is a bottom reversal pattern, and it is one of the very well-known bullish reversal patterns. We can say that this pattern is exactly the opposite of the Dark Cloud Cover pattern. We won’t be able to see this pattern very frequently on the price chart, but when it appears, a trend reversal is guaranteed. Sometimes you will find this pattern in the consolidation phase, but it’s not worth your time to trade it in ranges. So it is always recommended to find this pattern in a clear trending market because that’s where we can generate more effective signals. The only limitation of this pattern is that it requires the use of other technical tools to confirm the signal and cannot be used stand-alone. But that’s the case of most of the candlestick patterns, so that’s not a major limitation.

That’s about the Piercing Line candlestick pattern. Let us know if you have any questions in the comments below. Cheers!

Categories
Forex Daily Topic Forex Price-Action Strategies

Remember the Rule ‘Set and Forget’

In today’s lesson, we are going to demonstrate an example of H1 breakout trading. Usually, in this strategy, the price goes towards the direction with good momentum if things go accordingly. In this example, the breakout candle, breakout confirmation candle are immaculate, but it takes a long pause before it hits the target. It has a lesson to give us. Let us dig into this.

In today’s lesson, we are going to demonstrate an example of H1 breakout trading. Usually, in this strategy, the price goes towards the direction with good momentum if things go accordingly. In this example, the breakout candle, breakout confirmation candle are immaculate, but it takes a long pause before it hits the target. It has a lesson to give us. Let us dig into this.

In today’s lesson, we are going to demonstrate an example of H1 breakout trading. Usually, in this strategy, the price goes towards the direction with good momentum if things go accordingly. In this example, the breakout candle, breakout confirmation candle are immaculate, but it takes a long pause before it hits the target. It has a lesson to give us. Let us dig into this.

The price after being bearish finds its support. It consolidates for a while and produces a bearish pin bar followed by a bearish engulfing candle. Traders are to wait for a breakout at the level of support to get them prepared to go short on the pair.

The last candle breaches the level of support and closes well below the level. The candle is having a tiny lower spike. Ideally, H1 breakout strategy traders wait for such a breakout candle.  They are to wait for the next H1 candle to close below the breakout candle. If that happens, the game is on. Let us proceed to the following chart.

As expected, the next candle closes below the breakout candle. The candle looks very bearish, being an ideal candle to confirm the breakout. The sellers may trigger a short entry right after the last candle closes. Let us have a look at the same chart with some calculations in it.

The sellers may set the level of stop-loss above the level where the trend is initiated. They may set the take-profit level with 1:1 risk-reward. It means

Entry- Stop Loss= Take Profit-Entry.

The price consolidates after the signal candle. It bounces at the level, where it bounced some hours earlier. This is the first sign of a double bottom. It looks the buyers may take over the control, which may make the price hit the stop loss. You may remember, in one of our lessons, it has been recommended that a trader may have to close his entry manually. It was an example of the Friday market. Today’s market is not the Friday market. Thus, we must not close it manually, as it may get us a loss, but we must let it run. Let us wait and see how it ends.

It looks much better now. The price heads towards the South with good bearish momentum. It may not take much time to hit the target.

It does not go according to your calculation. It takes much longer than our expectations. However, it hits the target at last. The lesson that we have learned here is we must let a trade run to do its bit. Once we take entry after measuring the risk-reward, we must be patient. In a word, we must remember the rule ‘set and forget.’

Categories
Forex Price-Action Strategies

The H4-H1 Chart Combination Keeps You Busy Even in a sluggish Market

Usually, the Forex market gets sluggish in December. It gets tough for traders to find out a good entry on major charts as far as price action is concerned. However, the H4-H1 chart combination still offers a few entries. In today’s lesson, we are going to demonstrate an example of an entry based on the H4-H1 chart, which was offered in mid-December 2019.

Usually, the Forex market gets sluggish in December. It gets tough for traders to find out a good entry on major charts as far as price action is concerned. However, the H4-H1 chart combination still offers a few entries. In today’s lesson, we are going to demonstrate an example of an entry based on the H4-H1 chart, which was offered in mid-December 2019.

Usually, the Forex market gets sluggish in December. It gets tough for traders to find out a good entry on major charts as far as price action is concerned. However, the H4-H1 chart combination still offers a few entries. In today’s lesson, we are going to demonstrate an example of an entry based on the H4-H1 chart, which was offered in mid-December 2019.

Let us proceed.

We’re looking at the H4 chart. The last candle makes a strong breakout at the last swing low. Traders are to wait for consolidation and H1 breakout to go short on the pair. Let us find out whether it starts consolidating from right there or comes further down.

It comes down further for one more candle. It means traders are to wait longer. However, the nearest support is far enough. Thus, the price has a lot of space to travel towards the South.

The price starts consolidating and produces two bullish candles consecutively. The pair is to make a big decision from here. Does it continue its journey towards the North, or does it find its resistance nearby? Let us find out from the next chart.

The price finds its resistance and produces a bearish engulfing candle. The sellers have been waiting for this. It is time for the traders to flip over to the H1 chart and wait for an H1 bearish breakout to take a short entry. Let us find out how the H1 chart looks.

The H1 chart shows that the price produces an engulfing bearish candle and heads towards the South. The price on this chart makes a breakout at the red marked support level. It may make the traders wait for, or it may make a breakout straightway. Let us what the price does here.

The price makes an explicit bearish breakout. The breakout candle looks very strong, barely having a lower shadow. A short entry may be triggered right after the candle closes by setting Stop Loss above the level where the H4 chart produces the bearish reversal candle. Let us now find out how it ends.

The price heads towards the South with good bearish momentum. It produces a bullish engulfing candle having a long upper shadow. It may be time for the sellers to close the whole entry since it is the month of December.

As mentioned, in December, traders do not get as many entries as they usually get. However, the H4-H1 chart combination may offer a few entries occasionally even when the market gets sluggish.

Categories
Forex Price-Action Strategies

Daily-H4 Timeframe Combination – The Market Sometimes Makes You Wait More Than You Think

In today’s lesson, we are going to demonstrate an example of an entry derived from the daily-H4 combination. Usually, the daily-H4 combination does not take that long to offer an entry once the price makes a breakout on the daily chart. In today’s example, things are a bit different. Let us find out how it starts and ends.

In today’s lesson, we are going to demonstrate an example of an entry derived from the daily-H4 combination. Usually, the daily-H4 combination does not take that long to offer an entry once the price makes a breakout on the daily chart. In today’s example, things are a bit different. Let us find out how it starts and ends.

In today’s lesson, we are going to demonstrate an example of an entry derived from the daily-H4 combination. Usually, the daily-H4 combination does not take that long to offer an entry once the price makes a breakout on the daily chart. In today’s example, things are a bit different. Let us find out how it starts and ends.

The figure above shoes the daily chart. After a strong bullish impulse, the price action gets choppy for several days. Do you notice anything here?

The price gets caught within a rectangle. Since it has been choppy for quite a while, it makes some traders think not to keep the pair on their watch list.

There is a saying in price action trading “the more it ranges, the harder it breaks’. Thus, the next breakout may be a very strong one.

The breakout candle looks good. However, it is not that strong a breakout as we have expected. Nevertheless, it is a valid daily breakout, so traders are to flip over to the H4 chart to take a long entry.

The figure above shows the H4 chart. The price has been heading towards the North with an average bullish momentum. Traders are to wait for the price to find its support and make an upside breakout to offer them a long entry.

The price keeps being choppy on the H4 chart as well. It neither has consolidated nor produced a bullish reversal candle on which buyers could take a long entry. It has instead been within another bullish rectangle. This time it is, of course, an H4 bullish rectangle. Let us proceed to find out which way it makes its next breakout.

The price makes an upside breakout again. A bullish engulfing candle with long lower shadow makes the breakout. The buyers have been waiting for it, so a long entry may be triggered right after the candle closes. The Stop Loss shall be set below the rectangle support. There is no visible swing high. This suggests that the profit taking should be managed manually.

The plan has worked wonderfully well. The price goes straightway towards the North with extreme bullish momentum. The buyers may trail their Stop Loss in the middle of the big candle or at least above the breakeven point. As it has been going, it may keep pushing towards the North further. Let us find out what happens next.

The chart produces a bearish reversal candle. It is an Inside Bar, but it is time for the buyers to close the entry.

The price takes so long to make a breakout on the daily chart. It also takes a long time to offer entry on the H4 chart as well. This situation does not happen frequently, but sometimes it may occur. Thus, traders are to be mentally prepared for it.