Simple candle signal that works (Forex strategy)

This forex strategy was born out of simple question that has lead to experiment. When we notice few strong consecutive candles in the market (3-10), is the price more likely to reverse or continue ? 

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Can some edge be extracted out of this situation ?

 

If so, how tall should candle be for the signal to provide some edge. We started experimenting with various numbers of consecutive candles to look for. Their sizes and some additional filter were  applied to provide even more advantage for our trading.

 

Above mentioned efforts resulted in candle trio MT4 expert advisor by theforexkings. EA that looks for three consecutive bullish/bearish candles closing in the direction of EMA defined trend.

 

Looking at the historical data, it was quite clear that, this is solid momentum signal.

 

Expert advisor can trade this strategy with relatively low historical drawdown compared to profit its potential. System is therefore conservative, never holding more than one trade at the time and with great upside. Each entry is protected by trailing stop (based on candle low/high). tThis type of trailing stop tends to work great with momentum signals.

 

Used tools and indicators

Following setting were used in test of this forex strategy ( Candle trio MT4 EA , EURUSD, 1H tick). Steady lotsize was traded during the whole test (compund interest not included in balance curve).

 

EMA filter (600,250 and 200,100) Two ema tandems must both close in the direction of trend.

 

Signal: three consecutive bullish/bearish candles each with defined body size min/max.  The Oldest candle is marker with 3. The most recent candle is marked with 1.

 

  • Candle 3 size: 100 – 1500 points

  • Candle 2 size: 100 – 1500 points

  • Candle 1 size: 100 – 1500 points

Trailing stop universal (extra deviation 1000 points): Placed upon entry. Adjusted with each consecutive candle close, only in the direction of profitable winning trade. Extra deviation is applied to put it further away from the entry.

 

Max number of trades: 1, however system can work with more trades if setup properly.

 

Target profit points: 600

 

Expert advisor : Candle trio MT4 EA, trading this forex strategy has bunch of setting that are helping it to survive in the market (slippage filter, spread filter). Those are however not crucial for strategy logic.

 

Rules of the forex strategy

 

SELL

 

EMA filter confirms downtrend. In both EMA tandems, fast is trending below slow EMA.

 

Close of three consecutive bearish candle with defined min max body size. We enter on formations and last candle close.

 

TS is placed at the high of last closed candle + extra deviation above.

 

Target profit is also set upon the entry.

 

Each trade closed either by TS or TP.

 

BUY

EMA filter confirms uptrend. In both EMA tandems, fast is trending above slow EMA.

 

Close of three consecutive bullish candle with defined min max body size. We enter on formations and last candle close.

 

TS is placed at the low of last closed candle - extra deviation below.

 

Target profit is also set upon the entry.

 

Each trade closed either by TS or TP.

Get MT4 expert advisor trading this forex strategy

 

  

For best results, use this forex strategy with one of our trusted forex brokers

(STP/ECN with MT4 bridge).

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Disclaimer:  Expert advisor was tested for profitability on historical data. All screen shots provided are displaying real results of the test. However past data will never guarantee future success. Every expert advisor needs to be tested properly on demo account. LIVE use only on your own risk. Read full disclaimer. TheForexKings Team does not give any financial advice. TheForexKings does not take any responsibility for any user’s investments and investment decisions. All rights reserved. Strictly for personal use.

 

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ABOUT US

THEFOREXKINGS

“Trading FOREX since 2006. Full time trader and web developer since 2013. My two biggest hobbies are trading and web development. In TheForexKings I managed to connect both of them. Even after 12 years of trading I still have the same passion for the market as at the beginning. The aspect I enjoy the most : development and testing of new ideas.” 

 

Only in 2016 - 2017 we have created more than 400 forex strategies. During this period we have also developed and published +200 MT4 Expert advisors based on those strategies. We are dedicated to provide you with viable and complete trading systems that have thrived in extensive historical testing. We want to give you complete and transparent trading solutions, that once mastered ,will set you financially free. We want to give you a fighting and winning chance in the market. ” 

—  Marian, Proprietor of TheForexkings.com