This is an easy and quite an interesting Forex strategy, in which the trade happens in day diapasons only and trade signals are valid only during one working day.
Studying the Forex markets it was noticed that under the condition of a price fixed in top/down 10-12 percent of a day diapason at the market’s closing there is a 80-90 percent probability that the price will continue moving towards the day candlestick’s closing at the market’s opening. However, in general the price will be closed above (or below) this candlestick only in half of the cases! This regularity allowed the 80-20 Strategy to exist and be quite popular and widespread in the Forex markets.
This is an example of making a deal using the 80-20 Strategy.
Suppose you were opening a trade terminal today and noticed that:
Yesterday the day candlestick opened in the top 20 percent of the day's range, and was closed in the bottom 20 percent. That is, if it is divided into 5 parts, it turns out that the price of its opening appeared to be in the upper 1/5 of the candlestick closed, while the closing price - in the lower 1/5 of the day candlestick closed.
Today’s day candlestick has opened, but the price in the Forex has gone in the direction of the past closed day candlestick, supposedly from 10 to 15 Pt.
In these cases make a deal according to the following steps:
When the price is lower than a yesterday's minimum and there is a gap to set a pending order, set it to Buy Stop at the same price as the yesterday's minimum.
Having opened a position for a buy, set a securing Stop-Loss 3-5 steps below today’s minimum.
Then use a Trailing-Stop to fix your profit, after what move the Stop - Loss to a safe distance you set for yourself, depending on the volatility and the chosen currency pair in the Forex market.
For example, if the size of the day candlestick is 100 - 200 Pt, the Trailing - Stop must be set at a distance of 50 to 100 Pt. The candlestick of 50 - 70 Pt requires the Trailing - Stop of 25 - 30 Pt.
You can set the Take-Profit at a distance twice as bigger as the initial Stop-Loss if you would like (as it is required by the Money-Management Forex), or you could just set the in the break-even level as soon you find it necessary and leave the transaction open until the end of the day, deciding later whether to keep it open or not. Still, it is highly recommended to use Trailing - Stop in order to fix the profits.
Attention: when making a deal for a sale, you should do the opposite!
Note: The deals in the 80-20 Strategy do not happen so often, but after watching several currency pairs, you can greatly increase the chance that you will enter the market!
THE TURTLE SOUP STRATEGY
This strategy is designed to find out the cases when the breakout is false. In these circumstances the price in the market usually rolls back or even turns. Of course, the majority of turn will be short-term and allow to close the deals with a small profit or breakeven, or even with a little stop-loss. But sometimes these turns can be middle- or even long-term trends.
To open a deal you should do the following:
Before proceeding to the trade it is necessary to open a day graph of the currency pair chosen. You can use a smaller time frame if you choose to do so. However, we would not recommend going lower than M15.
You should also consider that today’s candlestick is always going to be the last one of the 20-day diapason. That is, you should count 20 days back starting from the today’s candlestick and find an absolute minimum and maximum in this time interval. After that, mark the extremes with horizontal lines. The latter is not mandatory but helps to see the situation more clearly.
It is very important to remember that the previous day maximum or minimum should be at least 4 days from todays.
Buy stop order should be submitted immediately after the today’s candle breaks the 20 day minimum. It should be set 5-10 points above the previous minimum’s price. A bought deal should be opened exactly the opposite way, which means immediately after the 20 day maximum. Note that this order is valid for today’s candlestick only. If it was not working during the day, delete it.
Immediately after the pending order signaled, it is necessary to set the stop loss several points below (for a bought deal) or above (for selling) the current candlestick. Here is an example of working with the simple Turtle Soup Strategy.
If the opened position is increasing it is necessary to transfer it to the breakeven as fast as possible. You can use trailing-stop for that if you choose so. However, you must consider that it must be no less than 50 point for the volatile currency pairs such as GBPUSD or GBPJPY. For the less active currency pairs the minimum is 30 pints.
The signals can be received after the first unsuccessful entry to the market. Thus, if the deal after some time since its opening has been close by the Stop-Loss, you can set the pending order again at the same price. However, you should consider that this rule applies only to the first or second day after the 1st opening of the transaction.
“TURTLE SOUP PLUS ONE” STRATEGY
First of all it is necessary to wait until 20-day minimum or maximum appears the market. Extremes should be formed at least three days before the current candlestick. Furthermore, the current minimum is closed at the previous minimum level or slightly below.
Unlike the Turtle Soup, a pending order should be installed on the following day after the candlestick closes at the level of the previous 20-day minimum or maximum. As in the Turtle Soup, you must delete the pending order if it does not work for this or the following day.
In this system, the stop loss should be installed a few points below the last minimum or maximum, depending on whether it is buying or selling. Here is an example of deals made with the Turtle Soup plus One strategy
As in the case with the Turtle Soup, it is possible to use the trailing stop.
It is noteworthy that in the day charts the signals for the deal opening do not appear that often. However, you can use several currency pairs simultaneously. This way, the amount of deals will increase.
Besides, by observation and testing it was found that the signals of these strategies are often supported by divergence in the MACD, Stochastic and CCI indicators.
Note: Both Turtle Soup and Turtle Soup plus One can be used as middle-term strategies and the long-term ones. They are based on the breaking the particular maximums and minimums. In the Turtle system’s case it is breaking of the 20- and 55 day extremes. However, there is always a “but”, which in this case is a rather complicated procedure of counting the position’s volume (an “N” value). If necessary, this system can be modernized without using this “N” value. Instead of it, no more than 1 or 2% of the deposit might be used, with the stop-loss set for the closest maximums and minimums. Thus, you can exit the market in case the 10 day extreme is broken. In this case, however, it is a whole different strategy.
«FOREX TREND RIVER» STRATEGY
This trading is not at all complicated and consists only of two moving averages. For trading with the Forex Trend River system it is possible to use the trading instruments with a good volatility, such as EURJPY, EURUSD, GBPUSD, etc. The time frames recommended for the work are M30 and H1.
The first indicator is set in the currency pair’s graph chosen. This is a standard Moving Average indicator with the following settings:
The first Moving Average settings
Image 1. The first Moving Average settings
Additionally the levels in the Levels tab are set for the indicator that later will serve as the levels for the entry to the market and for obtaining the take-profit. For brokers with a4digit quotes the following levels are added: 15, 89, 144, 233. These are not just random numbers but the values of the Fibonacci sequence. For brokers with 5-digit quotes these values will be equal to 150, 890, 1440, 2330 points:
Additional levels for the first moving average
Image 2. Additional levels for the first moving average
After the indicator is bound, a moving average with 4 levels above it appears in the chart. The first level has a value of 15 and serves as a filter for opening transactions for the purchase. The next three levels are the levels of taking the profit. According to the strategy, the profit is taken in three stages (partial closing of the transaction), or if the entry into the market at the Level 15 is carried out by 3 orders, then upon reaching each successive level one deal will be closed.
However, in order to fully work with the Forex Trend River strategy you need to bind to the chart another moving average, according to which the deals for sell will be carried out. The parameters are the following:
The second moving average settings
Image 3. The second moving average parameters
Note that the line of this moving average is drawn in respect with the candlesticks closing price. The levels set for this line have the same values as in the first case, only a minus is added before each number. In this case, the levels will be displayed in the graph below the moving average:
Additional levels for the second moving average
Image 4. The levels’ values for the second moving average
After the two indicators are bound in the chart, a dynamic channel of moving averages is formed. It narrows and expands depending on the state of the market: if the market is flat, the channel narrows, if the market is trendy, the channel expands (see the Images 5 and 6).
RULES OF TRADING WITH THE FOREX TREND RIVER STRATEGY
Let us now look in detail at the rules of trading with the Forex Trend River Strategy. The entry into the deal for a buy will occur as the price intersects the upper end of the moving averages canal top down, and at a candlestick’s stable closure above the level of 15, which serves as a filter. It filters the false thrusting moves of the canal composed of the moving averages with the levels of 15 and negative 15. After the signal candlestick’s closure three deals open up. The simplest option is when all three of them are of the same lot, for instance, 0,1. Take profit for each of them is set at one of the following levels: 89, 144, 233. As these levels are dynamic, the price, upon which the take profit is going to be taken, will be changing according to the take profit’s changing. Stop-loss, however, for the bought deals, sets behind the line opposite to the moving average at the level of negative 15 (it is market with an arrow in the Image). That is, a trader from time to time has to control his positions, changing the take profits and stop loss’ values as the price will be moving (click the image)
BUYING WITH THE FOREX TREND RIVER STRATEGY
Image 5. An example of a bought deal with the Forex Trend River strategy
When the price reaches the level of 89 the first deal will be closed (TP1), whereas the second and the third ones will remain in the market until the price reaches set conditions.
Another way of entering the market is to open the orders of different volumes: for reaching the first level of take profit the lot’s volume of 0,3, for the second level it is 0,2 and for the level 144 it is 0,1. The lot’s rate of change may be different and defined by the trader on the basis of their trades’ degree of aggressiveness, and Forex’s money management also has its say. Remember that you can calculate the stop-loss level according to the rules of money management with the help of the MM online calculator.
The conditions for the sell deals are the opposite. Entering the market occurs as the price intersects the lower end of the moving averages (15 and – 15 level) canal top down, and at a candlestick’s stable closure under the level of -15. The entry also happens with the help of three orders, where the take profit is set at the levels of -89, - 144, -233. Stop-loss is fixed at the opposite side of the canal at the level of 15 (click to enlarge):
SELLING WITH THE FOREX TREND RIVER STRATEGY
Image 6. An example of a sell deal with the Forex Trend River strategy
Take profit and stop-loss values are measured as the levels’ values are changing. In the majority of cases the price reaches the first level of take profit of 89 (for bought deals) and of -89 (for sell deals). The second level is not always reached, the third one is reached by the price when the trend movement is obvious, whereas the deal’s closure can happen in several days. Considering that during the rand movement he levels also change their position, the stop-loss’ value is also changed. That is way in the majority of cases the closure of the second and third stop-loss deal takes place in a no loss zone.
As an example of the Forex Trend River Strategy’s profitability let us look at the situation with the currency pair EURUSD in the time frame of 1 hour since Aug 19 to Sep 4, 2014 (click the image):
An As an example of the Forex Trend River Strategy’s profitable deal.
Image 7. Take profit is 645 points with the Forex Trend River Strategy.
On Aug 19, according to the Forex Trend River Strategy’s rules we open 3 sell orders, Aug 20 get the first profit, Aug 25 TP of the second order reacts, and finally Sep 4 we receive the profit from the third order. The total take profit is 645 points!
As you can see, the Forex Trend River Strategy described is not complicated and effective. As the price changing requires a trader to change the take-profit and stop-loss’ values in the orders, he (a trader) needs to monitor the market from time to time. If there is no time for the monitoring, this can be entrusted to the Forex Trend River Advisor. But this is a topic of another article called: “Forex Trend River Advisor – trade with the strategy fully automatically!”
THE DIDI TRADING STRATEGY
This Forex strategy has shown quite a positive dynamics of return, taking into account that the possible minimum of the indicators is use in the trade. There are only two of them (it is actually just one, but we decided to add the filtering moving to be on the safe side). Therefore, the beginners in market trading can use it right away as speculators. The analysis system is in the trend, so be careful to use it in the flat market. Entering the deals as well as closing them is carried out only at the current price. No stop orders or take profits are not provided by the developers and it is probably right. This strategy is a short-term one and the deal usually remains in the market for no more than 45 - 300 minutes in the European session. This means that a trader will be able to personally supervise the open orders.
Of course you can upgrade the method’s rules and set the fixed losses limits or the purposes of the deal. But at the same time one should not forget the importance of thorough testing policy on a long history of quotations.
DIDI Trading system is designed for 15-minute quotes charts and is recommended to be used on the major currency pairs with the dollar. Our tests were performed on the euro and dollar. Recommended risk management trade for one trading operation is from 3 to 5%, so the less the risk is, the less will be the final drawdown, which is particularly important in the flat market. As it was mentioned above, the closure of profitable and unprofitable deals is performed in the market. The special DIDI index indicator helps to do this on the 15 minute timeframe. You will know how to use it later one. First of all, let us take a look at the working pattern of the DIDI Trading system:
HOW TO ENTER AND EXIT A TRADING POSITION
The DIDI Forex indicator was invented by the strategy authors. It allows to determine the current trend’s direction at several time frames simultaneously. In the strategy we are going to use the current H1. To enter the buying in is necessary that a green line is above a red one on M15 and the same figures are shown at a later indicator. It is the same for selling: it is necessary that both instruments have the red line above the green one. To exit the deal you have to wait for a moment when DIDI Index in the current time frame changes its figures.
THE “SIMPLE STUPID” STRATEGY
The moving average: this indicator was added by the administration of our website to filter deals, you can exclude it from your method since the developers do not use it. However, we believe it will help to filter out losing thrusting moves during the flat market period. It is very easy to use it in the trade: sell deals require a price to be below the moving average and bought deals – below.
This is a short time Forex strategy. It is very simple and it operates the trade indicators only, which in the 15 minute time frame helps the fast profitable trade. That is, to make profit on the stable trend markets and to close one’s orders the same day. This way any beginner can either withdraw all the profit immediately or let it grow and keep trading. The recommended risk management per deal should not exceed 2-3%, as the quotes unpredictable behavior causes stop-order to appear more often. In order to keep these losses from getting critical for a deposit, it is important to remember the risks control. The main currency instruments for which the strategy was designed are known to most of the market’s traders as the currencies paired with the US dollar. The best choice is eur usd, gbp usd, usd or jpy. However, anyone can test and optimize the strategy according to the currency preferred.
So, the trading system is developed for the intraday trading, and therefore it is recommended to be used only for 15- and 30-minute charts of the Forex tool you have selected. Our testing of this indicator was carried out on the 15-minute candlesticks. Stop orders are set to the nearest local minimum or maximum (peak points of correction), plus 10 - 15 points for a market noise and spread. Translation to breakeven for this tactic is not necessary, since the transactions are closed on the same day, even if there was no closure on the take profit (by the end of the European session).
There are several ways to fix an income:
twice as much as the set stop loss order
According to the reverse signal.
You can alternate these options according to your taste and preferences of the current trading day. Also we should not forget that the Simple Stupid strategy is a probabilistic strategy, and thus the positions are closed 30 minutes prior to the release of important news. Before describing the rules of the system, take a look at its interface:
HOW TO ENTER A TRADE POSITION
EMA 8 and EMA 5 indicators are used in a standard way. When a blue moving (period 5) crosses a black one (period 8) top down, consider the sale. It is important to remember that the opposite is true for the bought deals.
Heiken Ashi indicator is also used standardly. When the HA candlestick is red, consider selling, when it is white, consider buying.
Mom indicator with a period of 10 has an important zero dotted line. When the indicator is below this line, the sell is considered, when it is above zero, a trader looks for compliance for a bought order
Stochactic DiNapoli indicator uses the moving lines of this instrument only. That is, when a blue line crosses a red one top down, consider a sell. When the down top crossing happens, open a bought deal.
THE “COMBINED” STRATEGY
This Forex strategy is quite difficult when it comes to the interpretation of the entry and exit signals. Therefore it is recommended to traders experienced in trading in the foreign exchange currency market. This strategy operates quite a lot of indicators that allow you to trace the trend, according to which the trading should be carried out, with a high degree of accuracy. It also traces the fair signals for a deal opening in buying or selling the currency. In fact for the analysis of market a speculator that follows this strategy will use 5 indicators. The most well-known are Bollinger and moving averages. The system is designed for medium-term work on the Forex stock market exchange. The small fixed stop orders of 30-50 points allow you to extract from 200 to 500 points of profit. This is an excellent and well-designed trading indicator methodology that can bring you decent monthly income without yours being permanently present at the terminal. Additionally, the current spread, swap and time in different stock markets are shown in the work graph.
The exit from the open trading position is performed by the system’s developer based on Bollinger’s indicator, on the candlestick’s closing below the indicator’s end line in particular. We believe that you can find yourself other interesting and effective methods of closing the market’s order, for example, various Murrey Math or a pivot.
As it was already mentioned above, the working time frame is 4 hours. Buying and selling entry is done strictly according with the current trend. Stop orders are fixed and 30-50 points from the entry point are recommended to use. However, the safest stop loss location is definitely behind the main trend moving. Let us look at a strategy’s working graph and deeply analyze the signals of a currency pair’s increasing or decreasing:
EMA 156 indicator changes its color depending on whether a price has broken the moving average top down or down top. This indicator points at the main currency instrument’s trend: if the indicator’s line is blue then the bullish trend prevails, if the line is red, it means the bear trend is active in the market. Using the entry market signals always consider this indicator’s figures!
EMA 22 Indicators with different algorithms of calculation: the difference lies in the analysis of the candlesticks on closings or openings. Indicator lines form a kind of a parallel channel to break. When it is broken through, the trader receives a bought or sell signal. That is, if a price closes below the channel of Moving Averages, then consider selling, if it closes above, consider a purchase. To make the interpretation of the signals easy, the indicator is colored in accordance with the closing of the bar in red (for sale) and blue (for shopping.
Bollingers indicator (or, as the developer calls it, Elder auto Envelope). There are no many peculiarities in building it, so it is up to you which indicator you consider it to be. MQL - programmers will surely detect some minor differences. However, the important thing is to understand exactly how to use these lines. And they are used exclusively to exit the market position. Once the candlestick closes below the channel boundaries, a trader exits the sells. Once the candlestick closes above the channel, the trader exits the buys.
Stochastic indicator in the form of a histogram is used pretty simple: the blue histogram means an overbought, the red one is an oversold. Therefore the blue bar means sell signals, and the red one is bought signals. Be careful and do not get confused!
MACD indicator in the form of a histogram: it is a well-known indicator implemented in a more convenient form. It is all according to a standard: red bar is selling, blue one is buying.
THE “CANDLE SIGN” STRATEGY
This strategy uses a non-standard approach in the implementation of Forex trading and requires the elementary knowledge of how construct the complex graphs reflecting market movements and patterns of price movements. All that is necessary for a beginner or an experienced trader to understand the «Candle Sign» strategy is the ability to quickly perform mathematical calculations, and, of course, a desire to work and increase profits.
The best currency pair for this strategy is euro-dollar.
The time interval is 1H.
TO USE THE CANDLESIGN STRATEGY SUCCESSFULLY YOU SHOULD CONSIDER THE FOLLOWING PARAMETERS:
First of all, you need to set the first price level. Consider that the closest price level should be defined at the moment of the candlestick’s opening and set according to the 4 digit broker. For example:
The opening price is 1,2824, therefore, the price level is going to be 1,2800.
Secondly, you need to carry out some operations for the “buy stop” and “sell stop” pending orders. For that you need to perform the following mathematical operations:
At the price’s opening you need to round its value and then multiply by 10. You will get something like this:
We round the value of 1,2824 and get 1,3. Then
1,3 multiply by 10 and get 13.
13 is the number of the points.
This points are necessary to be doubled (13 Х 2 = 26). Then 26 steps are made from the rounded price value (1,2800). Thus you set sell stop и buy stop.
Stop loss and Take Profit are also set according to the certain regularities.
Stop loss for both orders are set for 26 points, except that for the Stop Loss 26 points are counted from the signal candlestick’s opening.
1,2824 – 26 = 1,2798 (buy)
1,2824 + 26 = 1,2850 (sell).
When setting Take Profit it is necessary to increase the price at the candlestick’s opening by 100 ties and then set it to zero after the second digit.
1,2824 х 100 = 128,24. After setting to zero you get 120 points.
These 120 points are necessary to be set at the point of entry to the market. (they are added to or subtract them from the Take profit).
Thirdly, the Trailing stop needs to be set. It is calculated by multiplying the opening price by 2,5.
Here is an example of working with the strategy.
In fact, for those who like mathematical calculations and for holders of a good response, this Forex strategy is very likely to bring success. This approach is also good because it provides more opportunities to the more accurate calculations of the graph’s movements. Therefore, the «CandleSign» strategy allows you to rely not on the relative analytical predictions but on mathematically precise calculations, thus reducing the risks of loss of time and money.
The Forex Advisor is available for this strategy.
THE “DAILY BREAKOUT SYSTEM” STRATEGY
This strategy is quite profitable despite its simplicity and it is a breakout strategy. It has a number of nuances and some several additional conditions for the reentry, if the price turns or in the situation of a flat.
DAILY BREAKOUT SYSTEM STRATEGY’S BASIC PRINCIPLES
We approximately know that if a price has broken the previous day maximum (or minimum), the situation is going to develop in one of the following directions:
The stops operating in the day intervals that are below or above a candlestick may work, then the price moves several points in the direction of breaking. 10-30 points more and the price will reach the flat.
In this case an algorithm for the “10 points for euro\dollar” Forex strategy is applied.
Image, click to enlarge:
After the price has broken the day maximum (minimum), it is possible that it turns around and goes back.
Image, click to enlarge:
maximum and minimum are going to be broken by a price’s intensive moving and it is not going to get back to this level again (only if a price has not broken its maximum or minimum during 3 days at least).
Image, click to enlarge:
It is clear that this Forex strategy is used according to the situation:
Set two pending orders at the previous day maximums and minimums – one on each side.
Take-profit is set at the level of 25-40 points.
Stop-loss is at the level of 15-20 points.
Take into consideration only the first intersection of the minimum and maximum during the working day. In case of the order’s closing, the orders are not set that day anymore.
After the price has broken the minimum or maximum level and moved a certain amount of points from it (let us say, 10-15, depending on the Forex strategy you chose), set the stop-loss of the open order in a breakeven. You can also fix your profit, closing half of the deal and changing the other half to a breakeven.
When the order is set to zero and half of the deal is closed, set one more order at the same level of the order’s opening (look at the Image #2 – a thick blue line), but at the opposite direction (if the buy had been set initially, then set sell and vice versa), counting on the fact that a rebound from the level happened, not a break.
AN IMPORTANT ADDING FOR THE STRATEGY
If the correction is going according to the trend, then pended orders can fail to work for several days in a row, and after the correction the intense movement toward the trend can be noticed (look at the Image #3), which means the candlestick’s body covers the maximums/minimums of the correction candlesticks. Therefore the failed orders are deleted two days after their installment. However, if one of the orders did work, then at the end of the day all the fail orders for buy or sell should be deleted.
Besides, the turning order can be set (as in example #2) only when the previous day’s extremes were broken. If during a day only one out of three orders worked, delete the other two.
If the Take-Profit of the first break order worked, then the turning order should be deleted.
SESSION BREAKOUT STRATEGY
The Session Breakout Forex Strategy is based on the session maximums and minimums’ breaking in the Asian, European and American Forex market. The currency par is GBPUSD, the time interval is M15, the indicators used are : i-Sessions.mq4 (helps to define the sessions’ limits) and ATRonChart.ex4 (helps to set the stop-loss).
The Session Breakout Forex Strategy is explained in the picture:
The Session Breakout Forex Strategy
The i-Sessions indicator shows us the limits of each session, thus we see the minimum and maximum of each of them.
The Session Breakout Forex Strategy
The trading is carried out by the pending orders.
The Buy Stop order are set at the maximum of the finished session, the Sell-Stop orders are at the minimums of the finished session.
The Take-Profit is set at the distance of 15 points for the GBPUSD currency pair.
To define the stop-loss the ATRonChart.ex4 indicator is used. When the sell-stops work, set the stop-loss above the top end of the ATRonChart indicator for the previous candlestick. If the buy stop works, the stop loss is set below the lower end the ATRonChart indicator for the previous candlestick, preceding the break’s candlestick.
All the failed orders that had been set during the previous day remain by the following day’s closing.
After all the orders are set, this is what approximately get (click to enlarge; the image will open in a new tab).
The Session Breakout Forex Strategy
Thus, in the image on the left there is a zone that consists of the 3 sell orders with the profit of 15 points each. After the break the profit of 45 points was received. Then, according to the picture, the orders that allowed to make the profit of 15 points each worked the same way.
FOREX PRICE ACTION STRATEGIES WITH NO INDICATORS
Introduction to the Price Action. This system became widely known because of the trader James16, who in one of the English-speaking forums explained the principles of working with this system. Trading with Price Action Strategy (PA) is performed based directly on a price chart, price’s behavior and system’s different patterns without any indicators.
This is price behavior that takes into account everything what is happening in the market, all of the world events world and the reaction to them. Therefore, price behavior and its correct interpretation, based on the emerging graphic patterns is the basis of the system. Knowing how certain patterns work in most cases allows the trader to open a deal in the right direction and make a profit. There is quite a large number of patterns and, accordingly, lots of trading systems based on them. Let us analyze step by step the simplest and most commonly used strategies:
The Pin-Bar trading system (by Pinocchio bar). This is a simple and profitable Forex strategy.
The pattern’s structure and its forming. Pin bar is a price pattern that forms in the graphs quite often, especially at the trend’s bottom or top and in rebounds. It can serve as a signal for trend’s changing or correction movement’s ending. Pin bar is quite a reliable set-up.
A correctly formed Pin-bar has a number of certain characteristics that show that the set-up is also correct:
Long nose. It should extend beyond the surrounding bars far enough (“to pop” from the adjacent bars)
The Pin-bar’s level of the opening and closing should be close to one of the bar’s ends
The Pin-bar’s level of the opening and closing should be close to one of the bar’s ends
Pin-bar cannot be the inside bar
Pin-bar should have levels of opening and closing within the left eye
Pin-bar is used for trading as an independent graphic pattern, but better results can be achieved when it appears:
at the bottom or top of swings
at the Fibonacci’s correction levels (at the previous price movement’s rebounds)
at the moving averages
at the strong levels of support and resistance (PPZ)
If the Pin-bar is formed at the circumstances mentioned above, this means a trend is very likely to change.
It is necessary to notice that the market forms many pin-bars. For a successful trade you should chose the correctly formed patterns in the right places – formed either in the bottom or the top of the swing movement, or those that are rebound from PPZ (levels of merging of the moving averages, round numbers and Fibo-levels).
THERE ARE SEVERAL RULES OF USING THE PIN-BAR FOR OPENING TRADE POSITIONS:
If the trend is ascending, we use the signal from pin bar formed on the swing low - the lowest point of swing motion to enter the market.
If the trend is descending, we use the signal from the pin bar formed on the swing high at the top of the market to enter a deal.
If the trend is ascending the signal from the pin bar formed on the swing high at the top is ignored.
If the trend is descending, the signal from pin bar formed on the swing low (the lowest point of swing motion) is ignored.
Trading system based on the Pin-bar’s forming. In the picture the method of trade position’s opening according to the pin-bar. Trading is always carried out in the direction opposite to that of a nose.
Order for opening a position is set at the level of 10-15 points above\below the pin-bar’s foundation. It is recommended to set the pending order which is not going to work in case of the unfavorable tendency’s development. As a rule, stop-order is placed several points above\below the pin-bar’s nose peak.
In the example above, the optimal situation is to enter the position is shown in the picture, that includes a well-formed pattern, a pin-bar’s nose that broke the moving average line (blue line) and the Fibonacci’s correction level (yellow line) equal to 38.2%.
IT IS NECESSARY TO KNOW TWO IMPORTANT RULES:
If the correct pin-bar is formed, a pending order should work at the forming of the third bar from the pin bar at a maximum. In case it does not happen, a setup is false and the order needs to be canceled.
If after the pin bar’s formation a price moves in the direction of the nose on the following bars and the price movement is more than 61.8% of the size of the bar, the signal is false and the order should be canceled.
There are several ways to set the Stop-loss and an earlier opening of a trading position.
MANY TRADERS PRACTICE AN INITIAL STOP-LOSS SETTING THAT IS CLOSER TO THE ENTRY POINT:
Stop-loss is set at the level slightly higher than the pin-bar’s left eye
Stop-loss is set near the moving average or PPZ level of merging
Stop-loss is set at the level of 61.8% of pin-bar’s Fibonacci’s level
It must be remembered that such an approach on the one hand reduces the risk of loss when the price moves unfavorably, but on the other hand, it significantly increases the likelihood of Stop-loss orders working, so the trader can be even kicked from the trade exactly when the price moves in the favorable direction again.
ALSO A LOT OF TRADERS USE MORE AGGRESSIVE WAYS TO ENTER A TRADE DEAL:
Entering the position at the level of pin-par’s closing
Opening the position at the next pin-bar’s rebounding
In fact, the trader is able to combine different methods of an earlier entry into the position with different ways of a more aggressive use of a Stop-loss order, which, if he has certain skills, will allow him to earn higher profits . Unfortunately, it is connected with an increased risk that the trader will have to deal with.
Thus, some experienced traders enter the position in fractional parts of the lot at several points. For example, to enter the trade at a half of the lot at the level of a pin-bar’s closing, placing the other part of the position at the 50% level of the pin-bar. At such an entry a price will open part of the position in a half of the lot, and then, if the price reaches the level of 50% rebound, then the remaining part of the lot opens at a better price. However, there is a possibility that during rebound the price does not reach the level chosen by the trader, or the rebound does not happen at all, which means a good deal missed.
That is way it is recommended to study these combined methods at a Forex demo account and then implement in practice after getting experienced in trading.
Managing an open position while trading the pin-bars.
After the opening of the position it is vitally important not to let the position go with the flow but to carry out its profound managing. A great deal of attention must be paid to exiting from a deal.
After a deal is opened at the correct pin-bar, sometimes (approximately in 10% of cases) a price in the next two bars will be moving in the directions of a pattern’s nose and the deal will close in case the stop-loss work, not letting the trader to close the deal in breakeven.
When a price is moving in a favorable direction of making a profit, it is recommended to take part of the profit at a first chance, putting the remaining part of the position at the breakeven level. For doing so it is necessary to break the position into imaginary two or three parts and close each one successively if possible.
In this case you will partly fix the profit, and after putting it to breakeven your position will be safe, which will create a sense of a psychological comfort for the further work with the position. It is not recommended to close the last part of the position, but rather to let it “go with the flow” with a chance to enter a long-term trend and get a “prize” profit. Ways and methods of managing a trading position are defined by the trading strategy of a particular trader, way of managing a risk and deposit’s amount.