Rule : First of all draw line between high and low candles ( between 0.00 BST � 8.00 BST ) right after London open. This lines is our major resistant and support line. We want to spot :
two candle pattern � piercing pattern, dark cloud cover or engulfing - ( depends on market situation ) : ( first is our base - can be replaced by daily l/h and second is a trade signal )
Below/Above the res/sup line*
On the res/sup line*
for better probability with divergence occurred, and keep in mind following trend direction
-hammer or shooting star intersect with sup/res line with divergence spotted.
Important :Use ADX if you trade against trend to determine strength trend.
MACD must cross zero line in our trade day.
Only trade with momentum ( price action ).
Optional : Use SMA(10) or(and) middle BB if you miss(late) trade opportunity.
LONG TERM
Wait for the change of MACD(daily) color. Expect to continuation movement with direction of according MACD color. Enter with False Breakout rule ( but be more flexible- our stop loss is larger- enter when price break res\sup and back above\below it ) . Hold trade for 2-5 days or to BE ( after 1 day).
SL: No more than 40-50 pips.
SHORT TERM
Use this rule every day.
SL : e\u : 15-20 g\u: 15-20 u\j : 10-15 ( or low/high of the second pattern candle or base on ATR(20))
TP 1:support/resistance line or 3*SL
TP2: measured boxed range between sup and res
Optional : After 30 -45 pips move stops to break even.
Note : You can change SL and TP whatever your trading style is.
Strategy was profitable for past two months. I want to official test it here for about 3 months. During this time I hope we share some ideas and thoughts about this system.
In the end of each day or at least week I will post result.
(TP2 not hit but if you move your stop to BE after hit TP1 or after 30 pips you are still on trade so wait for tomorrow or take profit at end of the day)
U\J � skip this trade ( see picture ) although it was a win trade
Really like the look of this strategy, there’s a hundred and one threads trying to work out the best way of trading the breakout of the asian range, but looking to trade the reversal after “false breakout” is great thinking.
The risk / reward ratios used are also fantastic, and you often seem to hit the reward rather than the risk! How long have you been trading this method?
Surprised no-one else has commented on this so far…
Couple of questions if you don’t mind. Do you enter upon a break of the second candle in the formation , or just enter straight away once the second candle closes in the formation. If on the break is it off the body, or wick?
Also, in your EURGBP trade was the candle formation you indicated what you would refer to as a Piercing Pattern? I don’t tend to look for this formation, but looking at the “rules” for such a pattern it doesn’t fit the criteria on my platform as the second candle i,e. bullish didn’t close over 50% of the first i.e. bearish candle, and is more just a Harami / Inside-Bar. On yours this looks to be border-line. What do you look for in this pattern? Did the fact that there was divergence in this case make the difference?
As for the E\G trade.We trade base on momentum and price action. We got clearly move under and back of supp. plus divergence. This is strong setup. If I see it under sup I won�t trade even more I don�t count this formation as one of interesting us pair ( pair of piercing or dark cloud cov. ). Also take notice to black candle pullback, if we measure from low of the black candle to close white candle we had close over 50 % .
I trade once the second candle closes in the formation.
Ps. I hope you understand what I mean- my English is not very well.
So if I’ve got this right, UJ triggered a long this morning based on nice Morning Star candle formation plus divergence (I use Stoch generally but does the same job as MACD etc for this I think)?
