This pattern based forex strategy uses morning and evening star chart patterns as entry signal. Additionally, bollinger bands are used to gain the timing advantage. Trend identification is not required as signal opposing the trend is extremely rare.
Morning/evening star signalizes price encountering massive resistance in its further movement and bounce becomes very likely. Using this signal together with high/low position of price in BB tunnel improves signal accuracy and precision.
Trading with this signal and this setup, will bring mostly positions that will move immediately into the green numbers without any resistance.
Forex strategy indicators
Bollinger bands forex indicator (20). BB will establish high and low price. Selling becomes more profitable at upper bollinger band (price tends to correct downwards). Buying will be done at bottom BB. BB tunnel boundaries will offer statistically better price for us to enter our trade.
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Forex strategy rules
We will be looking for morning star char formation crossing bottom BB line to enter the trade long.
Morning star formation consists of three candles.
1. Bearish candle hitting the support in form of bottom BB band.
2. Extremely narrow, typically bearish candle with tall downward wick (at least twice the size of candle body). There might be a gap between 1. And 2. Candle (it improves the signal reliability).
3. Tall bullish candle, closing above the open of first formation candle.
We enter the trade long on 3.(bullish) candle close. Stop loss is placed one pip below the formation low.
Take profit: Double the size of formation (measured from entry to its low)
We will be looking for evening star char formation crossing upper BB line to enter the trade long.
Evening star formation consists of three candles.
1. Bullish candle hitting the resistance in form of upper BB band.
2. Extremely narrow, typically bullish candle with tall upwards wick (at least twice the size of candle body). There might be a gap between 1. And 2. Candle (it improves the signal reliability).
3. Tall bearish candle, closing below the open of first formation candle.
We enter the trade short on 3.(bearish) candle close. Stop loss is placed one pip above the formation high.
Take profit: Double the size of formation (measured from entry to its high)