Successful test is one of the main signal of trends health and its strength. Test, even as a standalone signal offers great risk reward ratio and often times marks the best possible entry within the trend. It is not uncommon, that test is immediately followed by massive price movement. Those movements can be easily used to our benefit in this forex strategy.
Used forex indicators
MACD (moving average convergence divergence) 48,102,9
Tools
Candle formation – test in forex.
Forex strategy rules
Timeframe: above 15 min.
Currency pair: any
BUY:
MACD histogram closing above zero line – uptrend is in progress.
Finding test formation:
Bearish candle with extremely tall bottom wick. Bottom wick is at least double the size of candle body plus it upper wick.
Next candle is strongly bullish closing above the open of firs signal candle (ideally above its high). Sometimes market pauses, creating a narrow candle within the formation. Signal remains valid if this candle does not surpass low of the formation, reached by first bearish candle.
We enter long placing Stop loss below the low of first signal candle.
Take profit: At least double the size of signal formation.
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SELL:
MACD histogram closing below zero line – downtrend is in progress.
Finding test formation:
Bullish candle with extremely tall upper wick. Upper wick is at least double the size of candle body plus it bottom wick.
Next candle is strongly bearish closing below the open of first signal candle (ideally below its low). Sometimes market pauses, creating a narrow candle within the formation. Signal remains valid if this candle does not surpass high of the formation, reached by first bullish candle.
We enter short placing Stop loss above the high of first signal candle.
Take profit: At least double the size of signal formation.
