We present you with strategy using combination of forex patterns – flags and cocktail of indicators: MA + Volumes, to find correction within major trend.
Once we identify small trend (correction) within our major trend, we can precisely time our position entry at the end of minor trend corection. This excelling timing method provides us with great risk reward ratio and tight stop loss.
Tools used in forex strategy
Any timeframe and currency pair. Preferably majors and 15 min timeframe.
EMA 200 (exponential moving average)
EMA 21 (exponential moving average)
Volumes forex indicator (default settings)
EMA 21 (applied in first indicator data – volumes window)
Rules for the forex strategy
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We identify the trend
Uptrend: EMA 21 above EMA 200
Downtrend: EMA 21 below EMA 200
Entry long.
We are looking for downward sloping flag in uptrend. After the resistance breakout (upper trendline), we look at the volume on breakout candle. Volume must be above EMA 21 applied in volumes window, signalising above average activity in breakout candle. We enter long, placing stop loss at the lowest low reached in flag forex pattern.
Take profit: After price surpasses the highest high previously reached in the flag fpattern, we can either close position immediately, or we can place stop loss to break even and let position roll.
Entry short.
We are looking for upwards sloping flag in downtrend. After the support breakout (bottom trendline), we look at the volume on breakout candle. Volume must be above EMA 21 (applied in volumes window), signalising above average activity on breakout candle. We enter short on candle close, placing stop loss at the highest high reached in flag forex formation.
Take profit: After price falls below the lowest low previously reached in the flag formation, we can either close position immediately, or we can place stop loss to break even and let position roll.
