This forex pattern simply tell us, that effort of one group of traders (bulls/bears) that lasted up to three hours was overturned in one single hour session. Winning group administered a beating to the losing group. To recover from beating takes some time. This is therefore a high probability signal.
Losing group will not come to fight in next couple of candles. We can use this market situation to enter the position, however it does not tell us about long term trend. Other tools can be employed such as forex indicators (RSI, moving averages, ADX) and trendlines. However, strategy as suggested doesn't require you to use any of them.
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This entry signal is much more accurate. It is so accurate that you don't have to rely on trend identification. Instead you can just focus on signal, making money and finding investors.
Forex strategy rules
We will be looking for three consecutive candles. Either bullish or bearish, regardless of price development.
Our simple signal will be single candle to opposing direction, surpassing three previous candles and closing beyond them.
BUY: Three consecutive bearish candles. Followed by strong bullish candle, closing above open of first bearish candle. We enter on bullish candle close (signal completion). We place stop loss below low of the formation. Distance between entry and low will be mirrored as take profit.
SELL: Three consecutive bullish candles. Followed by strong bearish candle, closing below open of first bullish candle. We enter on bearish candle close (signal completion). We place stop loss above high of the formation. Distance between entry and high will be mirrored as take profit.
As you can see this strategy uses equal TP and SL. It means that in absolutely chaotic market, results will closely resemble coin toss. However, this is highly logical and accurate signal. Success rate can be as high as 90 percent. Imagine winning 9 out 10 coin flips, when you need just 6 out of 10 to be in profit !
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