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USDCHF 1D TRIANGLE BREAKOUTTriangles are repeatable trading chart patterns. Triangles are consolidation chart patterns that can breakout either direction. Each chart pattern will have defining trendlines of the support/resistance levels creating the pattern. What ever time frame you are trading this chart pattern, wait for a candle close outside of the trendline in the direction of the breakout candle. (Our time frame preference is the Daily chart). Add volume indicator - Volume is the amount of $ that went into a particular candle or in Forex the # of trades that took place. Add ATR indicator - Volatility is the amount of price movement that occurred. Use the ATR to measure the price movement. When you see descending Volume bars and descending ATR line (which indicates volatility) this shows a dis-interest in traders to invest in this pair creating consolidation which creates the chart pattern. Trade Management after there is a breakout candle close. 1 - Position size (compare volume bar to volume ma line). a - Breakout candle must be 100% of volume average for a full position size. b - If 75% of volume average then ½ position size. (To find 75% of Volume look at the charts volume settings – divide smaller # into larger # = 75%+) If not 75% then stand aside from the trade. 2 – If candle breaks out of a trendline, 15m before the close of the day prepare your buy/sell order. Enter two trades. 1st trade will have a SL & TP. It will close automatically when the 1st TP is hit. 2nd trade only has a SL and will be allowed to run. When 1st TP is hit move the SL to breakeven. Look at ATR and prepare SL at 1.5 of ATR. Prepare 1st trade TP at 1 of ATR. 3 - SL for both trades will be 1.5 x ATR. 4 - 1st trade TP will be 1 x ATR. 5 - No TP on 2nd trade – letting profit run and adjusting SL to follow price. 6 - When 1st TP hit – move 2nd trade SL to breakeven. 7 - Adjust the 2nd trade SL to follow price. *8 – After Breakout candle – if price closes back into chart pattern close trade don't wait for SL to be hit. *9 - When breakout candle is more than 1 ATR from breakout candle open. a - Enter 1st trade at candle close with ½ position size. b - Enter 2nd trade with a pending limit order that is 1 ATR of breakout candle open. c – Price should pullback to that pending limit order for 2nd trade. d – If Price returns back into chart pattern close trade before SL is hit.
by Tradingstrategyguides
4
DOGEUSDT 1D BULL FLAGBull Flags are Ranges that are repeatable trading chart patterns. Bull Flag Ranges are consolidation chart patterns that can breakout either direction. Each chart pattern will have defining trendlines of the support/resistance levels creating the pattern. What ever time frame you are trading this chart pattern, wait for a candle close outside of the trendline in the direction of the breakout candle. (Our time frame preference is the Daily chart). Add volume indicator - Volume is the amount of $ that went into a particular candle or in Forex the # of trades that took place. Add ATR indicator - Volatility is the amount of price movement that occurred. Use the ATR to measure the price movement. When you see descending Volume bars and descending ATR line (which indicates volatility) this shows a dis-interest in traders to invest in this pair creating consolidation which creates the chart pattern. Trade Management after there is a breakout candle close. 1 - Position size (compare volume bar to volume ma line). a - Breakout candle must be 100% of volume average for a full position size. b - If 75% of volume average then ½ position size. (To find 75% of Volume look at the charts volume settings – divide smaller # into larger # = 75%+) If not 75% then stand aside from the trade. 2 – If candle breaks out of a trendline, 15m before the close of the day prepare your buy/sell order. Enter two trades. 1st trade will have a SL & TP. It will close automatically when the 1st TP is hit. 2nd trade only has a SL and will be allowed to run. When 1st TP is hit move the SL to breakeven. Look at ATR and prepare SL at 1.5 of ATR. Prepare 1st trade TP at 1 of ATR. 3 - SL for both trades will be 1.5 x ATR. 4 - 1st trade TP will be 1 x ATR. 5 - No TP on 2nd trade – letting profit run and adjusting SL to follow price. 6 - When 1st TP hit – move 2nd trade SL to breakeven. 7 - Adjust the 2nd trade SL to follow price. *8 – After Breakout candle – if price closes back into chart pattern close trade don't wait for SL to be hit. *9 - When breakout candle is more than 1 ATR from breakout candle open. a - Enter 1st trade at candle close with ½ position size. b - Enter 2nd trade with a pending limit order that is 1 ATR of breakout candle open. c – Price should pullback to that pending limit order for 2nd trade. d – If Price returns back into chart pattern close trade before SL is hit.
Long
by Tradingstrategyguides
GBPJPY 1H QUASIMODO STRATEGYQuasimodo Pattern Trading Rules The Quasimodo trading rules for sell signals can be summarized as follow: A prevailing uptrend needs to be visible – series of HH followed by a series of HL. Break in the market structure – price start to make lower lows LL. Entry Option #1 - Place a sell order near the right shoulder. Entry Option #2 - The 50% - 61.8% Fibonacci retracement zone is a better entry technique if price does not reach right shoulder level. Hide the protective stop-loss above the last higher high HH. Take profit near the first valley of the Quasimodo chart pattern. Final Words – Quasimodo Pattern Trading In summary, Quasimodo pattern trading is a new technique used to catch trend reversals. Don’t be afraid to give it a try just because it’s a new chart pattern. When all the elements of this reversal pattern come together, you have a receipt for success. With our Quasimodo trading strategy, you now have a proper framework to tame the high volatile forex market. So, here is a quick summary of what you’ve learned today: Quasimodo chart pattern is a reversal pattern. Quasimodo trading is not similar to Head and Shoulder trading. Quantify the crookedness of Quasimodo by drawing a visual line on the price chart. V-shaped price structure of the Quasimodo pattern produces more profitable signals. The 50% - 61.8% Fibonacci retracement zone is a better entry technique. Quasimodo Trading Strategy – The Crooked Pattern from Notre Dame Learn the Quasimodo trading strategy to find profitable trend reversal opportunities. Throughout this trading guide, you’ll learn what is Quasimodo pattern trading, how to spot this reversal setup, what are the similarities between Quasimodo trading and Head and Shoulder trading, and, last but not least, we’re going to have a deep dive into how to create a winning trading strategy. Trading is not an easy game, but with the Quasimodo trading setup you can gain some valuable insight into that market sentiment, more precisely, you will know in advance when the trend is about to reverse. By being able to stay ahead of the market, you can increase the accuracy of your trading strategy and improve your expected return on investment (ROI). Table of Contents 1 What is Quasimodo? 2 Differences between Quasimodo and Head and Shoulder 3 When to Trade Quasimodo Trading Setup? 4 How Quasimodo Pattern Trading Works? 5 Quasimodo Pattern Trading Rules 6 Quasimodo Trading Strategy 7 Final Words – Quasimodo Pattern Trading What is Quasimodo? Quasimodo is a reversal trading pattern that appears at the end of an uptrend. As a price formation, the Quasimodo pattern is depicted by three peaks and two valleys, where: First, the middle peak is the highest, while the outside two peaks are of the same height. And secondly, the second valley is lower than the first one. Note* Some technicians might call this reversal pattern the “Over and Under” chart pattern. Quasimodo pattern in forex trading predicts a bullish-to-bearish trend reversal. Based on the analogy of market sentiment we can distinguish two types of Quasimodo patterns: Bullish Quasimodo, which appears at the end of a downtrend. Bearish Quasimodo, which appears at the end of an uptrend. Now, you might be inclined to believe that the Quasimodo pattern looks similar to the Head and Shoulder trading pattern. You’re not mistaken as the two trading chart patterns are related but at the same time, they are distinguished price formations. Below, we’re going to expand on the differences between Quasimodo trading vs. Head and Shoulder trading. Differences between Quasimodo and Head and Shoulder There are two major differences between the Quasimodo pattern trading and Head and Shoulder trading: The valleys have different price structures – aka the depth of the valleys have no symmetry with the Quasimodo pattern. And, the two reversal patterns use two different entry techniques. The main difference between the Quasimodo pattern and the Head and Shoulder pattern is the left leg (second valley) of Quasimodo is much lower than the right leg (first valley). With the Head and Shoulder pattern, both valleys are more or less of the same scale. The Quasimodo price structure doesn’t stand out compared to the HS pattern. That’s where the Quasimodo name is derived from – aka the “malformed” second valley, which depicts a crooked Head and Shoulder pattern. In this regard, it’s not going to be that easy to identify with your naked eye the Quasimodo forex chart pattern. Instead, you'll need to use advanced trading indicators. The second major difference between the two reversal patterns is the point of entry. Usually, the point of entry for the HS pattern is the break of the neckline, but with the Quasimodo pattern, we put an entry order near the left shoulder. Basically, Quasimodo is an advanced pattern of Head and Shoulder. A key question that is asked by many traders is how we determine when to trade the Quasimodo chart setup? When to Trade Quasimodo Trading Setup? The best time to trade the Quasimodo pattern is after a significant rally or sell-off no matter the time frame used. All chart patterns are fractal in nature meaning they generally appear in various forms in different time frames from the daily chart down to the 1-minute chart. This is great news for traders who trade across multiple time frames. The existence of the prevailing trend gives us the opportunity to either catch an entirely new trend or at least we get the chance to profit from a temporary retracement. Additionally, the Quasimodo chart pattern allows for better entry points, which is in contrast with trend trading where the entry signals are delayed. But, as you might know, each trading style has its pros and cons. Now, let’s see how Quasimodo pattern trading works. How Quasimodo Pattern Trading Works? The Quasimodo pattern works based on the imbalance between the supply and demand forces. Or, in other words, the Quasimodo chart pattern tracks the shift in the price structure. Market structure is the continuous series of higher highs and higher low producing higher peaks and troughs. When we have a break of structure, meaning a break of the ongoing HH and HL, the price starts first to print a lower low. The Quasimodo trading strategy provides us with a proper framework to interpret the constant ebbs and flows of any asset (currency, cryptocurrency, stocks, commodity, etc.). The bearish Quasimodo pattern is in short concerned with how the market comes from a buying momentum and heads towards the selling momentum. The Quasimodo chart pattern starts to become visible only once the price fails to make another higher low (HL). For some novice traders, this type of information might be enlightening because now you can have a proper framework to analyze the price structure. You have to keep in mind that this is one approach to view the markets and by no means the only one. Now that things are starting to get clearer, we’re good to define the Quasimodo pattern trading rules. Quasimodo Pattern Trading Rules The Quasimodo trading rules for sell signals can be summarized as follow: A prevailing uptrend needs to be visible – series of HH followed by a series of HL. Break in the market structure – price start to make lower lows LL. Place a sell order near the right shoulder. Hide the protective stop-loss above the last higher high HH. Take profit near the first valley of the Quasimodo chart pattern. As a general rule, the Quasimodo pattern carries more weight if the second valley is much lower than the first valley. In other words, the bigger the distance between the two valleys, the more crooked the Quasimodo pattern becomes. Next… Let’s have a look at the bullish Quasimodo reversal pattern. The Quasimodo trading rules for buy signals can be summarized as follow: A prevailing downtrend needs to be visible – series of LL followed by a series of LH. Break in the market structure – price start to make higher high HH. Place a buy order near the right shoulder. Hide the protective stop-loss strategy below the last lower low LL. Take profit near the first peak of the Quasimodo chart pattern. Now let me share with you a simple but effective trading trick. If you want to test how crooked the Quasimodo chart pattern is, simply draw some lines along with the price structure. When you do this, the Quasimodo price structure will pop up on your price chart. When you highlight the price structure we can clearly see the crookedness of Quasimodo. Thus, in this particular trade, the market didn’t give us the chance to enter a buy order. And that’s the thing with the Quasimodo pattern trading, meaning lots of missed opportunities. To go around this pitfall that is common with all chart patterns, we’re going to add some confluence to the Quasimodo pattern and twist the rules. Below, we’re going to outline an advanced Quasimodo trading strategy: Quasimodo Trading Strategy You don’t have to add complicated stuff to make a simple chart pattern give more accurate trade signals. The only extra tool we need to optimize the Quasimodo trading strategy is the Fibonacci retracement indicator. Now, if you’re a fan of the Fibonacci retracement tool, you might want to check this new Fibonacci Trend Line Trading Strategy. The Fibonacci retracement indicator can help us anticipate where the last price swing that is part of the Quasimodo chart pattern might end. If you backtest this pattern, you’ll see a lot of missed trading opportunities because the last swing wave of the Quasimodo pattern doesn’t always stretch near the left shoulder. If you need to learn the best backtest strategy check out our blog! The Fibonacci retracement levels can help us identify reliable price zones of support and resistance. We’re particularly interested in the price zone between the 50% Fibonacci retracement and 61.8%, with the sweet spot being the 61.8% Fibonacci retracement level. By applying the new rules of the Quasimodo trading strategy, we’re able to capture a full-blown reversal. Another key point to take into consideration when you trade the Quasimodo pattern is the quality of the swing highs and lows. We need to find a mechanical approach to quantify the quality of the swing highs and swing low points. As a general rule, we consider a qualified swing high (swing low) only those points that have a V-shaped pattern. These price formations are also known as V tops and V bottoms. A V-shaped swing low can be easily recognized by the price sharply switching from bearish to bullish respectively from bullish to bearish. If we examine the Quasimodo chart pattern, we can notice that every single swing high and swing low part of the Quasimodo pattern is V-shaped.
Short
by Tradingstrategyguides
11
EURSEK 1D RANGE TRADINGRanges are repeatable trading chart patterns. Ranges are consolidation chart patterns that can breakout either direction. Each chart pattern will have defining trendlines of the support/resistance levels creating the pattern. What ever time frame you are trading this chart pattern, wait for a candle close outside of the trendline in the direction of the breakout candle. (Our time frame preference is the Daily chart). Add volume indicator - Volume is the amount of $ that went into a particular candle or in Forex the # of trades that took place. Add ATR indicator - Volatility is the amount of price movement that occurred. Use the ATR to measure the price movement. When you see descending Volume bars and descending ATR line (which indicates volatility) this shows a dis-interest in traders to invest in this pair creating consolidation which creates the chart pattern. Trade Management after there is a breakout candle close. 1 - Position size (compare volume bar to volume ma line). a - Breakout candle must be 100% of volume average for a full position size. b - If 75% of volume average then ½ position size. (To find 75% of Volume look at the charts volume settings – divide smaller # into larger # = 75%+) If not 75% then stand aside from the trade. 2 – If candle breaks out of a trendline, 15m before the close of the day prepare your buy/sell order. Enter two trades. 1st trade will have a SL & TP. It will close automatically when the 1st TP is hit. 2nd trade only has a SL and will be allowed to run. When 1st TP is hit move the SL to breakeven. Look at ATR and prepare SL at 1.5 of ATR. Prepare 1st trade TP at 1 of ATR. 3 - SL for both trades will be 1.5 x ATR. 4 - 1st trade TP will be 1 x ATR. 5 - No TP on 2nd trade – letting profit run and adjusting SL to follow price. 6 - When 1st TP hit – move 2nd trade SL to breakeven. 7 - Adjust the 2nd trade SL to follow price. *8 – After Breakout candle – if price closes back into chart pattern close trade don't wait for SL to be hit. *9 - When breakout candle is more than 1 ATR from breakout candle open. a - Enter 1st trade at candle close with ½ position size. b - Enter 2nd trade with a pending limit order that is 1 ATR of breakout candle open. c – Price should pullback to that pending limit order for 2nd trade. d – If Price returns back into chart pattern close trade before SL is hit.
by Tradingstrategyguides
EURCHF 1D RANGE TRADINGRanges are repeatable trading chart patterns. Ranges are consolidation chart patterns that can breakout either direction. Each chart pattern will have defining trendlines of the support/resistance levels creating the pattern. What ever time frame you are trading this chart pattern, wait for a candle close outside of the trendline in the direction of the breakout candle. (Our time frame preference is the Daily chart). Add volume indicator - Volume is the amount of $ that went into a particular candle or in Forex the # of trades that took place. Add ATR indicator - Volatility is the amount of price movement that occurred. Use the ATR to measure the price movement. When you see descending Volume bars and descending ATR line (which indicates volatility) this shows a dis-interest in traders to invest in this pair creating consolidation which creates the chart pattern. Trade Management after there is a breakout candle close. 1 - Position size (compare volume bar to volume ma line). a - Breakout candle must be 100% of volume average for a full position size. b - If 75% of volume average then ½ position size. (To find 75% of Volume look at the charts volume settings – divide smaller # into larger # = 75%+) If not 75% then stand aside from the trade. 2 – If candle breaks out of a trendline, 15m before the close of the day prepare your buy/sell order. Enter two trades. 1st trade will have a SL & TP. It will close automatically when the 1st TP is hit. 2nd trade only has a SL and will be allowed to run. When 1st TP is hit move the SL to breakeven. Look at ATR and prepare SL at 1.5 of ATR. Prepare 1st trade TP at 1 of ATR. 3 - SL for both trades will be 1.5 x ATR. 4 - 1st trade TP will be 1 x ATR. 5 - No TP on 2nd trade – letting profit run and adjusting SL to follow price. 6 - When 1st TP hit – move 2nd trade SL to breakeven. 7 - Adjust the 2nd trade SL to follow price. *8 – After Breakout candle – if price closes back into chart pattern close trade don't wait for SL to be hit. *9 - When breakout candle is more than 1 ATR from breakout candle open. a - Enter 1st trade at candle close with ½ position size. b - Enter 2nd trade with a pending limit order that is 1 ATR of breakout candle open. c – Price should pullback to that pending limit order for 2nd trade. d – If Price returns back into chart pattern close trade before SL is hit.
by Tradingstrategyguides
LTCUSD 1D TRIANGLE BREAKOUTTriangle are repeatable trading chart patterns. Triangles are consolidation chart patterns that can breakout either direction. Each chart pattern will have defining trendlines of the support/resistance levels creating the pattern. What ever time frame you are trading this chart pattern, wait for a candle close outside of the trendline in the direction of the breakout candle. (Our time frame preference is the Daily chart). Add volume indicator - Volume is the amount of $ that went into a particular candle or in Forex the # of trades that took place. Add ATR indicator - Volatility is the amount of price movement that occurred. Use the ATR to measure the price movement. When you see descending Volume bars and descending ATR line (which indicates volatility) this shows a dis-interest in traders to invest in this pair creating consolidation which creates the chart pattern. Trade Management after there is a breakout candle close. 1 - Position size (compare volume bar to volume ma line). a - Breakout candle must be 100% of volume average for a full position size. b - If 75% of volume average then ½ position size. (To find 75% of Volume look at the charts volume settings – divide smaller # into larger # = 75%+) If not 75% then stand aside from the trade. 2 – If candle breaks out of a trendline, 15m before the close of the day prepare your buy/sell order. Enter two trades. 1st trade will have a SL & TP. It will close automatically when the 1st TP is hit. 2nd trade only has a SL and will be allowed to run. When 1st TP is hit move the SL to breakeven. Look at ATR and prepare SL at 1.5 of ATR. Prepare 1st trade TP at 1 of ATR. 3 - SL for both trades will be 1.5 x ATR. 4 - 1st trade TP will be 1 x ATR. 5 - No TP on 2nd trade – letting profit run and adjusting SL to follow price. 6 - When 1st TP hit – move 2nd trade SL to breakeven. 7 - Adjust the 2nd trade SL to follow price. *8 – After Breakout candle – if price closes back into chart pattern close trade don't wait for SL to be hit. *9 - When breakout candle is more than 1 ATR from breakout candle open. a - Enter 1st trade at candle close with ½ position size. b - Enter 2nd trade with a pending limit order that is 1 ATR of breakout candle open. c – Price should pullback to that pending limit order for 2nd trade. d – If Price returns back into chart pattern close trade before SL is hit.
COINBASE:LTCUSD
by Tradingstrategyguides
GBPNZD 1D RANGE TRADINGRanges are repeatable trading chart patterns. Ranges are consolidation chart patterns that can breakout either direction. Each chart pattern will have defining trendlines of the support/resistance levels creating the pattern. What ever time frame you are trading this chart pattern, wait for a candle close outside of the trendline in the direction of the breakout candle. (Our time frame preference is the Daily chart). Add volume indicator - Volume is the amount of $ that went into a particular candle or in Forex the # of trades that took place. Add ATR indicator - Volatility is the amount of price movement that occurred. Use the ATR to measure the price movement. When you see descending Volume bars and descending ATR line (which indicates volatility) this shows a dis-interest in traders to invest in this pair creating consolidation which creates the chart pattern. Trade Management after there is a breakout candle close. 1 - Position size (compare volume bar to volume ma line). a - Breakout candle must be 100% of volume average for a full position size. b - If 75% of volume average then ½ position size. (To find 75% of Volume look at the charts volume settings – divide smaller # into larger # = 75%+) If not 75% then stand aside from the trade. 2 – If candle breaks out of a trendline, 15m before the close of the day prepare your buy/sell order. Enter two trades. 1st trade will have a SL & TP. It will close automatically when the 1st TP is hit. 2nd trade only has a SL and will be allowed to run. When 1st TP is hit move the SL to breakeven. Look at ATR and prepare SL at 1.5 of ATR. Prepare 1st trade TP at 1 of ATR. 3 - SL for both trades will be 1.5 x ATR. 4 - 1st trade TP will be 1 x ATR. 5 - No TP on 2nd trade – letting profit run and adjusting SL to follow price. 6 - When 1st TP hit – move 2nd trade SL to breakeven. 7 - Adjust the 2nd trade SL to follow price. *8 – After Breakout candle – if price closes back into chart pattern close trade don't wait for SL to be hit. *9 - When breakout candle is more than 1 ATR from breakout candle open. a - Enter 1st trade at candle close with ½ position size. b - Enter 2nd trade with a pending limit order that is 1 ATR of breakout candle open. c – Price should pullback to that pending limit order for 2nd trade. d – If Price returns back into chart pattern close trade before SL is hit.
by Tradingstrategyguides
EURUSD 1D MEAN REVERSION TRADING STRATEGYBest Mean Reversion Strategy: Before we get to that point, first and foremost, let’s see what tools we need to use for this strategy. The best mean reversion indicator that works 85% of the time is the RSI indicator. So, you will need the RSI oscillator on your charts. Now, there is one more important thing that needs to be done. The RSI settings must be changed from the default 14-period to 2-period RSI. So, we’re having not just any type of RSI, but a very fast RSI. Levels are 10 & 90. The other technical indicators we’re going to deploy on the charts are: 10-period simple moving average. 200-period moving average. Note* Another thing to keep in mind is the recommended time frame is the daily chart. Intraday charts won’t work because the fast-period RSI will generate a lot of false signals on lower time frames. Now, let’s see how we can combine the 3 indicators into a profitable mean reversion strategy. The first obvious question is when to buy and sell currency. To answer this question the mean reversion trading strategy needs to satisfy 3 triggers: The price needs to be above the 200-day EMA. This means that the overall price is in an uptrend so, we’re only going to look for buy signals in bull markets. Second, we look for the price to below the 10-day SMA, which shows a deviation from its mean. Last but not least, we look at the RSI to overshoot below 10, which signals that we’re in oversold territory. Note* For sell signals use the same trading rules but in reverse. Once all 3 conditions are satisfied we enter a trade at the open of the following day. Once we’re in a trade we also need, we also need to know when to exit the market. This is where the 10-period simple moving average comes into play again. What we’re looking for is for the price to reverse back to the 10-period SMA strategy. More often than not the price will overshoot to the upside and break above the 10-period SMA. So, to fully capitalize on the entire move we use multiple take profit targets: The first profit target is to cash half of the position once we touch the 10-period SMA. The second portion of your position is left until we break and close above the 10-period SMA. Based on our backtesting result, on average your trades should reach the second target within 1-3 days. The longer you keep your position open, the lower the chances of the trade to succeed. As a general rule, you should cash out of your entire position within the first 3 trading days. Now, we have left out for last the most important part, which is managing risk. When it comes to the protective stop loss we’re advising not to place a stop loss right away, but instead, use a time stop. Let me explain… Based on our backtesting results we have found that a lot of the times the market will do a false breakout below the previous day low (high) and hurt our position. So, to avoid this scenario we have found a great trick to move around it. Our rule is very simple: If by the first half of the day our position shows a loss, we close that trade and call it a day. This is a risky play but we have the edge on our side to play this kind of trick. After all, trading is a risky game and everyone needs to decide for themselves how to manage risk. Final Words – Best Mean Reversion Strategy In summary, the most alluring thing about mean reversion trading is the high win-loss ratio and the simplicity behind it. One thing to keep in mind is that the mean reversion strategy tends to perform poorly when the market is in a hard-mode trend. But that shouldn’t be much of a big deal since the market is ranging 75% of the time. The key takeaways from the mean reversion trading strategy are as follow: Mean reversion can be used with all asset classes (stocks, commodities, currencies or cryptocurrencies). Range trading and overbought/oversold signals work the best with this method. Adjust the RSI settings to a fast-period. You can generate quick profits – short holding time periods. A trading tip – use a time stop instead of a price stop. Thank you for reading! Mean Reversion Trading Strategy with a Sneaky Secret. In this guide, you’ll learn a mean reversion trading strategy with some trading secrets that will assist you to limit the downside. The first part of the guide will highlight what is mean reversion trading, while in the second part we’ll reveal the mean reversion strategy and how you can fine-tune it to fit your personality. If this is your first time on our website, our team at Trading Strategy Guides welcomes you. Make sure you hit the subscribe button, so you get your Free Trading Strategy every week directly into your email box. The mean reversion trading systems are more appealing to a lot of traders because it tends to have a higher win rate as opposed to the trend following strategies. Even when the markets are in well-established trends, mean reversion happens quite often. So, there are more opportunities to profit from mean reversion trading. Let’s kick the ball rolling and start with the basic by first explaining what is mean reversion in trading and then we’re going to reveal 5 trading principles that can be used with the mean reversion strategy. Table of Contents 1 What is Mean Reversion Trading? 2 How Mean Reversion Trading Works? 3 Why the Mean Reversion Strategy Works? 4 Mean Reversion Trading Strategy 5 Final Words – Best Mean Reversion Strategy What is Mean Reversion Trading? Put it simply; mean reversion trading assumes that over time the prices of any asset (stock, commodity, FX currency or cryptocurrency) in time will revert back to the mean or average price. In other words, reversion to the mean trading comes down to the old saying: “What goes up must come down.” The mean reversion theory is at the foundation of many trading strategies that involve buying and selling of those asset class prices that have deviated from their historical averages. The idea is that in the long-term prices will return back to their previous average prices and normal pattern. Example of mean reversion trading strategies includes: Reversals. Pullback trading. Retracement. Range trading system. Overbought and oversold strategies. Our best mean reversion strategy is to trade those price ranges that occur after a severe price markup or markdown. In this case, reversion to the mean implies trading around the middle of the range as our average price. In essence, mean reversion is playing around a central value be it the middle of the range, or a moving average, or however you wish to express it. The reversion to mean trading system tends to produce a higher win rate in those instances where we can notice extreme changes in the price. We can measure extreme price changes relative to the time frame used. Obviously, there is also a probability that the price will not revert back to its mean. This can indicate that there is a real shift in the market sentiment and we’re in a new paradigm. Now that we know what is mean reversion trading, let’s see how the mean reversion regression works. How Mean Reversion Trading Works? With mean reversion, we’re looking to trade against the heard. A lot of the times when you’re doing mean reversion trading, you’ll be quick in-and-out of a trade. That’s why day trading mean reversion strategy works better. There are other different ways to trade with the mean reversion strategy, including: Price stretch from a simple moving average strategy. A break outside the Bollinger Bands strategy and a return back to the mean. A test of support and resistance strategy while the price is consolidating. The linear regression is clearly slopping upwards and it’s acting as a magnet to the price. Each time the price deviates from the average price line it snaps back to it outlining the reversion to the mean concept. The main advantages of the mean reversion strategy include: Effective exit strategy – the take profit target is always the average price. High win rate – the shorter the mean reversion time frame used the higher the win rate. Good risk-adjusted returns. All trading strategies have their own pros and cons. The biggest flaw is that once you’re in a trade you’ll often see first a loss before you see a profit. The main components of the mean reversion strategy should include: 1. Entry signal after the price has moved away from its average price. You can simply calculate how far away percentage-wise are from the mean or use an ATR strategy multiple declines or simply use a volume oscillator to gauge oversold/overbought readings. 2. Exit signal gives you a way out once you get into a trade. 3. Broad market timing. Why the Mean Reversion Strategy Works? Mean reversion is a key element part of how all financial markets work. Mean reversion happens because the prices have a tendency to overshoot and undershoot their intrinsic value. These “price anomalies” happens because the impact of new information that hits the market takes time to be digested by the market. The market participants will take some time to understand the new information as the information is filtered slowly. Additionally, it takes time for the market to establish a fair value. Secondly, mean reversion trading also works because prices also move based on collective emotions. What this means for traders is that the price tends to overshoot to the downside a bit more than they overshoot to the upside. This is true because fear tends to be a bigger emotion than greed. Let’s put the puzzle pieces together and construct our reversion to the mean trading strategy.
Education
by Tradingstrategyguides
3
RSI Trendline StrategyHello, traders! Last time we considered the topic about the technical indicator's types combinations to increase your profit. I promised you to show in details some strategy which applies combination of the indicators. Let's consider the TREND + OSCILLATOR strategy which uses the EMA and RSI indicators. First of all we should define the direction of a market trend. The price is above 200 EMA means that the market is in global uptrend. So, we are going to search bullish signs for RSI indicator. Today we are going to use RSI in a non-standard way. We will search the RSI downtrend lines breakouts. You can see such line on the chart. When the RSI breaks through this line during the price is in the uptrend it is a buy signal. It is great to have another one confirmation. Here we can see that the price bounced off the 200 EMA and exactly after that there was a massive growth. Why does it work? During the uptrend we often have the consolidation or correction phases. If the RSI is in the downtrend it means that the asset's oversold zone is upcoming, but the market is in the uptrend and bulls dominate. Thus, the money reaccumulates here and when the bear's activity become weak the bulls push the price above rapidly. DISCLAMER: Information is provided only for educational purposes. Do your own study before taking any actions or decisions.
Education
by Skyrexio
4
How To Combine Indicators to Make Profit?Hello, traders! We have already know many diffirent indicator, but sometimes we can face with the situation when a combination of different indicators demonstrates bad trading performance. Usually the reason of this confusion is that investors use indicators of the same type. We should analyze the market situation in different ways. The indicators can be divided by five groups. TREND INDICATORS This indicators helps to define the trend direction (uptrend, downtrend, sideways). This is very important part of the analysis because the uptrend is the most applicable for long, downtrend - for short, sideways - for range trading. Examples: EMA, Parabolic SAR, Alligator. OSCILLATORS This type is used for the trend confirmation, overbought/oversold conditions defining, to find the trend weakness (divergences). Examples: RSI, Stochastic, %R Williams. VOLATILITY There are can be periods of low-volatility and high-volatility on the market. The low-volatile periods are great for the long-term trading, while high-volatile periods are applicable for intraday and scalping in pullback or range trading. Examples: Bollinger Bands, ATR. VOLUME This indicators demonstrate moments when the volume increases or decreases. It is widely known that the big price moves are usually associated with significant volume traded. Examples: Money Flow Index, On-balance Volume. CENTRAL PIVOT RANGE This is a separate indicator's type because all indicators we discussed above are lagging, it means that it reacts to price action and usually produce the signal too late. The CPR indicator is the leading and is used for the potential price levels. We have already considered it on this channel on TradingView. COMBINATIONS We should combine indicators from different groups to increase trading performance. For medium and long-term trading it is great to use trend indicators with volume (EMA + On-Balance Volume) or with oscillators (EMA + RSI). For intraday trading the volatility and oscillators combination is applicable (Bollinger Bands + Stochastic RSI). The CPR indicator could be added to almost every combinations, because it is the leading indicator. Now you can use this article to construct your own trading strategy. Next time we will consider a simple strategy based on these principles DISCLAMER: Information is provided only for educational purposes. Do your own study before taking any actions or decisions.
Education
by Skyrexio
AMZN 1D ASCENDING TRIANGLEAscending Triangle are repeatable trading chart patterns. Ascending chart patterns will have a directional bias depending on the previous incoming trend. Each chart pattern will have defining trendlines of the support/resistance levels creating the pattern. What ever time frame you are trading this chart pattern, wait for a candle close outside of the trendline in the direction of the breakout candle. (Our time frame preference is the Daily chart). Add volume indicator - Volume is the amount of $ that went into a particular candle or in Forex the # of trades that took place. Add ATR indicator - Volatility is the amount of price movement that occurred. Use the ATR to measure the price movement. When you see descending Volume bars and descending ATR line (which indicates volatility) this shows a dis-interest in traders to invest in this pair creating consolidation which creates the chart pattern. Trade Management after there is a breakout candle close. 1 - Position size (compare volume bar to volume ma line). a - Breakout candle must be 100% of volume average for a full position size. b - If 75% of volume average then ½ position size. (To find 75% of Volume look at the charts volume settings – divide smaller # into larger # = 75%+) If not 75% then stand aside from the trade. 2 – If candle breaks out of a trendline, 15m before the close of the day prepare your buy/sell order. Enter two trades. 1st trade will have a SL & TP. It will close automatically when the 1st TP is hit. 2nd trade only has a SL and will be allowed to run. When 1st TP is hit move the SL to breakeven. Look at ATR and prepare SL at 1.5 of ATR. Prepare 1st trade TP at 1 of ATR. 3 - SL for both trades will be 1.5 x ATR. 4 - 1st trade TP will be 1 x ATR. 5 - No TP on 2nd trade – letting profit run and adjusting SL to follow price. 6 - When 1st TP hit – move 2nd trade SL to breakeven. 7 - Adjust the 2nd trade SL to follow price. *8 – After Breakout candle – if price closes back into chart pattern close trade don't wait for SL to be hit. *9 - When breakout candle is more than 1 ATR from breakout candle open. a - Enter 1st trade at candle close with ½ position size. b - Enter 2nd trade with a pending limit order that is 1 ATR of breakout candle open. c – Price should pullback to that pending limit order for 2nd trade. d – If Price returns back into chart pattern close trade before SL is hit.
NASDAQ:AMZNLong
by Tradingstrategyguides
CHFJPY 1D RANGE TRADINGRanges are repeatable trading chart patterns. Ranges are consolidation chart patterns that can breakout either direction. Each chart pattern will have defining trendlines of the support/resistance levels creating the pattern. What ever time frame you are trading this chart pattern, wait for a candle close outside of the trendline in the direction of the breakout candle. (Our time frame preference is the Daily chart). Add volume indicator - Volume is the amount of $ that went into a particular candle or in Forex the # of trades that took place. Add ATR indicator - Volatility is the amount of price movement that occurred. Use the ATR to measure the price movement. When you see descending Volume bars and descending ATR line (which indicates volatility) this shows a dis-interest in traders to invest in this pair creating consolidation which creates the chart pattern. Trade Management after there is a breakout candle close. 1 - Position size (compare volume bar to volume ma line). a - Breakout candle must be 100% of volume average for a full position size. b - If 75% of volume average then ½ position size. (To find 75% of Volume look at the charts volume settings – divide smaller # into larger # = 75%+) If not 75% then stand aside from the trade. 2 – If candle breaks out of a trendline, 15m before the close of the day prepare your buy/sell order. Enter two trades. 1st trade will have a SL & TP. It will close automatically when the 1st TP is hit. 2nd trade only has a SL and will be allowed to run. When 1st TP is hit move the SL to breakeven. Look at ATR and prepare SL at 1.5 of ATR. Prepare 1st trade TP at 1 of ATR. 3 - SL for both trades will be 1.5 x ATR. 4 - 1st trade TP will be 1 x ATR. 5 - No TP on 2nd trade – letting profit run and adjusting SL to follow price. 6 - When 1st TP hit – move 2nd trade SL to breakeven. 7 - Adjust the 2nd trade SL to follow price. *8 – After Breakout candle – if price closes back into chart pattern close trade don't wait for SL to be hit. *9 - When breakout candle is more than 1 ATR from breakout candle open. a - Enter 1st trade at candle close with ½ position size. b - Enter 2nd trade with a pending limit order that is 1 ATR of breakout candle open. c – Price should pullback to that pending limit order for 2nd trade. d – If Price returns back into chart pattern close trade before SL is hit.
by Tradingstrategyguides
PALLADIUM 1D BEAR FLAGBear Flags are a Range type of chart pattern. Bear Flag Ranges are repeatable trading chart patterns. Bear Flag chart patterns will have a directional bias (Short) depending on the previous incoming trend. Each chart pattern will have defining trendlines of the support/resistance levels creating the pattern. What ever time frame you are trading this chart pattern, wait for a candle close outside of the trendline in the direction of the breakout candle. (Our time frame preference is the Daily chart). Add volume indicator - Volume is the amount of $ that went into a particular candle or in Forex the # of trades that took place. Add ATR indicator - Volatility is the amount of price movement that occurred. Use the ATR to measure the price movement. When you see descending Volume bars and descending ATR line (which indicates volatility) this shows a dis-interest in traders to invest in this pair creating consolidation which creates the chart pattern. Trade Management after there is a breakout candle close. 1 - Position size (compare volume bar to volume ma line). a - Breakout candle must be 100% of volume average for a full position size. b - If 75% of volume average then ½ position size. (To find 75% of Volume look at the charts volume settings – divide smaller # into larger # = 75%+) If not 75% then stand aside from the trade. 2 – If candle breaks out of a trendline, 15m before the close of the day prepare your buy/sell order. Enter two trades. 1st trade will have a SL & TP. It will close automatically when the 1st TP is hit. 2nd trade only has a SL and will be allowed to run. When 1st TP is hit move the SL to breakeven. Look at ATR and prepare SL at 1.5 of ATR. Prepare 1st trade TP at 1 of ATR. 3 - SL for both trades will be 1.5 x ATR. 4 - 1st trade TP will be 1 x ATR. 5 - No TP on 2nd trade – letting profit run and adjusting SL to follow price. 6 - When 1st TP hit – move 2nd trade SL to breakeven. 7 - Adjust the 2nd trade SL to follow price. *8 – After Breakout candle – if price closes back into chart pattern close trade don't wait for SL to be hit. *9 - When breakout candle is more than 1 ATR from breakout candle open. a - Enter 1st trade at candle close with ½ position size. b - Enter 2nd trade with a pending limit order that is 1 ATR of breakout candle open. c – Price should pullback to that pending limit order for 2nd trade. d – If Price returns back into chart pattern close trade before SL is hit.
OANDA:XPDUSDShort
by Tradingstrategyguides
GBPJPY 4H DOJI SANDWICH STRATEGY (CONTINUATION OR REVERSAL)Best H4 Forex Strategy The H4 trading strategy revolves around a very common chart pattern known to the technicians as the Doji candlestick. Our forex H4 trading system combines some high probability setups that we’ve found work best on the 4-hour time frame. A detailed guide to the Doji Candlestick pattern can be found on the internet. As far as the probabilities of the trade working using this special Doji setup and the magnitude of the trade working it’s extremely high. We’re going to demonstrate how the Doji Sandwich setup paints the change in market sentiment. The Doji chart pattern can take many different shapes and forms. The main characteristic of the Doji is the small body where the open and the close are very close together. However, the hanging man, shooting star, bullish and bearish Harami, inverted hammer and dark cloud are considered to be variations of the standard Doji pattern. So, we’re going to also use the above-mentioned chart patterns to spot buying and selling opportunities. The Doji candle pattern is only one part of the overall Doji Sandwich trade setup. Let me explain… The Doji Sandwich is very easy to identify as it’s a 3-bar reversal pattern comprise of: One large candle that closes near the higher end (or lower end) of its price range. Followed by the Doji candle. Another large candle is of the same magnitude as the first candle. Note* The last candle must be in the same direction (bullish or bearish) as the first candle. The term “sandwich” comes from the fact that the Doji candle appears sandwiched between two larger candles. And, this is what makes the H4 forex trading strategy very effective. This will produce a high probability reversal setup. When you combine the Doji candle with the nearby candles we have a recipe for success. This simple trade setup on the 4h chart, will almost double your success rate. On Wall Street there is a saying: “If something doesn’t work, it disappears very quickly.” But, that’s not the case with the Doji Sandwich setup as it has stood the test of time. We’ll demonstrate the profitability of the setup using live trade examples. Now, here is the thing: The truth about trading is that no matter what trading setup you use, there will always be false signals. So, in order to harvest the bad forex signals from the good forex signals, we’re going to use some extra technical tools. Filter Your Trading Setups with Stochastic Indicator The overbought and oversold conditions are based upon the stochastic indicator. See the best practices on how to use the stochastic indicator here: Best Stochastic Trading Strategy- Easy 6 Step Strategy. Note* We use the default settings for the stochastic indicator. As a general rule, if you can spot a reversal signal when your stochastic indicator is in an overbought/oversold area, we’re very close to see a trend reversal. The Doji Sandwich pattern meets all of our requirements: The first candle and the third candle are more or less of the same length and point in the same direction (bullish flag chart pattern). Second, the middle candle is a Doji candle. Moving on… Spotting a chart pattern is only half of the equation; we also need an entry technique for our H4 trading strategy. The Entry Technique There are two ways to enter this trade: You can buy (sell) as soon as the 4th candle opens. Wait until the high (low) of the third candle is broken. We have used both types of entry techniques to take advantage of high probability trades. Here is the thing… Once you’re in a trade, you still need to have a plan to manage your trades and not leave it to luck. For trade management, we’re going to throw in some additional technical indicators. How to Manage Your Trade? This is important so don’t bypass this trading gem. The following moving averages are used by the H4 trading strategy: The 200 moving average. The 50-period simple moving average SMA. Every major money manager in the world uses those moving averages to make informed decisions about their portfolios. Now… Here is how we use the 200 moving average: The 200 MA is only used for long-term guidance and to decide how long are we going to stay in the trade. For example, if we have a bullish Doji sandwich pattern but well under the 200 MA, we’re going to treat this trade as a short to medium-term trade. However, if the pattern develops above the 200 MA, we want to stay with the trend and ride that wave to squeeze as much profit as possible. The chart shows the Doji Sandwich pattern being printed well below the 200 MA in which case we’re going to treat this trade as a short-term trading opportunity. Now, you might be wondering: “How to use the 50-period moving average?” The 50 MA is there for guidance purposes only. What we look after is for the price to break above the 50 MA either within the first candles after we entered the market or during the development of the Doji Sandwich pattern. Next… We’re going to answer how to protect your bottom line and exit with a nice profit. Stop Loss and Exit Strategy First, the protective stop-loss trading strategy is placed below the Doji candle, which is the middle candle of the 3-bar pattern used. More, once we break and close above the 50 moving average, the stop loss than can be trailed below the 50 MA to further reduce the risk. Next… We have several options to take our profits: First, if we’re below the 200-MA, we get out once the stochastic indicator is in overbought territory. If we’re above the 200-MA, we need to be more creative as to capture a larger portion of the trend and combine the action of both MAs. Best 4H Forex Strategy – Advanced Setup If you like this 4h price pattern, we’re sure you’ll also like if we share with you a second alteration of the 4h Doji Sandwich. Everything remains the same, only two things change. Let me explain… For example, if you’re looking for a bullish reversal the first candle is a bearish candle, while the last candle of the 3-bar formation is a bullish candle, like in the 2nd trade. Note* In the case of a bearish reversal the first candle is bullish while the last candle is bearish. Here is one more hint: If the third candle closes above the high of the first candle then this is setting the stage for a very high probability trade. Try it for yourself and look on your charts for the Doji sandwich pattern. Final Words – H4 Trading Strategy In summary, the H4 forex trading strategy is ideal for looking for trading opportunities around the clock. Keep in mind that the H4 trading strategy requires a solid understanding of how the market operates. The trading rules outlined throughout this guide should be enough to help you navigate all types of trading environments. So, here is a summary of what you’ve learned: The H4 time frame lets you benefit from both worlds (intraday PA and larger TF). The H4 chart carries more weight in FX trading due to how each day is broken is trading sessions. The Doji Sandwich is a 3-bar reversal pattern. You have learned an intuitive entry technique along with trade management tactics. The best H4 forex strategy will increase the odds of your success even further. Thank you for reading! H4 FOREX TRADING STRATEGY USING THE DOJO SANDWICH Learn the H4 forex trading strategy a cash-rich system to benefit from both the intraday price fluctuations and the larger time frames. Throughout this guide, we’ll outline a detailed plan around the best H4 forex strategy and what are the best trading tactics to implement on the 4-hour chart. What time frame you trade on will largely determine how you calculate your support and resistance levels, your risk level and determine the trend direction. Our goal is to focus on the 4-hour time frame namely because: 1 - It allows you to actively trade the markets around the clock 2 - It combines the benefit of the intraday charts along with the big picture trends Probably the 4 hour chart is the best time frame for simple swing trading. If you have a 9 to 5 job, or a family that keeps you busy, but you still want to make money from the forex market, we recommend trying the H4 trading strategy. We’re going to reveal the Doji sandwich pattern in the next sections, so continue reading. Without further ado, let’s first layout the foundation of what is H4 in forex and then move on to show you our H4 forex trading strategy. Table of Contents 1 What is H4 in Forex? 2 Why the 4 Hour Time Frame is Important 3 How to Use the 4 Hour Chart to Confirm Your Trades 4 Best H4 Forex Strategy 4.1 Filter Your Trading Setups with Stochastic Indicator 4.2 The Entry Technique 4.3 How to Manage Your Trade? 4.4 Stop Loss and Exit Strategy 4.5 Best 4H Forex Strategy – Advanced Setup 5 · Final Words – H4 Trading Strategy What is H4 in Forex? Now, probably most of you already know that in the forex trading and technical analysis realm, H4 is simply an abbreviation for the 4-hour daily time-frame. The 4-hour time frame is an intraday TF where each corresponding candle encompasses exactly 4 hours of trading activity from open to close. The 4h chart also comes as the standard default time-frame with most top trading platforms so, it’s readily accessible. The 4h time frame carries a distinctive role, especially in the forex market. Unlike stocks which are opened for trading for a limited 8-hour window, in forex trading, the foreign exchange market never sleeps. So, in the stock market, the 4h TF is useless as one full day of trading will be comprised of two 4h candles. However, in the forex market, one full day of trading activity is comprised of six 4h candles. What is even more important, one 4h candle point out to a half of each major trading sessions. In the forex market, the Sydney, Tokyo, London and New York session have their unique price action. And, this is where FX traders can focus on new trading opportunities. Moving on… We’ll explain the main benefits of using the 4h trading system. Why the 4 Hour Time Frame is Important Trading on the 4h time frame is not only suited for those with limited time on their hands or the beginner traders. Check out our guide on the best trading strategy for beginners. There are other benefits of trading 4h time frames that can’t be found on other time frames, including: You’re no longer a slave to the markets and have more freedom. The impact of risk events on the 4h chart is less visible. Timing the market is not that critical, giving you more wiggle room for error. Larger profit potential. And, of course, benefiting from combining the benefits of intraday TF with larger time frames. Now… One of the biggest mistakes traders makes trading the 4-hour chart is that they don’t pay attention to the fact that different brokers have different closing times for the 4-hour candle breakout strategy. This is a time-critical forex trading consideration. And, that can make the difference between winning and losing. How to Use the 4 Hour Chart to Confirm Your Trades Since time in the forex market is broken in several trading sessions and forex brokers run on different time zones, the 4h candle will close at a different time of the day. Nowadays, most forex brokers run on the GMT+3 time zones but, if you want to be safe, better check with your broker. The main disadvantage of the different FX broker server times is that you will get different 4h candle closing. Every new candle on the 4h time frame is formed every 4 hours. This in turn will lead to different price actions on your 4h chart. To resolve this issue, and have a more accurate representation of each trading session we use the New York close time to define when a new 4h candle is printed. In forex trading, the New York close is considered the standard closing time for the day. Learn how to master forex trading with our complete guide. If you’re serious about trading, you need to use forex charts with the New York close. Let me explain… The daily closing price in any market, be it forex, stocks, commodities or cryptocurrencies displays who won the battle between buyers and sellers for that session. Traders who are planning to use the h4 forex trading strategy need to have the correct New York closing charts. If you want the identical price action on your charts as we have them, you should use the New York close charts. Now… If you use the correct New York close charts, you should see each 4-hour candle close at 5:00 PM, 9:00 PM, 1:00 AM, 5:00 AM, 9:00 AM and 1:00 PM. If you’re using the Central Time, you should see each 4-hour candle close at 4:00 PM, 8:00 PM, 12:00 AM, 4:00 AM, 8:00 AM and 12:00 PM. On the other hand, if you’re using the Pacific Time, you should see each 4-hour candle close at 2:00 PM, 6:00 PM, 10:00 PM, 2:00 AM, 6:00 AM and 10:00 AM. Taking care of this type of detail while it might seem unimportant it can make the difference between winning and losing. Traders can use these 4-h candles to find potential new trading opportunities. You’ll only need a 10-minute window of time upon the close of each of the 4h candles to analyze your favorite currency pair and spot new opportunities to make money.
by Tradingstrategyguides