Timeframe: One smaller time frame like 5 minutes and another higher like 4 Hours.
Setup: If present 4 Hour candle is red, we look only for short on 5 minute timeframe. If present 4 Hour candle is green, we look only for long on 5 minutes timeframe
Entry: (Through ‘Pending Orders’, ‘buy stop’ and ‘sell stop’)
Breakout of previous 5 minute high in case of long setup. Breakout of previous 5 minute low in case of short setup.
Stop loss: Low of previous 5 minute candle in case of long setup. High of previous 5 minute candle in case of short setup.
Target: 1:1 target. That is equal to the range of 5 minute candle. Distance between entry and stop loss is projected forward as target.
Once target is achieved or stop loss is hit, the sequence is repeated.
The timeframe can be chosen differently by traders depending on preference. One smaller and another bigger.
Automating the strategy can remove emotional issues while trading. One thing to note is that colour of the higher time frame candle is always of the present candle. Without waiting to close. Because waiting for higher time frame candle to close will be too late.
You guys might want to backtest it over a year’s data. You’ll change your minds. It doesn’t lose money but doesn’t really cover its spreads, etc.
Two suggestions for making it a little better follow.
Reduce the interval between the chart periods (4 hours and 5 minutes is too big - you can try 1 hour and 5 minutes, or 4 hours and 30 minutes, either will do better).
You can limit the entries only to colour-change candles, meaning enter long after a green candle on the short time-frame has immediately followed a red one, and enter short only after a red candle has immediately followed a green one on the short time-frame. This works much better, overall, because it means you’re entering after a retracement.
But although it’s definitely based on a sound idea, its overall profit factor is going to be pretty marginal (at best).
What matters is to test it for yourself, so you know for yourself, rather than just trying to copy something that looks nice. Test and test and test again. Don’t trade methods without testing them for yourself.