Forex Mom

Archive for the ‘7-Forex Trading Strategies’ Category

70% of the time the market is in consolidation, only 30% of the time is it trending. A trending market is making higher highs and higher lows (uptrend) or lower highs and lower lows (downtrend).

When we are in consolidation we draw lines of support and resistance. If the distance between support and resistance is 60 pips or less, we have small consolidation.

We cannot trade small consolidation. We must wait for a breakout.

Waiting for a breakout of small consolidation

70% of the time the market is in consolidation; only 30% of the time it is trending.

When the candles are no longer making higher highs and higher lows (uptrend) or lower highs and lower lows (downtrend) then the candles are in consolidation.

We do not follow the fibonacci’s when we are in consolidation. We do not follow crowns either.

We draw the lines of support and resistance. If the distance between support and resistance is greater than 120 pips, it is large consolidation.

When the candles go down to support and we see a good bullish candlestick formation, we enter long. We place our stop 10 pips below the support line (or low of the candlestick formation) and we place our limit 10 pips before the line of resistance. It is a good idea to move your stop loss each time a higher low is formed.

When the candles go up to resistance and we see a good bearish candlestick formation, we enter short. We place our stop 15 pips above the resistance line (or high of the candlestick formation) and we place our limit 10 pips before the line of support. It is a good idea to move your stop loss each time a lower high is formed.

Trading large consolidation

It has been especially helpful for me to watch my mentors trading large consolidation. I learned more from waching them than from reading theories all day long. My mentors are Market Traders.

Let’s start with an uptrend. As we are going up, the candles are waving up and down. To find a good entry to go up, we want to wait for the candles to go down, and start going up. After we see 3 candles of retracement, we draw a counter trendline (down) and wait for a good bullish candle to break this. We prefer a candle that is at least 75% body (25% wick).

We put our stop 10 pips below the low. We use fibs or support/resistance to determine our limit.

Or you can set a very high limit (1000 pips) and move the stop loss every time a higher low is formed. Then you can ride this wave as long as it lasts (surfing the forex)!  HANG 10!

Trading counter trendline breaks in an uptrend.

Let’s go to the downtrend next. As we are going down, the candles are waving up and down. To find a good entry to go up, we want to wait for the candles to go up, and start going down. After we see 3 candles of retracement, we draw a counter trendline (up) and wait for a good bearish candle to break this. We prefer a candle that is at least 75% body (25% wick).

We put our stop 15 pips above the high. We use fibs or support/resistance to determine our limit.

Or you can set a very high limit (1000 pips) and move the stop loss every time a lower high is formed. Then you can ride this wave as long as it lasts (surfing the forex)!  HANG 10! (Can you hear the Beach Boys in the background… listen very carefully).

Trading the counter trendline break in a downtrend.

Trendline break from the sell zone into the buy zone

When the trendline is broken, wait for the first decision candle AFTER the candle that breaks the trendline.

Make sure this decision candle is large (not small) and the body of the candle is at least 75% of the candle (25% wick). The wick may touch the trendline, but the body of the candle cannot. Then enter at the close of this decision candle.

Place your stop 15 pips above the high (going short) or 10 pips below the low (going long).

Place your limits based on the fibs or support/resistance.

Never forget equity management! Do not risk more than 50 pips in a trade.

Buy an Sell Zones

You start by identifying the trendline.

If the candles are above the trendline, you are in a buy zone. If the candles are below the trendline you are in the sell zone.

 While you are in the sell zone, you will want to enter short (bearish) when you see a high formed and a good bearish candlestick formation (evening star, engulfing bearish, tweezer top, dark cloud).