This forex strategy offers great entry points, with amazing risk reward ratio. In old times of wall street pits, it was often used to capture good entry points within trend. To do so, it employs candle formations signalising trend continuation.
Trading setup
Indicators : EMA(Exponential moving average) 21 and 14
Buying into the uptrend
EMA 14 is trending above EMA 21 (uptrend)
Price is traded above EMA 21 for at least two closed candles.
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Entry:
3-6 consecutive candles formed. Each with lower high than previous candle. Each newly closed candle is flatter (Narrower body, narrower range) than preceding candle. Or at least equal.
We enter buy position 1 pip above last high of the candle, while condition 1 was met.
Stop loss: 1 pip under low of signal formation. We move SL to break even, once the trade reaches double the size of signal formation (distance from stop loss to the base of the formation – previous high).
Take profit: We exit position on EMA crossover (EMA 14 crossing under EMA 21).
Selling into the down trend
EMA 14 is trending above EMA 21 (uptrend)
Price is traded under EMA 21 for at least two closed candles.
Entry:
3-6 consecutive candles formed. Each with higher low than previous candle. Each newly closed candle is flatter (Narrower body, narrower range) than preceding candle (Or at least equal).
We enter sell position 1 pip under last low of the candle, while condition 1 was met.
Stop loss: 1 pip above high of signal formation. We move SL to break even, once the trade reaches double the size of signal formation (distance from stop loss to the base of the formation – previous low).
Take profit: We exit position on EMA crossover (EMA 14 crossing above EMA 21).
