This forex strategy is based on fundamental market reactions, that are fuelled by crowd psychology. Therefore, strategy can be applied on all forex pairs and most of the time frames (above 15 min).
Indicator: fractals
Skills: trend line drawing
Basic premise of 3 swing forex strategy
While price trends it creates lower lows in downtrend and higher highs in uptrend. Failing to create new high means only one thing – trend is discontinued. Even the biggest and strongest trend have that one last max / min. How do you recognize it ? Simple, price will not reach further.
3 swing strategy helps to find those market turning points.
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Rules:
In downtrend, looking for a long position.
We draw trend line connecting highs in the downtrend.
Main feature of downtrend – lower lows are created as the price declines (those are marked by fractals).
Signal for buy:
New lowest low created (marked by fractal indicator1)
New low created, higher than previous low. Price failed to create new lowest low.
We place pending order for buy at the high created between last two lows.
Trend line breakout is confirmation of the signal.
Exit strategy:
We place stop loss at lowest low. Distance between LL and position entry will be also our profit target.
In uptrend, looking for a short position.
We draw trend line connecting lows in the uptrend.
Main feature of uptrend – higher highs are created as the price rallies (those are marked by fractals.
Signal for sell:
New highest highs created (marked by fractal)
New high created , lower than previous high. Price failed to create new highest high.
We place pending order for sell at the low created between last two highs.
Trendline breakout is confirmation of the signal.
Exit strategy.
We place stop loss at highest high. Distance between HH and position entry will be also our profit target.
PRO TIP:After you learn to better recognize lows and highs discard fractals, it will help you to become even more effective.
