Palladium is bearish lately ⛷️Bearish Order Blocks Tutorial.
Bearish order block played out well with 1:8 RISK:REWARD!
4h
XAUUSD 4H MACD CROSSOVER TRADING STRATEGYPrice was in an uptrend.
Price bounce off a previous resistance.
Price created a Bearish Engulfing Reversal Candle.
Entered trade at the close of above candle.
MACD crossover happened at the close of the candle also.
Stop Loss placed above reversal candle.
EXITED trade after consolidation made price go sideways.
EURUSD 4H FADE ENGULFING STRATEGYEngulfing Trading Strategy
The engulfing pattern is fairly regular in its occurrence. Appearing regularly means that a lot of the time, it simply won’t work. Statistically speaking, candlestick patterns have a high failure rate, which is why we come with the idea to fade the engulfing bar pattern. Of course, candlesticks can indeed be useful--but advanced trading strategies will require you to look beyond these basic charts and think deeper.
To develop an effective engulfing trading strategy, we need to establish a proper framework to stack the odds in our favor.
Step #1 Spot a Sideways Market
The first thing we want to look for is a sideways market where no one is in control.
This is very important because it’s setting the stage for price manipulation. The premise behind the typical price manipulation is based on the core idea that smart money needs buyers when they want to sell and they need sellers when they want to buy.
In this regard, our goal is to identify price areas where the trading volume is flat.
Usually, in ranging markets, volume remains mostly flat.
Since the market is range-bound around 75% of the time, it will be easy to spot a sideways market, especially on the intraday charts which are prone to exhibit more noise.
The natural flow of the price dictates that sooner or later we’re going to see an expansion in volume, which brings us to the second step.
Step #2 Localize the Engulfing Pattern
The ranging price action needs to be followed by the engulfing pattern.
Going on with our EUR/USD chart, we can spot a bearish engulfing pattern.
Since we’re still in a range the sellers of the engulfing pattern need to overcome a lot of support/resistance levels that were built-in during the consolidation phase. What happens is that the sellers who got tricked to enter the bearish engulfing pattern are now trapped inside a consolidation zone.
One of the first signs that selling the engulfing pattern was a bad idea could be that we didn’t have enough profit margins.
Smart money love to create these types of price deceptions.
How these price deceptions work is very simple.
The smart money needs to create a sudden price movement so that it attracts the retail eye to enter the market. Once the retail trade bites the bullet, smart money only needs now to bid the market higher and cause everyone to panic. This in return will trigger more sell stops on the upside and subsequently, the upside move gets amplified.
Now, you might be asking yourself why all the fuss to trick the retail traders?
Well, it comes down to two things:
The market is a zero-sum game, so every transaction needs to have a counterparty.
And, secondly, smart money needs liquidity to execute their big trades.
Now, you get the idea of why smart money can use the textbook patterns to trick the retail traders.
Next, we need to establish how the engulfing trader strategy works.
Step #3 How to Fade the Engulfing Pattern
We have a clear signal to enter the market when to price breaks above the high of the bearish engulfing pattern. Normally, traders would sell at the break of the low so we’re doing the exact opposite.
Once the price deception is completed, we can see smart money buying aggressively.
As a general rule, once we break the high of the bearish engulfing pattern, we should see momentum picking up to the upside. If we see this type of price behavior we’re almost sure we have got a good trade.
The next step is to establish how to manage risk, i.e. where to hide our protective stop loss and when to exit the market.
Step #4 Where to Place Stop Loss
The stop-loss strategy is quite simple.
We hide our protective stop loss below the bearish engulfing bar.
If this indeed was a price manipulation set by the smart money, then the price should not break below the bearish engulfing candle low. However, since we can’t be 100% in control of what the market does in the eventuality it breaks below the low we want to get out, which is the stop-loss order job to do for us.
Step #5 Where to Take Profit
Now, in terms of take-profit….
If you want to take your trading to the highest point of success, you need to be able to maximize your profits with each trading opportunity.
The good news is that our take profit strategy is quite easy to implement.
You’ll have to take profits along the way and scale-out of your position as the trend matures. This ensures you’ll benefit from the entire price move.
Conclusion – Engulfing Bar Trading Strategy
In summary, the engulfing pattern trading strategy gives you a chance to trade along with the smart money and profit from trapped retail traders. Most traders will lose money when trading candlestick patterns but with a little bit of twist, you can turn the odds in your favor. And, that’s precisely what our easy guide to trading the engulfing pattern is aiming for.
Here is a summary of what you have learned so far:
The textbook engulfing pattern and how it works.
How to interpret the price manipulation around the engulfing bar.
How to trade along with the smart money.
Only fade the engulfing pattern that develops inside a sideways market.
How to maximize your profits by scaling out of your position.
Engulfing Trading Strategy - The Fade
The engulfing trading strategy will give you the skills you need to become a better trader. Through this guide, we’re going to take a deeper look into what exactly is the engulfing pattern and how understanding this particular pattern can improve your outcomes as a trader. Furthermore, we’re going to show you how to master the engulfing bar trading strategy with a simple twist.
Don’t worry if you already know how engulfing trading works, we have some additional information for you as well. This will strengthen your existing knowledge about the engulfing candle trading strategy and help you find new opportunities to succeed as a trader.
How we interpret the engulfing pattern can provide us with a further understanding of the current market sentiment, whatever form it might take. In return, this can help us better assess the probabilities of success behind each individual bearish and bullish engulfing pattern.
Table of Contents
1 What is the Engulfing Pattern?
2 How to Trade Engulfing Pattern
3 Why the Engulfing Pattern Works?
4 Engulfing Trading Strategy
4.1 Step #1 Spot a Sideways Market
4.2 Step #2 Localize the Engulfing Pattern
4.3 Step #3 How to Fade the Engulfing Pattern
4.4 Step #4 Where to Place Stop Loss and Take Profit
5 Conclusion – Engulfing Bar Trading Strategy
What is the Engulfing Pattern?
In technical analysis, the engulfing pattern is multiple candlestick patterns (2-candle pattern) that can signal a trend reversal or a trend continuation depending on where it develops in relation to the prevailing trend.
While you can find this candlestick price formation by using the engulfing pattern indicator, you can easily spot the pattern with your naked eye.
There are two types of engulfing patterns:
Bullish engulfing pattern.
Bearish engulfing pattern.
Being able to identify the engulfing pattern can help us time the market.
So, how do we identify the bullish engulfing pattern?
The bullish engulfing pattern is a combination of one bearish candlestick followed by a bullish candlestick that engulfs the entire body and wicks of the first candle. This shows that, generally, the broader market is moving in a positive direction.
Naturally, it signals a potential reversal of the prevailing trend.
On the other hand, the bearish engulfing pattern is the opposite of the bullish engulfing pattern. The bearish engulfing pattern can signal the possible start of a new downtrend. While these engulfing patterns do occur in the opposite direction, they are still governed by the same underlying principles.
Moving forward, let’s see the different ways how to trade the engulfing pattern.
How to Trade Engulfing Pattern
To exemplify how the engulfing pattern works, we’re going to showcase how to trade a bearish engulfing pattern. The opposite will be true for the bullish engulfing pattern. Understanding the difference between bullish patterns and bearish patterns will be key to leveraging engulfing patterns to your advantage.
As per the textbook rules, we first need to wait for the second candle of this price formation to close. A close below the low of the first candle shows a stronger bearish signal.
Secondly, the engulfing pattern gets confirmed once we break and close below the low of the second candle. The way we trade it can be broken down into two strategies:
Either sell right away when we break below the low.
Or, a more conservative approach would be to wait for a candle close below the low.
Note* As a general rule, only enter once the pattern is confirmed.
Using strict risk management rules, we can hide our stop loss above the high of the second candle. Usually, the engulfing pattern can boost attractive risk-reward ratios so you can capture profits at least 3 times your risk.
Now, before we reveal the better way to trade the engulfing pattern trading strategy, it’s important to understand what’s going on behind the scene.
What do we mean by this?
Simply put, we want to know the psychology behind the engulfing pattern.
Why the Engulfing Pattern Works?
How we interpret the psychology behind the engulfing pattern plays a big role in whether or not the pattern will work out.
Price Action Strategy is the ultimate indicator telling you what’s going on in the market. In terms of the market sentiment, it’s the only reliable source because the best technical indicators are all based on price action.
When we look at raw price action we can tell who is winning the bulls and bears battle.
The engulfing candle simply signals a big shift in the market sentiment.
So, let’s see what the bullish engulfing pattern is telling us from the supply and demand perspective.
The apparent shift in the supply-demand balance is revealed by the second candle, which shows that the buyers have stepped in and managed to overcome the sellers.
However, as we know it, the price can move higher even from a lack of sellers (supply-side is dry out). That’s the reason why you’ll see that, many times, the candlestick patterns failing more often than not.
The key idea here is that you need to be very selective and only trade the engulfing pattern when it develops at extreme ends of a trend. Truth to be told, the engulfing pattern rarely develops at the end of a trend. Most of the time, you’ll notice this chart pattern popping a lot of the time in the middle of the trend or in a sideways market where a lot of price manipulation happens.
But, what if we can use the engulfing bar trading strategy to take advantage of the price manipulation?
1D SMITH WESSON TRENDLINE BREAKOUTTrend Line Trading: The Trend Breaker Strategy
This trendline breakout trading strategy uses three indicators, which are the following:
MACD- The inputs for this indicator are: Fast Length= 12 (represents the previous 12 bars of the faster moving average), Slow Length= 26 (Represents the previous 26 bars of the slower moving average), and Signal Smoothing= 9 ( represents the previous 9 bars of the difference between the two moving averages. This is plotted by vertical lines called a histogram).
Simple Moving Average- The inputs for this indicator are: Length 8, Offset 0. (Red line)
Exponential Moving Average-The inputs for this indicator are: Length 20, Offset 0. (Blue line)
This Trend Breaker strategy also uses three different time frames. They are the 4 hour, the 1 hour, and 15 minute time frames. This top-down approach uses these time frames to identify a trend, find a breakout point, determine an entry point, and execute the trade.
Step One to trend line trading: Identify a trend
The first thing you need to do is identify an upward, downward, or sideways trend by switching to a 4-hour and 1 hour time frames. The reason both are used is that it will give you the best perspective in determining a trend according to this strategy. Draw a trend-line so that 3 points of resistance or support was touched. We created this trendline trading system so that you could easily enter trades without a lot of guesswork on your part. Here You can see a funny video about trading levels.
Since this strategy focuses on trends, a trend line will be drawn on the support or resistance lines of the trend. The criteria for a trend is that there needs to be at least three points of resistance or support.
As you can see on the 4- hour time frame this clearly is a downtrend.
Below is the same chart only this is a 1-hour time frame. This is just to get another perspective of this downtrend. It is good to do this to completely confirm this trend by identifying 3 levels of resistance. Trading with trend lines is not easy, that is why it is important to have a clear system of step by step rules to make it easy for you to follow.
Step Two: Identify a Breakout point Trendline Trading System
In order to find a breakout point of the trend that was identified in step one, the strategy will use a combination of the three indicators (MACD, 15 minute SMA, EMA) to identify a break out on the 15-minute time frame. This time frame is used because a trend was already identified in step one on the 4 hours and 1 hour time frames.
As you can see in the chart above on the 15-minute time frame, the MACD lines were crossed. When the crossover of the fast length and slow length occurs, this will signal a new trend. This gave an indication that a trend was breaking. The moving average and exponential moving average lines also crossed. So when the MACD lines cross and the simple moving average/ exponential lines cross wait until the candlesticks go above/below trend line that was drawn in step one, then identify a point of entry into the trade. One of the reasons we like trend line trading so much is that it is straight forward and simple and we recommend all traders have something simple.
So looking at our example above the criteria was met to go to step three because the SMA and EMA crossed and the MACD lines crossed. Also, the trend went upwards and hit our trend line. This is a signal to go to step three.
If neither of the indicators crosses before the candlesticks close and hit the trend line then do not go any further because the trade does not meet the criteria of the rules. The indicators need to show that the trend broke before it touched the trend line.
Note* When our indicators are crossing, the trend needs to be heading toward the trend line that was drawn in step one. This is because the trend is breaking and a breakout is about to occur. When the breakout happens we will discuss when to make an entry.
Step Three: Trend Line Trading Identify a point of entry
Here is a list of the entry criteria:
These 4 things must happen to enter a trade with this Trend Breaker Strategy.
Simple Moving Average Must Cross below the Exponential moving average.
Macd Must Cross
The price must break below or above the trend line.
After the break of the trendline, you must wait for 3 candles to close on the 15-minute chart before taking your entry.
Now we need to identify a point of entry. To identify a point of entry always use the 15 minute time frame in this strategy.
So in our example below, we see that there is an obvious stand-off between buyers and sellers on the trend line.
Once there are at least three candlesticks above or below the trend line, you execute the trade.
In this example, there are three candlesticks that fell above the trend line after our indicators signaled that the trend was broken. At this point, you want to make an entry. Also, read about Trader's Tech and Installing MT4 EAs with Indicators.
Step four: How to Trade with Trend Lines: Determine where to place a stop loss. 1 Use Pong Position Icon on left side toolbar. Adjust Top Prifit line until center text says 1 to 3 risk reward. This will show you where SL should be placed. OR
Place a stop loss past the last support and resistance levels in the trend itself. Again, use the 15 minute time frame to find this point of resistance/ support level.
In the example shown below, place the stop loss below the last support level. This will ensure that if there was a bearish move, it will hit the last point of support and make a bullish move upwards.
You can clearly see that there are two levels of support in the above example. Use the support levels to determine the stop loss. The rules were to place the stop loss below the last support level which is why you see the stop loss below these levels.
Step five: Trendline Trading System Exit Strategy
The plan clearly identified a trend, a breakout point, point of entry, and determined a stop loss. The final step is to determine the exit point. This Trend Breaker strategy uses 1 risk to 3 reward ratio.
What that means is you have the potential to make 3 times more than you are risking.
Use the Long Position Icon on the left side toolbar. Adjust top profit level until the center text says 1 to 3 risk reward.
Conclusion
This Trend Breaker Strategy is simple and yet effective. There is no need to stress and worry that you made the wrong trade. You follow the rules and do not let anything else make you back out of a trade. If it follows the rules, execute the trade with confidence.
Always remember to only be risking no more than 2% of your account!
This will help you identify daily trends and points where they break. There is no need to force yourself into a trade. If it does not follow your rules and guidelines then search for another pair to trade. Feel free to check out one of our other trading strategies.
XAUUSD GOLD SUPPLY AND DEMAND ZONESXAUUSD GOLD SUPPLY AND DEMAND ZONES - key levels. Trade with the flow. Ride the wave. Easy money on these zones. Watch my previous weeks analysis.
LTCUSD 4H BIG 3 TRADING INDICATORStep 1 - Add Big Three Indicator to your chart.
Step 2 - The Trend is up if Price is above the Blue 80 sma line.
Step 3 - ENTER TRADE when price has closed above Blue 80 sma line and Long column is Green.
Step 4 - SL below the bottom of all 3 moving averages
Step 5 - #3 CLOSE OUT TRADE when Big 3 Neutral Column turned Yellow at this candle close
ETHUSD 4H RSI 80-20 TRADING STRATEGY SHORT TRADERSI 80-20 TRADING STRATEGY SHORT TRADE RULES
1 - Find Highest candle in the last current 50 bars.
2 - That High candle coupled with RSI above 80 level.
3 - Wait for a new Swing HIgh but RSI is lower - DIVERGENCE.
4 - ENTER on breakout candle close below 1st candle's low.
5 - Stop Loss above new swing high.
6 - EXIT with a 1 to 3 risk reward Take Profit.
Add RSI to chart
Adjustments:
14 period, to 8.
70 and 30 lines, to 80 and 20.
This indicator comes standard on most trading platforms. You’ll just need to make the adjustments above.
Step 1 - Find the currency pair that is showing a high the last 50 candlesticks. (OR low depending on the trade)
The 80-20 Trading strategy can be used for any period. This is because there are reversals of trends in every period. This can be a swing trade, day trade, or a scalping trade. As long as it follows the rules, it is a valid trade. We also have training for building a foundation before a forex strategy matters. In this step, we only need to ensure it is the low or the high of the last 50 candles.
Step 2 - Using the RSI Trading Indicator:
When we find 50 candle high, it needs to be coupled with RSI reading 80 or higher. (If it’s low it needs to be combined with the RSI reading 20 or lower.). We have a reading that hit the 80 line on the RSI and was the high the last 50 candles.
Once we see that we had a high, the last 50 candles, and the RSI is ABOVE 80, we can move to the next step. Remember that this strategy is a reversal strategy. It is going to break the current trend and move the other direction.
Step 3 - Wait for a second price (high candle) to close after the first one that we already identified.
The second price high must be above the first high. Although, the RSI Trading indicator must provide a lower signal than the first. Remember that divergence can be seen by comparing price action and the movement of an indicator. If the price is making higher highs, the oscillator should also be making higher highs. If the price is making lower lows, the oscillator should also be making lower lows. If they are not, that means price and the oscillator are diverging from each other. Which is why it’s called “divergence.”
Just because you see a bullish or bearish divergence, doesn’t mean you should automatically jump in with a position. We have rules in place that will capitalize on this divergence so that we can make a significant profit. Keep in mind, that this step may take time to develop. It is very important to wait for this second high because it gets you in a better trade making position.
Price goes up/RSI goes down. That is the Divergence. Remember that our example is a current uptrend looking to break to the downside. If this was a 50 candle low, we would be looking at the exact opposite of this step.
Step 4 - How to Enter the Trade with the RSI Trading Strategy.
The way you enter a trade is very simple. You wait for the price to head in the direction of the trade and wait for a candle to close below the first candle that you identified that was previously 50 candle high.
Step 5 - Once you make your entry, place a stop loss.
To place your stop, bump back 1 to 3 time periods and find a reasonable, logical level to put your stop. You are looking for prior resistance or support.
We placed our stop below this support area. That way if the trend continued and did not break, it could hit this level and bounce back up in our direction.
Step 6 - I recommend you follow at least a 1 to 3 profit vs. risk level. This will ensure that you are maximizing your potential to get the most out of the strategy.
You can adjust as you wish. Keep in mind that most successful strategies that identify breaks of a trend use a 1 to 3 profit vs. risk level.
GBPJPY 4H 15M RABBIT TRAIL CHANNEL TRADING STRATEGY LONG TRADERule #1: Draw a channel on a 1 or 4 hour chart.
Rule #2 Identify If there is a Breakout on 1 hour or 4 hour chart.
Rule #3 Wait for a Pull Back on a 15 minute Chart.
Rule #4 After Pull Back on 15m, Make Entry.
Rule #5 Find a Stop Loss Placement.
Rule #6 Ride The Rabbit Trail to 50 pips with a TP Order!
Rule #1: Draw a channel on a 1 hour or 4 hour chart.
The first thing you need to do to get this strategy started off is you need to find a channel on a
four hour or one hour chart. Remember there must be two resistance and support points to
validate a channel.
This strategy can use many currency pairs. Make sure you search through all of them. Many say
that they “only trade EURUSD.” There is no reason for that..
Get in the charts and see for yourself! There are channels everywhere. This strategy will work
with any currency pair. The opportunities are endless..
Not too bad. So basically all you are doing here is drawing parallel lines on the tops and
bottoms of the price movement. This example hit a quite a few resistance and support levels
which means that when it breaks this channel it has the potential to make a huge move!
Rule #2 Identify If there is a Breakout on a 1 hour
chart.
The way you find the trade is to find a breakout of the channel that you drew on your chart..
In a perfect world the support and resistance levels will hold on forever..
But the world isn’t perfect..
So that’s why we have what is called a breakout.
This breakout happened on the top of the channel. So that means you will BUY.
If the breakout happens on the bottom of the channel then you will SELL.
Great! We have breakout candle let’s get in the trade and follow the rabbit trail to pip glory!
Rule #3 Wait for a Pull Back on a 15 minute Chart.
Why wait? Because the market is money grabbing machine, and they want your hard earned
cash!
You wait because sometimes the market does a “head fake” and turns against you.
So if you would have got in this trade right when it broke out of the channel you would soon
have got stopped out.
That is why it is so important to Wait for it to pull back.
This is where many people struggle. They see that it broke out so they want to click BUY or
SELL right now!!!
Think about the sayings you have heard since you were a child, “Patience is a Virtue,” Or “Good
things in life take Time”
Just be patient and wait…
This trade would not have burned you, but countless other trades would have!
Think about the pull back as the candle that closes towards the channel. So if the pull back is
above the channel you are looking for a bearish (red) candle. If the pull back is below the
channel you are looking for a bullish (green) candle.
*We only need one of these pull back candles on a 15 minute chart. Once this happens
move on to the next step.
Rule #4 After Pull Back, Make Entry.
We are getting so close to getting on our rabbit trail to make some serious pips!
Our lines are drawn, we identified the breakout, and waited for the pull back. It is now time to
make our trade.
The criteria to make an entry after a pull back on a 15 minute chart to enter a trade is that there
must be two 15-minute candles that support our trade.
If it is a BUY trade we want to see TWO bullish (up) candles after the pull back.
If it is a SELL trade we want to see TWO bearish (down) candles after the pull back.
Enter after the two bullish 15 minute candlesticks close.
So again, we WAIT for a pull back candle to close and then we need two BULLISH (green)
candles to close to many an entry.
Rule #5 Stop Loss Placement
This is probably one of the most important rules of the strategy.
You always need to place a stop loss somewhere for a reason. If you are throwing in stop
losses 5 to 10 pips from your entry order just because someone you read that somewhere, then
you are without a doubt treading some dangerous waters.
In a Buy The stop loss will be placed in the channel below the last support point.
In a SELL The stop loss will be placed in the channel above the last resistance point.
That way if it does come back in the Channel it will hit the support level and end up going back
up in a bullish movement.
Rule #6 Ride The Rabbit Trail to 50 pips!
The last thing you need to do is know when to exit the trade.
This strategy goes for a 50 pip target.
So when you make your entry, you calculate 50 pips take profit mark and place it.
The rabbit trail may be 2 hours, or could take as long as two days. You have your target so
really you have nothing else to do but sit back and watch your trade make you some money!
Stay in the trade and remember your rules. You are going for a 50 pip breakout trade!
EURUSD 4H PIN BAR SHORT TRADE STRATEGYBasic Guidelines:
Timeframe – ANY
Market – ANY
Indicators – NONE
OTHER – Trend lines, horizontal lines, support resistance lines (anything to help you find these areas).
Step 1: Find a Pin Bar On Your Chart.
*Note This is a stock price action strategy, and a forex price action strategy. I will use a currency pair as an example. Price action charts are with any market and timeframe.
First, identify a pin bar that has formed. In the example, this is considered a bearish pin bar because of the long wick above the body.
As you can see, the pin bar “wick” is above the body, which is considered a bearish pin bar.
In this case, we are looking for a downtrend bounce of the top of the range. This is a 4 hour time chart EURUSD
currency pair.
You can see the Bears tried their hardest to stop this uptrend from occurring. The Bears were too strong, which is why you see the pin bar form.
This is a perfect example of a pin bar price action reversal setup.
Step 2: Look for Past Price Action to Determine Why The Pin Bar Formed.
Why did the reversal suddenly hit a price, and then continue to the downside?
We can see price has been in a range pattern for quite some time.
Note** you can either look at the current time frame you are on, in this case, a 4-hour time period. Or you can bump up or down one or two periods to gather information.
Resistance in the past can mean support in the future. What happened is the price hit this level but failed to break through it.
Since the long bullish wick formed, we decide it is time to enter this trade based on what we learned from the prior days.
This is what Price Action is all about. No two trades are the same. However, we can take what we’ve learned from the past. Then make the best judgment as to where the price is going in the future.
You are essentially like a detective when you trade price action. The point is to gather many pieces of evidence to back up your conclusion. You are trading with confluence. Sometimes simple is best. Study the charts and form an educated conclusion as to where the price will go.
Step 3: Trade entry
You just enter the trade 2-3 pips from the break of the nose of the pin bar.
Step 4: Stop loss
Place the stop loss 3-5 pips away from the wick. The end of the wick will be a support area. So if this is broken the trend may continue downward. Which is why you place your stop 3-5 pips away from this.
Step 5: Exit Strategy
Your exit strategy is when you hit the first level of support or resistance on your chart. As you can see, the price hit a point then stalled out. Once we see the price action stalling out, we exit the trade immediately.
Conclusion – Price Action Pin Bar Strategy
Price action is another fundamental element to learn when trading the market. There are thousands of strategies you can use with price action. It is important to find something that works for you.
These pin bars are hard to miss. They are relatively accurate when you learn why a pin bar formed. Pin bar candles are shown in any time frame. The rule of thumb is, the higher the time frame, the stronger the signals. But that does not mean that this will not work on a five-minute time frame.
Do not trade every pin bar you see that forms. Gather up key information from the charts. Then form the best conclusion to determine if you should enter the trade based on the rules.
USDCHF 4H DOUBLE TOPStep #1: Identify the Phase of the Market. The Double Top reversal needs a uptrend.
Just because you can spot the reversal it doesn’t mean you have to jump in willy-nilly. Remember, we need the right context and everything needs to line up for a trade-able setup.
So, the first step is to identify the phase or market condition. At any given moment the market can be trading either up, or down, or it can go sideways.
Establishing the phase of the market aka identifying the trend is probably the biggest ingredient that can determine the success rate of double bottom pattern technical analysis.
Step #2: The historical precedent. An A++ Double Top Reversal is composed of 2 Rounded Tops
The second step of the Double Top is to find what we call the historical precedent or a chart pattern.
We don’t want to make a trading decision without price confirmation, and in our case, we use the reversal pattern. You need to identify two rounded tops in order for the pattern to be considered trade-able.
But, what is a rounded top?
In technical analysis, a rounded top is simply a price formation that typically occurs after an uptrend, prices move upwards and then quickly rallies creating a rounded top.
Now, of course, that depending on the structure the rounded top will vary in size and magnitude. But the idea is that we need a quick move up followed by a quick move down to define a rounded top
Note* A valid double top reversal has two rounded tops.
Step #3: Allow a maximum of 10 pips variation between the two tops.
Don’t seek perfection, because in trading you need to get rid of your idealistic mindset as the pattern will not look perfect all the time, so be flexible.
This is the reason why we need to allow a maximum of 10 pips variation between the two tops.
The probability of two tops happening at the same exact price level is almost impossible.
Now, we to determine an entry technique for our chart pattern strategy.
Step #4: Sell when Double Top breakout candle closes below the neckline.
After we identify the phase of the market and the characteristics of a good reversal we need to wait for confirmation that momentum is shifting.
The breakout candle is our signal that the momentum has shifted and it’s what it confirms and validates the double top pattern.
You’ll see the double top breakdown happen over and over again, but it’s important to analyze them within the context of the market trend.
The next logical thing we need to establish for the strategy is where to take profits.
Step #5: Take Profit at the same price distance as measured from the highest peak to the Neckline
The minimum profit target for this type of trade is approximately equal to the same price distance as measured from the double top to the neckline.
If we project the same price distance to the downside we obtain our first take-profit zone for the strategy.
The double top pattern can produce a major reversal so we advise you to be very flexible with your profit target not to miss any big profit opportunity.
Step #6: Place the protective stop-loss slightly above the resistance created by the Double Top reversal
The Double Top chart pattern strategy gives you a simple way to quantify risk because you can place your protective stop-loss slightly above the double top pattern.
The double top pattern really gives you the opportunity to also trade with a tight stop loss, which is great as we always want to keep losses at a minimum.
Note*** The above was an example of a SELL trade… Use the same rules – but in reverse – for a BUY trade, but this time we’re going to use the double bottom pattern.
Conclusion
There is no other chart pattern that illustrates the trend reversal. However, despite the high success rate you still need to use a protective stop loss and to wait for the breakout when trading with the double top chart pattern strategy. You can also trade with the breakout triangle strategy.
The bottom line is that you still need a plan to successfully trade the double top breakout. Our double top chart pattern strategy should answer all your questions in regard to how to make money with this simple pattern.
QUESTION - WHAT ARE THE BEST FOREX TRADING STRATEGIES?2ND ICHIMOKU TREND FOLLOWING TRADING STRATEGY
ICHIMOKU SETTING CHANGES
Kijun Sen Blue line to Red Line
Tenkan Sen Red line to Blue Line
This will match Ichimoku settings for MT4 & 5
Step One: Using Ichimoku Indicator to Find the Uptrend or Downtrend
Since this is a trend following strategy the first thing that needs to be identified is a trend. Do this on the one day, or four-hour time frame. These time frames will give you the best opportunity to identify a trend.
In our example trade, we see a downward trend with an upper trendline of resistance.
Drawing trend lines is one of the simplest ways to find a trend. Draw the trend line where there is support or resistance. Our example trade has three different levels of resistance to confirm this downtrend.
This trading strategy will always go in the direction of the trend. So an uptrend will ALWAYS be a BUY. A downtrend will ALWAYS be a SELL. This strategy uses all of these tools to identify if a trend will keep going and gets you into the uptrend or downtrend.
Step Two: Ichimoku Trading System The Tenkan Sen/ Kijun Sen Lines Cross
This next step using the Trend Following Trading Strategy, I will explain what criteria are needed for a trade entry.
Just to keep you on track, on the Tenkan Sen lines are Blue, Kijun Sen lines are Red. This crossing signal is going to tell you whether there is a strong bullish trend or a bearish trend.
When the Tenkan Sen line will cross below the Kijun Sen line, then this will give you an indication that there is a bearish trend.
You can see in our example trade the lines clearly cross which is our indication that this bearish downtrend is strong.
These lines are designed to do that very thing when they cross each other.
After the cross happened the Red line (Kijun) is now above the Blue line (Tenkan). That means that the trend is going to keep heading downwards. This is not an indication that the trend is breaking.
This was used on a four-hour chart. This chart is the best time frame to use because it gives you a good overall picture of how the last few days have gone as far as it trending.
In this timeframe, The lines need to cross either in the Kumo, which in the picture above is the orange area, or right below the cloud in this example. This was a sell signal because the trend was bearish while the Tenkan Sen line crossed below the Kijun Sen line in the senkou span area (Kumo).
Note* If the lines cross above the Kumo area in a downtrend, do not buy/sell. The opposite can also be applied to a downtrend. If the lines cross above the Kumo area in a downtrend, do not sell/buy. The reason for this is because this would be a weak signal that the trend will keep going up or down. The trade must always be made to go in the direction of the trend.
Recapping our rules using the Trend Following Trading Strategy, these three things must happen in order to enter a trade using the Ichimoku Indicator.
Identify the trend. This needs to be an upward or downward trend. The trade must go the direction of the trend.
Tenkan Sen line needs to cross Kijun Sen line.
When the two lines cross, they need to cross in one of these two specific areas. The first place would be in the Kumo area. The second will depend if its an upward or downward trend. In an upward trend, they need to cross above the Kumo area. During a downward trend, they need to cross below the Kumo area.
Note* This strategy is a trend following strategy. It is to help you identify a trend and identify that the trend will keep going either upward or downward.
Step 3: Determining an entry point Trend Following Trading Strategy
Determining an entry point should be very easy to do now. This is because once the Tenkan sen line crossed with the Kijun sen line either in the Kumo or just above or below on the four-hour time frame.
You can use the four-hour chart to enter and exit. Or you can drop down to a 1-hour chart for entry and exit.
I used the 4H to enter and exit on this example trade. But here is how to use a 1-hour chart for both.
Now, simply drop down to a one-hour time frame chart and enter the trade. You may check other time frames, but there really is no need since you have already followed the rules to enter the trade on the four-hour time frame. This is just to give you a better perspective on where you are entering.
Step 4: Stop Loss point
Stop loss is always important to have in case the trade goes in the wrong direction and you are now stuck in a pickle whether to end the trade early or end it too late and lose it all!
So we need a stop loss to help us out. Do this on the four hour time chart to see when the last areas of support or resistance were.
There need to be two or more points of resistance or support. In the example below, you see that there were support levels. So in this example, it will go just below them.
Step five: Exit Strategy
The exit strategy using the Trend Following Trading Strategy will wait until and trend starts moving the wrong direction and the lines cross again. I used the 4-hour chart to exit my trade. It is recommended to monitor this on the one-hour time frame to get the most accurate reading for this particular strategy.
The reason for this is that the trend is most likely coming to an end.
The trend can come back up, but once the lines cross over again it is time to exit the trade.
As you can see in the example the trend was slowly going back down. In the rules of this strategy, you will exit the trade if the lines cross over again.
So a trade may be 2 hours, 10 hours, 3 days or even a week! It depends on what the chart tells you and if it continues to follow the rules of the strategy.
Conclusion
The Trend Following Trading Strategy only uses this one indicator. That makes you focus on this indicator and does not make you have to keep checking others to see what they are telling you.
It may seem complicated at first with all of the different colored lines, clouds, and so on, however, when you break it down with this simple strategy, it makes it so much easier to understand.
Make sure you remember to only be risking no more than 2% of your account! No matter how confident you are, you should always follow this to maximize your account.
Thank you for reading the Trend Following Trading Strategy that uses the Ichimoku Indicator to help you gain a massive amount of pips at a time!
STATUS 4H UGLY DOUBLE BOTTOM LONG TRADE Step #1: Identify two bottoms where the second bottom is at least 5% higher than the first bottom
The first step is to identify the correct price structure of the ugly double bottom pattern. Basically, we need two bottoms where the second bottom is higher than the first one. In other words, the price needs to make a higher low.
The second bottom also needs to be between 5% and 20% higher than the first bottom. This trading rule will ensure we’re not developing a double bottom pattern. Secondly, it will ensure the downswing leg before forming the second bottom has a proper length.
There is one more critical element that needs to be satisfied. This brings us to the second step of our day trading cryptocurrency strategy.
Step #2: Bottom 1 needs to develop a “V” shape type bottom
The key to this reversal setup is the shape of the first bottom. The bottom 1 price structure needs to be a “V” shaped bottom.
The identification guidelines of the V-shaped bottom are quite easy.
The price needs to drop in a straight line, and then it reverses and moves up at a slightly steeper slope or at least at the same speed as it fell.
The good thing is that we don’t need to spot this reversal pattern on a real live feed as they happen, we can look in hindsight and have the time to validate them.
Next, we’re going to outline what key condition needs to be satisfied with our entry strategy and how to buy Status SNT.
Step #3: How to buy Status SNT: Buy after we break above the highest point between the two bottoms.
The ugly double bottom pattern is confirmed once we break above the highest point between the two bottoms. That’s also the moment when you would want to buy Status SNT.
A break above the highest high between the two bottoms will also mark a break in the price structure. Once we break above point B, the price is making a higher high. This, paired with the previous higher low means we can safely assume the market is in the process of establishing a new bullish trend.
This reversal setup indicates that catching a falling knife can work, but you need to be patient until all requirements fall into place and only then pull the trigger.
This brings us to the next important step we need to establish for our day trading cryptocurrency strategy, which is where to place your protective stop loss.
Step #4: Place your protective Stop Loss below the second bottom
As we’ve suggested earlier, you can adopt different strategies to manage your risk, but for the purpose of this example, we’re going to highlight one effective way to hide your stop loss. Here is another strategy on how to apply technical analysis step by step.
Place your stop loss below the second bottom!
Alternatively, you can place your stop loss below the bottom 1, but this requires using a wider SL.
Step #5: Take profit at the 1.272 Fibonacci extension level
For our exit strategy, we’re going to use the Fibonacci extension toll. You can establish accurate profit targets with the help of the Fibonacci extension tool. We’re going to use the two bottoms and the highest high between the two bottoms as reference points to draw the Fibonacci extension lines.
As a day trader, you only need one good trade to succeed in this business. Just imagine how much you can accomplish with one good trade per day.
**Note: The above was an example of a BUY trade using the best Status SNT cryptocurrency strategy. Use the same rules for a SELL trade – but in reverse
BTCUSD 4H KELTNER CHANNEL RANGE TRADING STRATEGYTrading Ranging Markets with Keltner Channel
It is said that the number one account killer in the market is a ranging market. Consolidations are very difficult to trade. However, you can take advantage of the difference in the way the Keltner channel system can be used in combination with other technical indicators.
The price won’t really touch the bands when it bounces between the upper and lower envelopes. When we’re in a ranging market, you’ll often see that the price will fail to touch the bands. The majority of the time the price will hug the middle band.
This anomaly in price behavior requires us to use a secondary technical indicator to find profitable trades.
Since the Forex market spends most of its time in consolidation (around 70% of the time), it’s mandatory to have a range trading strategy to survive in this market.
For range trading, we like to use Keltner Channel bands in combination with a 2-period RSI indicator. We tweaked the RSI settings so we can better identify tops and bottoms within a trading range.
*Note #3: For this Keltner trading strategy we use the 90-10 levels of overbought and oversold readings.
Here are some rules that can guide you to make the best trading decisions:
Keltner envelopes need to turn flat, to signal a consolidation.
The price needs to break below the middle band.
A buy order is triggered once the 2-period RSI goes below 10 indicating oversold conditions.
The protective stop loss can be hidden on the other side of the Keltner band.
For the long side take profit when the RSI reaches the 90 levels.
AUDUSD 30M / 4H PULLBACK LONG TRADETRADING PULLBACK RULES
1 - Find Daily uptrend with HH's & HL's.
2 - Switch to the 30m Time Frame
and Wait for a Pullback
against the Uptrend.
3 - Place Fib between last swing
high and low levels,
prior to the pullback.
4 - Buy Anywhere Between 50% and 61.8% Fib.
5 - Place Stop Loss below Swing Low.
6- Take Profit at break above the
previous Swing High.
XRPUSD 4H BUMP & RUN SHORT STRATEGYBump and Run Trading Strategy – Sell Rules
The Bump and Run trading strategy is one of the best reversal trading strategies that you’ll probably ever need to learn. The psychological reason why the Bump and Run reversal is such a powerful pattern is because it takes advantage of the result of excessive speculation. This propels the price too swiftly to the extreme which leads to a reversal.
Moving forward, we present the sell-side rules of the Bump and Run trading strategy:
Step #1: Wait until you can identify an uptrend (lead-in) and then an acceleration of that uptrend (Bump)
We’re breaking down the Bump and Run chart pattern into several steps. The first step is to identify an uptrend and then an acceleration of that uptrend. These two components of a trend constitute the first part of the Bump and Run Reversal.
*Note: A valid Bump and Run chart pattern has the first section of the trend drifting upwards very slowly and in the second part of the trend we need to see momentum picking up and the uptrend moving to the extreme.
Step #2: Draw the lead-in trendline that connects the lows during the first stage of the trend and draws a second trendline connecting the lows during the uptrend acceleration stage
The way you draw the trendline can be a subjective matter because there are several ways to do it and neither of them is better than the other. Ultimately, it all comes down to your experience and understanding of the price action.
Step #3: Sell Entry 1 at the break and close below the first Trendline , Sell Entry 2 at the break and close below Lead-in Trendline .
In order to maximize our potential profits we like to implement a two entries technique as follows:
Sell Entry 1 once the first trendline is broken. For confirmation of a valid breakout, we like to wait for the candle close below the trendline .
Sell Entry 2 once the Lead-in trendline is broken. Wait for confirmation of a valid breakout we like to wait for the candle close below the trendline .
During this stage, the market is in the process of reversal and the “Run” component of the Bump and Run chart pattern is formed.
The Run phase is identified when the price falls and breaks below the Lead-in trendline which also confirms that we’re in the process of reversing the previous trend.
The next logical thing we need to establish for the Bump and Run trading strategy is where to take profits.
Step #4: Take profit at the Lead-in trendline starting point
The ideal profit target for the Bump and Run trading strategy is at the Lead-in trendline starting point. In other words, take profits at the exact same level you use to draw your Lead-in trendline .
We encourage you to experiment different take profit strategies because the Bump and Run chart pattern can also lead to a severe reversal that can be the starting point of a big bearish trend .
Step #5: Place initial SL above the swing high created by the uptrend acceleration. Second SL placed above the Lead-in trendline breakout candle
Since we’re splitting our trade into two trades, we’re going to have two protective stop losses. The initial stop loss is placed just above the swing high created by the uptrend acceleration phase.
The second protective stop loss is placed above the candle that breaks the Lead-in trendline .
We’re adopting a very conservative approach here because if we truly have a reversal we consider that the market should not look back. In this regard, we keep our SL very tight.
We also recommend that once your second entry gets triggered to move your initial stop loss in the exact location as the SL2. This will guarantee you that even if you get stopped out on your second entry you’ll still be left with some profits.
*Note: The above was an example of a SELL trade… Use the same rules – but in reverse – for a BUY trade, but this time we’re going to use the inverse Bump and Run reversal.
BTCUSD 4H MACD TREND FOLLOWING STRATEGY(Rules for A Buy Trade)
Step #1: Wait for the MACD lines to develop a higher high followed by a lower high swing point.
The first rule of thumb to recognize a swing high on the MACD indicator is to look at the price chart if the respective currency pair is doing a swing high the same as the MACD indicator does. A higher high is the highest swing price point on a chart and must be higher than all previous swing high points. While a lower high happens when the swing point is lower than the previous swing high point.
Step #2: Connect the MACD line swing points that you have identified in Step #1 with a trendline.
At this point, we really ignored the MACD histogram because much of the information contained by the histogram is already showing up by the moving averages. Look at the price action now and compare it to our MACD trendline we drew early. We can clearly notice that the MACD contains the price action much better and reflects the trend much clear.
But, at this point, we’re still not done with the MACD indicator, which brings us to the critical part of our MACD Trend Following Strategy.
Step #3: Wait for the MACD line to break above the trendline. (Entry at the market price as soon as the MACD line breaks above).
When the MACD line (the blue line) crosses the signal line (the orange line) it’s an early signal that a bullish trend might start. However, if trading would be that easy we would all be millionaires, right? And that’s the reason why our MACD Trend Following Strategy is so unique. We’re not only waiting for the MACD moving averages to cross over but we also have our other criteria for the price action to break aka the trend line we drew early.
This is a clever way to filter out the false MACD signals, but you have to be equipped with the right mindset and have patience until all the piece of the puzzle come together. If you were to trade just based on the MACD crossover over time you’ll lose money because that’s not a reliable strategy. But if you use the MACD indicator along with other criteria such what this strategy tells you to do, you will find great trade entries on a consistent basis.
Step #4: Use Protective Stop Loss Order. (Place the SL below the most recent swing low).
Now, that you already know how to enter a trade at this point you have to learn how to manage risk and where to place the SL. After all, a trader is basically a risk manager.
You want to place your stop loss below the most recent low, like in the figure below. But make sure you add a buffer of 5-10 pips away from the low, to protect yourself from possible false breakouts.
Basically, a good entry price means a smaller stop loss and ultimately it means you’ll lose a lot less comparing it with the profit potential, so a positive risk to reward ratio.
Step #5: Take Profit when the MACD crossover happens in the opposite direction of our entry.
Knowing when to take profit is as important as knowing when to enter a trade. However, we want to make sure we don’t use the same trading technique as for our entry order. When the MACD line (the blue line) produces signal line crossovers (the orange line) we want to close the position and take full profits.
Before taking profits, it’s important to wait for the candle close – either the 4h or the daily candle – depending on the time frame you trade so you make sure the MACD crossover actually happens.
Note** The above was an example of a buy trade using the MACD Trend Following Strategy. Use the exact same rules – but in reverse – for a sell trade.
4H XRPUSD 1-2-3 REVERSAL CANDLE PATTERNTrading Rules
1 - Preceding Uptrend
2 - New Swing High Green Candle
3 - Lower Low Red Candle
4 - Lower High Green Candle
5 - Enter: Break of #3 Low
6 - 1st TP Take measured distance
from #2 High to #3 Low
7 - You determine SL & 2nd TP
The BEST Timeframe to Trade ForexYou got into trading for one reason and one reason only. To change your life. For freedom, for freedom to do the things you want to do. To spend time doing what you want to do when you want to do it.
NOT to be a slave to the screen. Not to stare at the charts all day.
And here is the thing. If that is what was required, to stare at the charts for hours at a time watching each tick, then you would do it. You would do whatever it takes to succeed.
The thing is and I want you to pay attention to what I am going to say right now because it is very important, the very thing you are doing is actually the thing preventing you from success. You are spending too much time watching the markets and taking way too many trades.
Trade less. Avoid the noise. Take strong signals with a different mindset and increase your win ratio and profitability.
BTCUSDT 4H DOUBLE DEATH CROSS LONG TRADE STRATEGYThe double death cross strategy employs one more moving average that will help you anticipate when the death cross signal will occur. The third moving average is the 100-day MA, which is a medium-term MA situated between the other two moving averages.
Step #1: Wait for the 50-day EMA to cross below the 100-day EMA. The two moving averages also need to converge with the price action. You can read more about day trading price action here.
If we get the crossover of the 50-day MA (blue line) and 100-day MA (orange line) at the same time the price is testing those moving averages like it’s doing on the GBP/USD chart below, that’s the best-case situation for trade because we can define the risk.
The rule you need to keep in mind is that when the MAs converge with the price you have to get ready for the ride because it is going to get BUMPY!
Step #2: Multiple entry strategy: Sell1 when we close below 50-day MA and 100-day MA. Sell2 when we break and close below 200-day MA.
Using multiple entries to improve your average entry price can be the best way to approach the death cross signal. Scaling into a position is our preferred trading method when looking to capture a large price move in a currency pair.
The fact that the price was near the death cross signal, it created tension in the market that eventually will lead to a sharp move to the downside.
We pull the trigger on the first half of the trade once we close below the 50-day and 100-day moving averages.
If at the moment when the death cross developed we’re already trading slightly below the two moving averages, sell at the market the moment we close below.
The second half of our position is entered once we break and close below the 200-day moving average.
**Note: It’s important to remember that the success of the death cross signal relays on this simple trade secret that price and the two moving averages need to converge.
Keep it 'simple stupid' is not just a simple aphorism, but it’s an old truth that can make the difference between losing and making money trading.
Step #3: Hide your protective Stop Loss above 50-day MA and 100-day MA
The most important thing we need to define when trading is our risk. If you want to be a profitable trader you really need a limited risk. This is the type of death cross trades that we want to pull the trigger on.
If the price were to move back above those moving averages, we can safely assume this is yet another false trade signal. In this trade case scenario, we’re risking a little and our reward is potentially much bigger.
So, the best place to hide your protective stop loss is above the 50-day MA and 100-day MA.
Step #4: Choose your own Take Profit strategy or use this Two-step process for the take profit strategy: Mark on your chart the high of the candle when the 50-day MA crossed below 200-day EMA. Take profit when this high is broken.
Our take profit strategy might seem a little bit complex, but once we break down the steps you need to follow, it will make more sense why we’ve chosen this approach.
The first thing you have to do is to remember what we said at the beginning of the article which is that when the price doesn’t converge with the two MAs this is a death cross false signal.
In the example below, we can observe this type of price action.
Now all you have to do is to mark the high of the candle when the death cross happened and take profit as soon as the high gets broken.
**Note: The above was an example of a SELL trade using the death cross strategy. Use the same rules for a BUY trade – but in reverse, in which case we have the golden cross trading strategy.
Conclusion - Death Cross Stocks
Following the death cross trade signal can be a very efficient approach to identify bearish sentiment in the market. If you want to switch from short-term trading and try capturing larger trends the double death cross trading strategy can help you achieve your goals.
You must know that the death cross definition is universally applicable to any other asset classes. We can have a death cross crypto or a death cross gold the same way we can have a death cross S&P 500. Capturing and detecting bearish trends can be a hard task because downtrends are typically different than bullish trends. However, the double death cross strategy gives you a systematic way to tackle bearish trends.
BTCUSD 4H STRIKE TRADER ELITE (STE) LONG TRADEStrike Trader Elite Indicator (STE) shows Entry Signal Level
Strike Trader Elite Indicator shows Stop Loss Level
Strike Trader Elite Indicator shows Take Profit Level
Strike Trader Pulse Indicator shows Histogram crossover
PM me is you have any questions I can help you with about the STE Indicator
EURCAD 4H SHORT TRADETSG MONEY MANAGEMENT RULES.
1 - Enter 2 trades @ Sell Limit @ 1.4554 - 1% Trade Balance each.
2 - 4H ATR = 25.
3 - SL = 1.5 x ATR (1.5 x 25 = 37.5 = 1.45915) SL for both trades.
4 - TP = 1 x ATR ( 1 x 25 = TP = 1.4529) TP is for 1st order only, 2nd order no TP let profit run.
5 - When 1st TP hit move 2nd order SL to breakeven.
6 - Trail 2nd SL behind previous fractal highs.
Price moved up to retest a previous Sup/Res level.
Sell Limit made @ 1.4554 for 2 trades.
1st TP hit @ 1.4529, move 2nd trade SL to breakeven @ 1.4554.
Price had a bullish pullback and hit 2nd trade SL
Price stayed below the previous Sell Limit level of 1.4554.
Price re-setup short trade and re-entered another Sell Limit order @ 1.4554.
1st TP hit @ 1.4529, 2nd SL moved to breakeven.
Price created a new current fractal low support of 1.4513.
Moved Trail SL to current fractal high @ 1.4537.
Price created a 2nd current fractal low support at 1.4483.
If Price breaks that level then Trail SL to 1.4505 current fractal high.
Continue to trail SL if Price continues its bearish move.
This current EURCAD 4H Short trade was found by DACapitalTrading Jan 13th.
We added to this short trade our TSG money management trade plan.
BYBIT BTCUSD 4H Automated StrategyHi guys, here's a new strategy for BYBIT:BTCUSD in 4h (240) timeframe. Long and Shorts.
To create this setup I backtested the configuration on one year data (2019 to today).
The goal was to make a solid Swing Trading Strategy which catches major moves in the market, with a relatively low risk.
To achieve this the idea is to use a Trailing Stop Loss AND Take Profit. I know Bybit doesn't allow such features but my indicator has it in its body.
The Long Take Profit starts at 30% which is 3 times higher than the Short one, because that's how Bitcoin is: its bull rallies tend to be stronger than the bears.
For the entries, I used oversold and overbougth reversing RSI in order to capture tops and bottoms.
RSI length of 7 with a lookback of 125 bars to get the highest/lowest point.
I filtered the bad entries using Tilson T3 trend line with a length of 36 days.
I hope you find the strategy interesting!
For those willing to automate or backtest using my private indicator, use the links below to get it.
Here is the configuration:
To create the alerts, use the regular 'LONG ENTRY' and 'SHORT ENTRY' for the entries and 'ALL EXIT' for exiting both kind of positions.
ETHUSD 4H EMA STRATEGYStep #1: Plot on your chart the 20 and 50 EMA
The first step is to properly set up our charts with the right moving averages. We can identify the EMA crossover at the later stage. The exponential moving average strategy uses the 20 and 50 periods EMA.
Most standard trading platforms come with default moving average indicators. It should not be a problem to locate the EMA either on your MT4 platform or Tradingview.
Step #2: Wait for the EMA crossover and for the price to trade below the 20 and 50 EMA.
The second rule of this moving average strategy is the need for the price to trade below both 20 and 50 EMA. Secondly, we need to wait for the EMA crossover, which will add weight to the bearish case.
We refer to the EMA crossover for a sell trade when the 20-EMA crosses below the 50-EMA.
By looking at the EMA crossover, we create an automatic buy and sell signals.
Since the market is prone to false breakouts, we need more evidence than a simple EMA crossover. At this stage, we don’t know if the bearish sentiment is strong enough to push the price further after we sell to make a profit.
To avoid the false breakout, we added a new confluence to support our view. This brings us to the next step of the strategy.
Step #3: Because the market goes down much faster, we sell on the 1st retest of the zone between 20 and 50. After the EMA crossover happened.
On a BUY trade wait for the zone between 20 and 50 EMA to be tested at least twice, then look for selling opportunities.
The conviction behind this moving average strategy relies on multiple factors. After the EMA crossover happened, we need to exercise more patience. We will wait for two successive and successful retests of the zone between the 20 and 50 EMA.
The two successful retests of the zone between 20 and 50 EMA give the market enough time to develop a trend.
Never forget that no price is too high to buy in trading. And no price is too low to sell.
Note* When we refer to the “zone between 20 and 50EMA,” we actually don’t mean that the price needs to trade in the space between the two moving averages.
We just wanted to cover the whole price spectrum between the two EMAs. This is because the price will only briefly touch the shorter moving average (20-EMA). But this is still a successful retest.
Now, we still need to define where exactly we are going to sell. This brings us to the next step of the strategy.
Step #4: Sell at the market when we retest the zone between 20 and 50 EMA for the third time.
If the price successfully retests the zone between 20 and 50 EMA for the third time, we go ahead and sell at the market price. We now have enough evidence that the bearish momentum is strong to continue pushing this market lower.
Step #5: Find your own SL & TP or
Place the protective Stop Loss 20 pips above the 50 EMA
After the EMA crossover happened, and after we had two successive retests, we know the trend is down. As long as we trade below both exponential moving averages the trend remains intact.
In this regard, we place our protective stop loss 20 pips above the 50 EMA. We added a buffer of 20 pips because we understand we’re not living in a perfect world. The market is prone to do false breakouts.
Step #6: Take Profit once we break and close above the 50-EMA
In this particular case, we don't use the same exit technique as our entry technique, which was based on the EMA crossover.
If we waited for the EMA crossover to happen on the other side, we would have given back some of the potential profits. We need to consider the fact that the exponential moving averages are a lagging indicator.
The exponential moving average formula used to plot our EMAs allow us to still take profits right at the time the market is about to reverse.
Note** The above was an example of a SELL trade. Use the same rules – but in reverse – for a BUY trade. However, because the market goes down much faster, we sell on the 1st retest of the zone between 20 and 50. After the EMA crossover happened.
Summary
The exponential moving average strategy is a classic example of how to construct a simple EMA crossover system. With this exponential moving average system, we’re not trying to predict the market. We're trying to react to the current market condition, which is a much better way to trade.
The advantage of our trading strategy stands in the exponential moving average formula. It plots a much smoother EMA that gives better entries and exits.
