ADX confirmed double top scalping FOREX strategy

by tonpop: My second forex strategy using ADX. This time double top/bottom formation is used as a signal. To simplify formation identification and to be able to backtest the results on historical data I use fractals indicator. Strategy is universally salable and works in all major currency pairs and time frames, however I use it as scalping method in min chart of EURUSD.

 

Used forex indicators

 

  • ADX (average directional movement index) period 60. ADX will identify current market direction (trend). The trend is filtered also with momentum (strength of a trend) in this indicator. I prefer to use higher calculation period of ADX when looking for chart formation.

  • Fractals will mark the double top/ double bottom formation in the chart. Using fractals makes it easier to find the formation and to avoid being subjective when finding those patterns.

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Forex strategy rules

SELL:

 

Main DeM line trending above 10 line signalizing sufficient momentum to confirm trend. ADX+(green) trending below ADX- (red). This will signalize downtrend and we will enter short trades only on double top formation:

Double top formation: Two bearish fractals can be connected with horizontal line. They are separated only by bullish fractal at the bottom (it will mark base of the formation).

Once the formation gets confirmed (second bearish fractal closes) we place pending sell order at the low marked by bullish fractal in the middle of formation.

 

Take profit: ADX+ crossing ADX- upwards – trend is done.

 

Note: It is possible and quite common that second bearish fractal will close with price below formations base (where we would have placed pending order). In that case we enter at market – manually.

 

BUY:

 

Main DeM line trending above 10 line signalizing sufficient momentum to confirm trend. ADX+(green) trending above ADX- (red). This will signalize uptrend and we will enter long trades only on double bottom formation:

Double bottom formation: Two bullish fractals can be connected with horizontal line. They are separated only by bearish fractal at the top (it will mark base of the formation).

 

Once the formation gets confirmed (second bearish fractal closes). We place pending buy order at the high marked by bearish fractal in the middle of formation.

Take profit: ADX+ crossing ADX- downwards – trend is done.

 

Note: It is possible and quite common, that second bullish fractal will close with price above formations base (where we would have placed pending order). In that case we enter at market – manually.

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