Lines drawn by envelopes forex indicator can also be interpreted as price comfort zones. Price can and will move outside of those boundaries even for a prolonged period of time. Rapid and sudden movement outside envelopes boundaries signalizes significant price momentum. But price can also temporarily close outside envelopes boundaries only to return back at opposite side of a range. There is no certain way of knowing.
We can use other tools to analyze the trend and improve our chances for profitable trade.
Or we can use the fact, that price closing outside envelopes tends to move rapidly either way and use this knowledge to trap the price.
Used forex indicators:
envelopes, default settings.
Forex strategy rules.
We plot envelopes forex indicator on any major currency pair. Recommended timeframe is 15 minutes (due to the average candle size) however all timeframes above 5 min can be used.
We wait for candle fully formed (open and close) outside of envelopes tunnel boundaries. We place pending buy order at the high of a candle, and pending sell order at the low of candle. Take profit equals the size of a range.
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Stop loss is placed at the same price as opposing pending order at other side of a candle range.
Second order: Once the first order got triggered, we double order size for opposing pending order.
Third order: In rare cases that even a second order moves to loss we enter third order. Third pending order is placed immediately after entering the second order. It is placed at a same price as first other, with double the size of second order.
Third order will be the last. Once position moves to loss we accept it and move to the next trade.
Notes: When using 0,01 lot for initial order our max loss at third losing position will be 0,07 lots. However winning trades are much much more frequent as we have market conditions on our side and we have three opportunities to liquidate each position in profit. This is very aggressive forex strategy that is definitely not suitable for everyone, but we are sure that there are many people out there that will love it.
You can enter more trades simultaneously or always just one. This depends on your ability to manage multiple positions without losing control.