Setups With My Forex Trading Strategy Price action allows you to take many different types of trades, reversals, continuations, range, swing, breakout and scalp trades to name a few. After a preceding trend stalls at support, and indecision forms, you often see a reversal trend. The image below shows indecision forming between support and resistance. If you want to get my latest analysis, or want to learn more price action setups, I got you covered. As long as you see a strong move heading into an area of support or resistance, you can consider it a preceding trend.
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When price approaches a sell area large amounts of sell orders are triggered countering buy orders. This usually results in price stalling or even turning around completely for a reversal. They place their entry orders at significant price levels.
Significant levels come in many forms. The next time it approaches the level it pulls back again and then again two more times yellow highlights. Because market movers place their buy orders at the 1. This is how markets work, buy and sell orders are grouped together in the same general area and when they are hit we see the impact on price. There are a lot of indicators out there that claim to give you great support and resistance areas.
Support and resistance placements still need to be done by a person. These are my support and resistance areas , but if you want to trade more pairs you will need to place them yourself. I am going to break it down into a step by step process for you though.
But first, we need to define some rules for support and resistance areas. Select a daily chart and zoom out until you see around one year of data. Identify the highest and lowest bounces in the last year and place an area at each.
Remember, place your areas at the bodies, not the wicks and as these are yearly highs and lows placing them based on a single bounce is enough. Place support and resistance areas between the first two by connecting areas which have two or more bounces. You will generally find that there are support and resistance areas on most charts. If you have more than 8 you probably placed too many. Well the standard approach to candlestick analysis is basic pattern recognition, which fails to work in real trading.
I delve much deeper than that, I look at the story behind the candle and in this chapter I will show you how to do that too.
You can read up on the basics here if you need to. Each pattern has a set in stone definition and that is the only meaning it can have.
Actually, it is worse than useless. Thinking about candles as just patterns is counterproductive. It makes you a worse trader, it leads you to make massive mistakes. Giving a pattern a set definition leads to tunnel vision.
When you see that specific pattern, you assume that something will happen. All candlesticks need to be assessed based on the candlesticks around them, and many other factors.
Normally people say that a spinning top means a reversal is imminent, which can be true. However, this same pattern can also mean that a continuation is imminent. It can mean that price is temporarily stalling. Every single candle on your chart is telling you a story. When you combine those candles together, you get the story of price. Reading and understanding the story of price is vital in Forex.
It is vital because it allows you to answer one of the most important questions in trading…. Being able to accurately answer this question is vital. If you are about to enter a short trade and you ask yourself. If you look at the three highlighted candles below, it is easy to conclude that sellers are in control of price.
The candles all closed lower than they opened, they all created new lows beyond the previous candles low and they all had small upper wicks in comparison to the candle body. The small upper wicks indicate that buyers were unable to push price up by much. It has a short upper wick, a small body, and a long lower wick. This is what I call an indecision candle. Indecision candles occur when neither buyers or sellers can gain and maintain control of price.
They are common, but if used in the right way, they can be very powerful. Take a look at this bullish trend yellow highlight , it is a strong trend, there are several bullish candles heading towards an area of resistance.
The big bullish candles tell us that during the highlighted period buyers were in complete control of price. Large Upper Wick Blue Highlight A large upper wick shows that buyers tried to continue the bullish trend but failed. Sellers took control of price and pushed it down. Small Bearish Body Green Highlight The small bearish body shows that sellers were able to close lower than the open.
This is significant because in the three candles before this price consistently closed higher than open. This shows us that buyers are losing power.
Small Lower Wick Red Highlight The small lower wick shows us that sellers were not able to gain much ground either. This tells us that sellers are not strong enough to turn price around completely.
However, they are strong enough to stall further buyer movement. All together this indecision candle forming right after strong bullish candles suggests that power has shifted from a decidedly bullish buyer market to an undecided market. While sellers are not in control, neither are buyers. If you remember, in the previous chapter we talked about resistance being a sell area and support being a buy area.
So the image above shows us three strong bullish candles heading into a resistance area. This tells us that the sell area is working. When price pushed into that area sell orders triggered and buyers could no longer continue up. Price action allows you to take many different types of trades, reversals, continuations, range, swing, breakout and scalp trades to name a few. In my free Forex trading strategy I will focus on one type of setup, the easiest to spot and trade, reversal. Reversals are one of the strongest price action setups, and one of the easiest to trade.
And because they occur so often, you can trade this setup exclusively and be a profitable trader. In fact, for years Forex trading strategy focussed on reversals only. However, these days I trade more price action setups. In the example above, the preceding trend is a very strong bearish move, indicating that there are a lot of bears in the market and very few bulls.
If bulls were strong then price would not be trending down. The preceding trend shows us that bears sellers have strong control of price and they are pushing price down into a support area.
The opposite applies for a bullish preceding trend which would show bulls buyers trending towards resistance, as you see below. A preceding trend can be formed by as little as one candle. If the candle is strong and covers a lot of price distance, I categorise it as a preceding trend for the purposes of reversal trading.
Preceding trends are pretty simple. As long as you see a strong move heading into an area of support or resistance, you can consider it a preceding trend.
A reversal setup will have one to three indecision candles. The indecision candles need to form on or near to the support and resistance area. If indecision does not form on or near to the area of support and resistance, it is not a valid reversal setup.
An indecision candle in a bullish preceding trend indicates that buyers are possibly losing control, and sellers may be gaining control. In a bearish preceding trend it indicates that sellers are losing control and buyers may be gaining control.
However, an indecision candle does not indicate that price will reverse with any degree of certainty. You cannot take a trade based solely on indecision. The image below shows indecision forming between support and resistance.
What about when a bullish preceding trend heads into an area of resistance sell area or a bearish trend into support buy area and indecision forms? But we cannot enter just yet, we need confirmation, which comes in at part three of a reversal setup. The reversal trend is the third and most important part of a reversal setup.
This is where we make our profit! After a preceding trend stalls at support, and indecision forms, you often see a reversal trend. The image below shows a bearish reversal trend forming after indecision on resistance. In this case we saw a transition of power from a bullish preceding trend to a bearish reversal trend separated by a stall on resistance. In this chapter I will show you how to use my Forex trading strategy to trade reversals profitably. My Forex trading strategy was built on reversal trading.
It has now expanded beyond just reversals, but reversal trading is where it all started. Over the years I have refined reversal trade entries into a simple step-by-step process. Entering trades does not need to be difficult — remember, my goal is to keep everything simple.
You need to enter the reversal trade after part two indecision closes, but before part three reversal trend completely takes off. Obviously if you enter after the reversal trend takes off, it is too late. In the image below you see a preceding trend heading into support, indecision, and a failed reversal trend. If you entered too early, you would have failed this trade. Many people wait for a candle close to get in, but I have tested this thoroughly and waiting for closes gets you in too late.
In the image below you can see the first candle in the reversal trend closing far from support. The key to reversal trading, or any trading for that matter is getting in at the right time.
I have tested countless entry methods in the last 15 years. In that time I have found three awesome entry strategies: When indecision forms on an area of support or resistance, you can use the high or low of the indecision candle as an entry trigger and as a stop loss. In the image above indecision has formed on resistance after a bullish preceding trend, so we want to enter a short reversal trade. We set our entry a few pips below the low of the indecision candle, and our stop loss a few pips above the highest point of the candle.
In trading, highs and lows are very important. If a new low is created from resistance it indicates sellers have taken control of price, which means we want to be short. Our stop loss sits above the high as a break of that high would indicate buyers have regained control of price. For long trades you set your entry a few pips above the high of indecision, and a few pips below the low.
Targets are also very easy, you need to make sure your target comes before major barriers like the next area of support or resistance. So, if you enter a long reversal from support, make sure that your target is before the next resistance area.
The minimum risk to reward ratio I use is 1: This means that my target has to be a minimum of 1. If there is a major barrier like the next support and resistance area in the way of my minimum target I skip the trade. In the image above the support area is before my minimum target of 1.
This strategy works on every single Forex pair, and it also works in other markets like cryptocurrencies, options, futures, stocks and everything. However, I often have extra pairs on my list that I monitor. If you want to see what I am currently watching check out my weekly analysis on YouTube.
As for time frames, I currently trade these. If your broker does not support 6, 8 and 12 hour time frames you need to find a broker who does, or simply use a charting platform separate to your broker. While this strategy can be traded with just the 4 hour and daily time frames, there is absolutely no sense in sacrificing potential trades because your broker is too outdated to provide new time frames. If you want to get my latest analysis, or want to learn more price action setups, I got you covered.
Every Monday I do weekly analysis using my price action strategy. You can check it out on my YouTube channel. If you want a more in-depth guide to my Forex trading strategy you can check out Forex Mastermind. You can read more about Forex Mastermind here. While the strategy above is an awesome day trading strategy and even a swing trading strategy, for scalping you will need a different approach.
However, the foundation of it all is to know what is forex trading. Each trader is different, while one strategy works for you, this may prove futile to another.
As such, you need to find the appropriate one for you and this can be done only by doing experimentation; remember actions speak louder than words! Experiment, learn from your mistakes and act wisely when you trade.
BinaryOnline has come across some top trading strategies that might interest you as these have been widely practised by traders across the globe and still remain the most recommended ones that we have curated for you.
If you are still a complete beginner in trading, then the forex scalping strategy might works for you. Scalping refers to making a large number of trades that can produce small profits individually, these are very short-lived trades. In other words, the main objective of this strategy is to make profit by buying and selling currencies by holding a positive for a short period of time and as such, closing it for a small profit only.
However, to decide whether the forex scalping strategy will be suitable for you will depend only if you can afford to spend enough time in trading. Scalping requires constant analysis of the forex market and technical graphs which can be found on the trading platform itself.
If you really wish to succeed, you need to quickly predict whether the market will go up or down and then open and close positions within few seconds or minutes. Intraday trading is a set of Forex day trading strategies that demand opening and closing trades on the same day. If you are someone who can concentrate well on any asset, you can opt for forex intraday strategy as you only need to focus on the charts or assets all day long that you will be trading.
This method requires focus and patience, hence you need to be totally determined to achieve your goals. Intraday trading does not restrict you to only one trade, you can open several positions at the same time and close them after one hour or few hours, whichever you prefer. If you have a good eye for analysing charts and markets, then you can easily up your game using this forex strategy; however, if markets go against your prediction, you will suffer severe consequences.
With swing forex trading strategy, you will be able to enter trades and take advantage of the upswings and the downswings. All your trades will either last for one day up to several days and even weeks if you do not stop or close the trade. Swing traders tend to trade the daily charts but some even get down to shorter time frames. Some traders like to explore much larger time frames to see what the long term swing is and if there is possibility of an upswing or downswing happening.
This forex trading strategy is ideal for those who have a busy schedule going on in their life such as full-time jobs. As such, these traders do not need to sit in front of their devices, but rather can check their trades once in a while to analyse the progress of charts or assets they placed a trade. The Bollinger Bands Indicator can be used while using swing forex trading strategy.
Below are some examples of major events that might have a huge impact on the market and change the trends of assets:. A trader can still make maximum use of daily news which can help him analyse the market and place trades accordingly.
But still if you are having difficulty no need to worry because we got you covered, you can check our Daily Forex Market where we have already analysed the assets for you and you can follow the tips provided before placing your trades.
If you wish to become successful as a trader, you will need to follow some forex trading strategies that will help you in your trading endeavours. In this article, we will go through the Top 3 forex strategies which are widely used in the forex exchange market. How to use forex trading strategies to be successful. What is the best forex trading strategy for you?
Jared Passey – The C3PO Forex Trading Strategy (lotsofpips.com)
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