Being able to properly draw a tunnel in forex chart is one of the most important skills a trader can have. Great way to practice this craft, is to identify tunnels in lower timeframe. This is a medium frequency forex strategy utilizing tunnels breakouts to scalp with tight stop loss and high percentage of winning trades.
Rules for the forex strategy
Knowledge on drawing trendlines is necessary.
Only major pairs in 5 min timeframe.
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SELL
We draw only support, connecting at least 3 lows within the wave structure of the price. Each one is higher than the previous one.
By connecting these lows we draw a bottom of the tunnel. Breakout of this boundary will be our entry signal.
We wait for standard breakout candle – bearish, penetrating upwards sloping support, closing below it. We enter immediately on new candle open.
Stop loss is placed one pip above highest high reached in our signal tunnel.
Take profit: Profit that equals distance between entry and stop loss.
BUY
We draw only resistance, connecting at least 3 highs within the wave structure of the price. Each one is lower than the previous one.
By connecting these highs we draw a top of the tunnel. Breakout of this boundary will be our entry signal.
We wait for standard breakout candle – bullish, penetrating downwards sloping resistance, closing above it. We enter immediately on new candle open.
Stop loss is placed one pip below lowest low reached in our signal tunnel.
Take profit: Profit that equals distance between entry and stop loss.
Notes
This strategy can be used without any additional trend identification
