Once again we bring you a strategy that combines forex indicator with pattern recognition. This time, we will be looking for pattern that is as simple as it gets. We will use all possible simplification methods to allow us to concentrate solely on the trade itself.
Forex indicators used in forex strategy
Alligator (56,26,20)
Minimal experience with tunnel and trendline drawing.
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Forex strategy rules
We switch to the line chart. We will concentrate only on price not candle formation.
We apply indicators in the 15 min chart of any major currency pair.
BUY:
Alligator lines confirming uptrend. Lines are clearly separated, untangled and lined from top to bottom: green, red, blue
We will draw only upper tunnel trendline (resistance). We do so by finding three highs, each marked by fractal. Each lower than the previous high. What is most important is, that they are perfectly (or almost perfectly) aligned. All three tops can be connected with single line. Example: We used another line to establish maximum deviation that can be accepted, for three tops to be considered aligned.
By connecting those three local highs, downwards sloping resistance is created. We enter the trade on resistance breakout, placing stop loss just below the formation low.
To establish low of the partial tunnel, we switch to the candle chart for a moment.
Take profit: We exit the position in profit once green alligator line crosses red line from above.
SELL:
Alligator lines confirming downtrend. Lines are clearly separated, untangled and lined from top to bottom: blue, red, green
We will draw only bottom tunnel trendline (support). We do so by finding three lows, each marked by fractal. Each higher than the previous low. What is most important is, that they are perfectly (or almost perfectly) aligned. All three bottoms can be connected with single line. We used another line to establish maximum deviation that can be accepted, for three bottoms to be considered aligned.
By connecting those three local lows, upwards sloping support is created. We enter the trade on support breakout, placing stop loss just above the formation high.
To establish high of the partial tunnel, we switch to the candle chart for a moment.
Take profit: We exit the position in profit once green alligator line crosses red line from the bottom.
