This forex strategy uses one of the most common forex pattern – double top,but not as reversal pattern, but as a trend continuation pattern, merely signalising that only thing reversing is correction in the main trend. Strategy uses alligator forex indicator (26,12,10) to identify the trend. Fractals indicator is used to impeccably identify tops and bottoms in forex pattern.
Forex strategy rules.
We plot alligator forex indicator in the chart. We identify trend.
Uptrend: Alligator lines are clearly separated and untangled. Alligator lines from the bottom to the top: Blue, red green
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Downtrend: Alligator lines are clearly separated and untangled. Alligator lines from the bottom to the top: green, red, blue
We look for double top in downtrend. Both tops are clearly marked by bearish (up) fractal. Both of the fractals are in same horizontal price level (we use fractals to avoid any hesitation coupled with visual charting).
Valley created after first identified top of the pattern will be our neckline. After the second top is drawn with closed fractal. We place pending sell order at the neckline. It is possible that second top fractal will be closed after price falls slightly below neckline. In that case we enter the position manually.
Stop loss: One pip above second top.
Take profit: We use distance from entry to stop loss as our take profit target. Risking same amount as we want to gain.
!!! Apply those rules to entry also on double bottoms !!