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.
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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.
