This forex strategy uses reliable forex pattern – double top/double bottom as entry signal. Furthermore, CCI with slow calculation period is used as sensitive trend filter. Double top/bottom is a reversal formation and its accuracy can be increased by using it to find end of a correction instead of trying to predict the end of major trend.
Double top/bottom formation may seem like a relatively common chart pattern but once we start looking for only the best entry, pattern gets very rare. Therefore, this forex strategy includes method of pattern identification with fractals that will filter out low quality pattern.
Strategy works very well across all timeframes and currency pairs.
Used forex indicators
CCI (commodity channel index) 140. CCI with extremely slow calculation period is used to identify trend/momentum. We will only take trades in the direction of that momentum.
Fractals forex indicator. Fractals will be used to properly distinguish double top/bottom pattern. Also, fractals are making it easy for us test the strategy on historical data. Results and entries are repeatable as there are less subjective factors influencing our trading.
For the best results, trade with professional ECN/STP broker with MT4. If you can't trade with profit. Automatically copy the traders that are already profitable.
Forex strategy rules.
SELL: Double top
CCI trending below 0 line. This will signalize downtrend. We will take only short trades in the direction of trend.
Entry signal:
Double top pattern:
Two tops marked by bullish fractal. Fractals can be connected by horizontal line (A). Second top must have wide upper wick, signalizing price hitting resistance. Double top reversal pattern may include evening star, test formation and so on. Each reversal pattern included in our entry signal will add to its reliability.
(B) line marks the low between the two tops. It must be also marked with closed bearish fractal. Price marked by bearish fractals will provide target for pending sell order.
Once the second top is complete, pending sell order is placed at the bearish fractal (B) between two tops.
After we enter the position stop loss is placed at the highest price marked by two tops (A). Distance between the entry (B) and (A) will be our signal range. Signal range will be used as a break even target (C).
Once the price reaches break even target (C) stop loss is placed at break even position and we will wait for full take profit.
Full take profit: CCI crossing zero line upwards.
BUY: Double bottom
CCI trending above 0 line. This will signalize uptrend. We will take only long trades in the direction of trend.
Entry signal:
Double bottom pattern:
Two bottoms marked by bearish fractal. Fractals can be connected by horizontal line (A). Second bottom must have wide bottom wick, signalizing price hitting support. Double bottom reversal pattern may include morning star, test formation and so on. Each reversal pattern included in our entry signal will add to its reliability.
(B) line marks the low between the two bottoms. It must be also marked with closed bullish fractal. Price marked by bullish fractals will provide target for pending buy order.
Once the second bottom is complete, pending buy order is placed at the bullish fractal (B) between two tops.
After we enter the position stop loss is placed at the lowest price reached by two bottoms (A). Distance between the entry (B) and (A) will be our signal range. Signal range will be used as a break even target (C).
Once the price reaches break even target (C), stop loss is placed at break even position and we will wait for full take profit.
Full take profit: CCI crossing zero line upwards.
