Spikes signalize rapid price movement that was almost immediate overcompensated by the movement to the opposite direction. In chart they are represented as candles with exceptionally wide wicks. This forex strategy takes advantage of such a condition that frequently occur on test and news releases. Strategy trades in difficult conditions, therefore good ECN/STP broker is necessary to support you in such an endeavor.
Used forex indicators
EMA (exponential moving average) 7: Add additional lines 500 and -500.
Apply in any timeframe above 5 min.
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Forex strategy rules
SELL:
We will be looking for extremely wide upper wick of a candle touching the +500 line above EMA.
We enter short immediately on its close. Stop loss is placed above the high of a wick.
Take profit: Look to close with profit at least 1/3 of risked amount. Exit the trade manually based on price development. Better sooner than later.
BUY:
We will be looking for extremely wide bottom wick of a candle touching the -500 line above EMA.
We enter long immediately on its close. Stop loss is placed below the low of a wick.
Take profit: Look to close with profit at least 1/3 of risked amount. Exit the trade manually based on price development. Better sooner than later.
Notes: Price tends to move rapidly in those situations, stay close to the chart. Spread may be increased during volatile conditions, make sure your account will be OK with it.
