Trade at your own risk, no guarantee is made that this strategy will be profitable. By using this strategy you fully accept liability for your actions as your own.
Follow the Journal too=>
Straight into it. This is wordy but has an insane amount of confluence that uses multiple timeframes
We aim to capitalise on mainly money management/risk management with winodds considered second. We want to maximise EXPECTED VALUE as per the follow E.V. Calculation:
(Win odds x amount won) - (chance of losing x amount lost)= Expected Value.
Example:
for a strategy with a 2:1 reward:risk ratio at 60% (0.6) winrate.
(0.6 x 2) - (0.4 x 1)= 0.8rr return per trade theoretically (aka Expected Value).
There are two parts to this strategy which are Entry and Trade Management. Entry first…
Entry
1.) First goal is to identify a Bias. We do this by going on the daily timeframe by looking for trades with an RSI between 55-60 (marked as bullish) or 40-45 (marked as bearish). We then view the previous day’s candle. If there is a bullish marked trade with the previous day’s candle being bullish we confirm the bias as bullish. If there is a bearish marked trade with the previous day’s candle being bearish, we mark it as confirmed bearish.
N.B. RSI is used as a trend indicator with the 50 mark being a pivot point. We are looking for room to drop or climb hence why we are interested in RSIs around the middle point. Anything above or below the figures suggested we assume we have missed the main market move and the trade is invalidated as it is risking reversal.
2.) 2nd step is to look at major structures identifing Major Swing Levels and other key Points of Interest. We move onto the 4 hour timeframe and circle key points where the market has changed direction considerably. Pay attention to previous highs and lows to ensure it is a major point where the market has clearly completely changed momentum. We also mark any key levels which show price interacting with this level recently at least 4 times (such as a support or resistance level). We also record any significant trendlines where price has interacted with the trendlines recently at least 4 times.
3.) 3rd step is minor structures. We move onto the 1 hour time frame and look at points of consolidation nearby the major structures recorded on the 4hour timeframe previously. We record supply and demand zones. These levels are critical for our take profit areas and entries.
Our goal is to find currency pairs which have recently broken out of a consolidation zone relatively close to a support area (if bullish) or resistance area (if bearish). The support and resistance areas as marked on the 4 hour timeframe. We then wait for a pullback taking a break-retest-continuation approach for entry. After we find a pair that has broken out of consolidation with a candle that has opened and closed out of our consolidation zone and has pulled back to the consolidation zone, we are ready to move to step 4.
4.) Step 4 is to confirm chart pattern and candlesticks. Move down to the 15m timeframe and look at the spot of the price pulling back (as found on step 3). We are waiting for a double bottom (if bullish bias) or double top (if bearish bias). Please note a head and shoulders or inverse head and shoulders can also be used accordingly.
Once a bullish or bearish chart pattern has been confirmed that matches our 1day timeframe bias we wait for a candle, on the 15m timeframe, that matches the bias (such as an engulfing candle). After this, we are looking for t another candle in the same direction as confirmation that closes above the engulfing candle if bullish bias or below if bearish bias. This trade is now ready for entry.
5.) Step 5 is defining levels. We use a fibonacci extension tool on the 1hour timeframe, placing 0 at the bottom of the nearby marked consolidation zone and 100 where the next consoldation zone starts that matches our bearish or bullish bias. We ensure that price hasn’t already gone past the 23.61%. We set entry at 23.61% level, stoploss just below 0% level, the first take profit level at 61.8 %, the second take profit level at 100% and the third take profit level at just before the 161.8%. We pay attention to any major structures that could block our ability to hit these levels and monitor the trades around these major structures as defined previously on the 4 hour timeframe.
6.) WE ONLY BUYIN FOR TAKEPROFIT 3 LEVEL FOR NOW. We want to wait for confirmation. We will now discuss our trade management strategy.
Trade Management
We want to maximise win value and minimise loss value. For this reason, we only buy in to take profit 3 initially and we scale up our positions if a trade shows success.
NB- we focus on the aiming for tp3 initially as this has the highest risk-reward ratio thus we don’t need to be right that often. If the trade proves it is heading in this direction we scale up increasing our position size as the market gains momentum.
7.) Enter aiming for take profit 3 with 2% of your available drawdown allowance (prop firm traders may have 10% account size as drawdown allowance or loss. Be aware of how much you are allowed to lose).
8.) If the trade hits Take Profit 1 area, we trigger another trade for 2% more of our available drawdown entering at TP1 and stoploss at the previous entry of our initial trade.
9.) If the trade hits Take Profit 2 area, we trigger another trade for 2% more of our available drawdown entering at TP2, and stoploss where we entered TP1 (TP= takeprofit level).
10.) We close all trades at takeprofit 3. We also can set the trades in advance should these levels be hit.
11.) Look for 2 other currency pairs where you can do the same thing. Set price alerts to help in monitoring the trades. If a stoploss is hit close all positions.
12.) We abort the trade if on the 1 hour timeframe we see a triple top (bullish bias) or a triple bottom (bearish bias) or a head and shoulders (bullish) or inverse head and shoulders (bearish) along with an engulfing candle in the opposite direction to our bias. This means should the abort strategy be triggered we close all positions on this currency pair immediately and search for another opportunity.
READ THE ABOVE SEVERAL TIMES, MAKE A CHECKLIST IF NEEDED, TRY IT ON A DEMO ACCOUNT AND MASTER THE PROCESS CORRECTLY
To finish off, this strategy has objective rules based components for every part, is overly procedural, has several levels of confluence and is based nearly completely on priceaction. It relies on several timeframes, resistance and support, supply and demand and periods of consolidation along with Fibonacci levels and has a scaling component to maximise amount won when the market confirmes the trade is winning along with minimise losses with a good abort strategy should the market turn. It uses well known chart patterns and candlestick patterns to also add insane levels of confluence.
You will not find anything anywhere near as close to this for confluence. I created this strategy with over 2 years of study and forward testing various things.
I finalised it recently, I would be very keen on others help to forward test it. I typically have Reward to Risk ratios of around 5 reward to 1 risk with this and my win rate so far shows about a 75% winrate to at least take profit 1 zone. Yes, I have to abort sometimes with a profit less than 5:1 but I’d be keen in finding our from others how often TP3 is hit.
Questions below!
