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| | [[Technical Trading Strategies]] typically form the initial basis for [[Pre-Trade_Considerations | trading decisions]] by [[Institutional_and_Retail_Traders#What_is_a_Retail_Trader? | retail traders]] when they enter the [[Forex]] market for the first [[Forex Market Hours | time]]. Understanding [[Technical Trading Strategies]] is a good place to learn how to [[Developing_your_Trading_Process | enter and exit trades]]. In this WIki, we will explore many different [[Technical Trading Strategies]] and how you might go about employing them within [[The Basic Cycle]] of all markets. |
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| | '''NOTE:''' No one [[Technical Analysis | technical]] strategy is going to work all of the time in all the various [[Price_Action_Analysis | market structures]] and environments. For example, [[Breakouts_and_Breakdowns | Breakout strategies]] will tend to work in [[Trends | trending]] environments but get chopped up in uncertain or [[Breakouts_and_Breakdowns#The_Sideways_Time_Correction | sideways markets]]. This means that understanding where you are in the context of [[The Basic Cycle]] and the overall [[Trends | trend]] will benefit you greatly when executing a [[Technical Analysis | technical]] strategy in live market situations. |
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| '''NOTE:''' No one technical strategy is going to work all of the time in all the various [[Price_Action_Analysis | market structures]] and environments. For example, [[Breakouts_and_Breakdowns | Breakout strategies]] will tend to work in [[Trends | trending]] environments but get chopped up in uncertain or [[Breakouts_and_Breakdowns#The_Sideways_Time_Correction | sideways markets]]. This means that understanding where you are in the context of [[The Basic Cycle]] and the overall [[Trends | trend]] will benefit you greatly when executing a technical strategy in live market situations. | | '''NOTE:''' All technical strategies will benefit from understanding the big picture [[Fundamental_Analysis | Fundamental Trend]] and the [[Sentiment_Analysis | prevailing Sentiment]] that is driving [[Price_Action_Analysis | market prices]] in the current [[Forex_Trading_Sessions | trading session]]. A good idea is to use technical trading strategies as a ''"Timing tool"'' to find smart places to [[Pre-Trade Considerations | enter trades]] in the direction of the [[Sentiment_Analysis | Sentiment]] that is currently driving [[Price_Action_Analysis | prices]]. |
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| '''NOTE:''' All technical strategies will benefit from understanding the big picture [[Fundamental_Analysis | Fundamental Trend]] and the [[Sentiment_Analysis | prevailing Sentiment]] that is driving [[Price_Action_Analysis | market prices]] in the current [[Forex_Trading_Sessions | trading session]]. A good idea is to use technical trading strategies as a ''"Timing tool"'' to find smart places to enter trades in the direction of the [[Sentiment_Analysis | Sentiment]] that is currently driving [[Price_Action_Analysis | prices]]. | | '''WARNING:''' As with any trading strategy, you need to take the [[Forex Market Hours | time]] to vigorously test each strategy in a simulated market situation before putting any of your money to work in the markets. Not doing the necessary [[Tick Data for Backtesting and Algo Trading | backtesting]] may result in financial losses. All strategies in this Wiki or on Volatility.red are for information purposes only and are not in any way intended as financial advice. |
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| ='''Basic Technical Trading Strategies'''= | | ='''[[Basic Technical Trading Strategies]]'''= |
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| | Many retail traders gravitate towards [[Technical Trading Strategies]] because they are visually simple to understand and execute in live market situations. In this Wiki, we are going to take a look at some very basic technical trading strategies that you can experiment with and see if any of them are a good fit for your trading plan such as: |
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| =='''The 3-5 Candle Drop'''==
| | * [[Basic_Technical_Trading_Strategies#The_3-5_Candle_Drop_and_Pop | The 3-5 Candle Drop and Pop]] |
| | * [[Basic_Technical_Trading_Strategies#The_Breakout_and_Breakdown | The Breakout and Breakdown]] |
| | * [[Basic_Technical_Trading_Strategies#Bullish_and_Bearish_Momentum_Stall | Bullish and Bearish Momentum Stall]] |
| | * [[Basic_Technical_Trading_Strategies#Matched_Move_Higher_and_Lower | Matched Move Higher and Lower]] |
| | * [[Basic_Technical_Trading_Strategies#Climactic_Buy_and_Sell | Climactic Buy and Sell]] |
| | * [[Basic_Technical_Trading_Strategies#The_3-5_Candle_Drop_and_Pop_Moving_Average_Plays | The 3-5 Candle Drop and Pop Moving Average Plays]] |
| | * [[Basic_Technical_Trading_Strategies#Moving_Average_Buy_and_Sell_Zones | Moving Average Buy and Sell Zones]] |
| | * [[Basic_Technical_Trading_Strategies#Major_Support_Buy_and_Major_Resistance_Sell_Zones | Major Support Buy and Major Resistance Sell Zones]] |
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| The 3-5 candle drop is a strategy that attempts to take advantage of a market in an uptrend that has experienced a 3-5 candlestick drop or retracement. The main objective of a trader is to find a safe spot to get into an advancing market. The retracement should be no more than 60% of the prior advance to remain a viable and safe buy setup.
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| | You can access the main Wiki on [[Basic Technical Trading Strategies]] [[Basic Technical Trading Strategies | HERE.]] |
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| '''Criteria of the 3-5 Candle Drop (see Figure 1.1):'''
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| * The stock or market should have 3 or more consecutive lower highs (each of the last 3 candles should have lower highs, we are not talking about pivots here) or 3 or more red candles. Having both lower highs and red candlesticks will make the setup more potent as this shows that the market has blown off a good amount of steam but the fact that it is less than a 60% retracement shows the strength is still on the buy side.
| | ='''[[Every Market has a Strategy]]'''= |
| * 3 or more consecutive lower lows. Make sure that the down candles are controlled and not aggressive.
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| * A reversal candlestick on or after the third candlestick lower.
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| * There must be a nice tradable price void, free of consolidation areas, for the stock to move up easily through after the entry buy has been taken.
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| * There must be some sort of support or demand to the left that the market is attempting to bounce higher from in the form of a congestion area, prior pivot, 40-60% retracement, a rising moving average or any other areas that can be considered a place of interest where demand for the market is present.
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| * The market should be in an uptrend for this strategy to have good accuracy. If not there should be at least one higher low pivot that has held above the prior pivot low. This will at least show that the market is attempting to transition to a possible uptrend.
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| https://i.imgur.com/JprtONn.png
| | Every Market has a Strategy! What we will do in this Wiki is break down when the best time to trade the [[Basic Technical Trading Strategies]] found in the [[Basic Technical Trading Strategies]] Wiki are and how you can apply these timing concepts to your trading including: |
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| Figure 1.1 – Criteria of the 3-5 candle drop
| | * [Every_Market_has_a_Strategy#When_to_Trade_Technical_Strategies | [When to Trade Technical Strategies]] |
| | * [[Every_Market_has_a_Strategy#Trading_Strategies_and_the_Stages_of_the_Basic_Cycle | Trading Strategies and the Stages of the Basic Cycle]] |
| | * [[Every_Market_has_a_Strategy#Strategies_and_the_Basic_Cycle | Strategies and the Basic Cycle]] |
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| '''Entry (see Figure 1.2):'''
| | You can access the main Wiki for [[Every Market has a Strategy]] [[Every Market has a Strategy | HERE]]. |
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| * A buy is placed when the stock or market trades above the prior candle's high after the 3-5 candle drop.
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| https://i.imgur.com/3xUQntK.png
| | ='''[[Intermediate Technical Trading Strategies]]'''= |
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| Figure 1.2 – The entry of the 3-5 candle drop with Stop loss area
| | Building on the [[Basic Technical Trading Strategies]] Wiki, in the following Wiki we will take a look at a few more [[Intermediate Technical Trading Strategies]] including: |
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| | * [[Intermediate_Technical_Trading_Strategies#The_Trend_Trade | The Trend Trade]] |
| | * [[Intermediate_Technical_Trading_Strategies#The_Profile_Trade | The Profile Trade]] |
| | * [[Intermediate_Technical_Trading_Strategies#5_Minute_Candlestick_Trade | 5 Minute Candlestick Trade]] |
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| '''Initial Stop (see Figure 1.2):'''
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| * Place the initial stop below the entry candle's low or the prior candles low, whichever is lower. This is the initial stop that can and will be moved as new market information happens. Traders will constantly need to update stop loss orders to lock in gains.
| | You can access the main Wiki for [[Intermediate Technical Trading Strategies]] [[Intermediate Technical Trading Strategies | HERE]]. |
| * The low of the newly formed pivot can also be used.
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| * The initial stop must be placed on whatever time frame that the 3-5 candle drop buy setup was found and traded.
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| '''Profit Target (see Figure 1.3):''' | | ='''[[Chart Patterns]]'''= |
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| * Establish a minimum target prior to entering the trade at or slightly above the prior pivot high or the next area of resistance. The objective of the target will depend on the how deep the prior retracement was and how aggressive it came down.
| | Utilizing [[Chart Patterns]] is a very old and time-tested practice in virtually all financial markets. We are not going to reinvent the wheel in this Wiki but we will introduce you to some of the most common forms of [[Chart Patterns]] that have stood the test of [[Forex Market Hours | time]] and are worth you taking the [[Forex Market Hours | time]] to learn and understand. |
| * Take into consideration how strong the pivot was and determine if the market should continue higher.
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| * Traders may want to only take a portion of the trade off the table if it has been determined that the market has a high probability of moving higher than the prior pivot high.
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| https://i.imgur.com/BD7CeaI.png
| | In the following Wiki on [[Chart Patterns]] we will explore: |
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| Figure 1.3 – Profit target of the 3-5 Candle drop
| | * [[Chart_Patterns#The_2_Pattern_Categories | The 2 Pattern Categories]] |
| | * [[Chart_Patterns#Rectangles | Rectangles]] |
| | * [[Chart_Patterns#Flags | Flags]] |
| | * [[Chart_Patterns#Triangles | Triangles]] |
| | * [[Chart_Patterns#Double_Tops | Double Tops]] and [[Chart_Patterns#Double_Bottoms | Double Bottoms]] |
| | * [[Chart_Patterns#Head_and_Shoulders | Head and Shoulders]] |
| | * And so much more... |
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| | You can access the main Wiki for [[Chart Patterns]] [[Chart_Patterns | HERE]]. |
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| '''Trailing Exit Procedures:'''
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| * After 2 candles are complete the stop may be moved from the initial stop loss area.
| | =Related Wikis= |
| * You may choose to start trailing your stop loss under each candlestick once the market or stock has moved at least 75% of the way to the profit target. This is a good idea to help protect your hard earned gains. There is nothing worse than watching a good winning trade turn into a stop out for a loss. Protect your gains, not all trades will make it to the profit target.
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| * Traders can drop one time frame lower and start trailing under each pivot on that lower time frame to lock in gains.
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| * If the trader has been in the position for a few candles and momentum increases in the direction the market is moving, consider dropping one time frame and trailing under each bar until stopped out.
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| * Once you have taken part of the position off for a profit you should never lose money on the trade. Any stop loss adjustment that you make at this point should always be for a profit.
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| * It is always a good idea to take part of your profit at the profit objective. This relieves the emotional need to take a profit and it allows the trader to think clearly. However, you never really know how far a move will go so having some of your position still on can lead to substantial gains in the event you catch a really large move higher.
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| | Readers of '''Technical Trading Strategies''' also viewed: |
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| '''3-5 Candle Drop Notes:'''
| | * [[Pre-Trade Considerations]] |
| | | * [[Forex Market Hours]] |
| * The 3-5 candle drop has better odds of achieving the profit objective if the candles do not overlap each other. Overlapping candles have less predictability than candles that are moving fluidly in a single direction. Overlapping candles lead to congestion areas that typically lead to erratic movements.
| | * [[Speculating]] |
| * The preceding 3-5 candle drop should be controlled and not as steep as the prior advance in order to be buyable setup.
| | * [[Having an Edge in your Trading]] |
| * The 3-5 candle drop can be traded in all time frames.
| | * [[Essential Forex Trading Guide]] |
| * There can be more than 5 candles in the down move but at some point, the trader will need to make a judgement call on whether this is becoming a consolidation or a failed attempt to move higher. The longer the down move takes place the lower the odds of follow through higher on any up move.
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| * It is always more reliable to have any number of power events on in conjunction to increase the accuracy of this setup.
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| =='''The 3-5 Candle Pop'''==
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| The 3-5 candle pop is a strategy that attempts to take advantage of a market in a downtrend and has experienced a 3-5 candlestick rally or retracement. The main objective of a trader is to find a safe spot to get into a declining market. The retracement should be no more than 60% of the prior decline to remain a viable and safe sell setup.
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| '''Criteria of the 3-5 Candle Pop (see Figure 2.1):'''
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| * The stock or market should have 3 or more consecutive higher lows (each of the last 3 candles should have higher lows, we are not talking about pivots here) or 3 or more green candles. Having both higher lows and green candlesticks will make the setup more potent as this shows that the market has blown off a good amount of steam but the fact that it is less than a 60% retracement shows the strength is still on the sell side.
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| * 3 or more consecutive higher highs. Make sure that the up candles are controlled and not aggressive.
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| * A reversal candlestick on or after the third candlestick higher.
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| * There must be a nice tradable price void, free of consolidation areas, for the stock to move down easily through after the short entry has been taken.
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| * There must be some sort of resistance or supply to the left that the market is attempting to move lower from in the form of a congestion area, prior pivot, 40-60% retracement, a declining moving average or any other areas that can be considered a place of interest where overhead supply is present.
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| * The market should be in a downtrend for this strategy to have good accuracy. If not there should be at least one lower high pivot that has held below the prior pivot high. This will at least show that the market is attempting to transition to a possible downtrend.
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| https://i.imgur.com/NsmHJN7.png
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| Figure 2.1 – Criteria of the 3-5 candle pop
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| '''Entry (see Figure 2.2):'''
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| * A short sell is placed when the stock or market trades below the prior candle's low after the 3-5 candle pop.
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| https://i.imgur.com/GJgDjxL.png
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| Figure 2.2 – The entry of the 3-5 candle pop with Stop loss area
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| '''Initial Stop (see Figure 2.2):'''
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| * Place the initial stop above the entry candle's high or the prior candles high, whichever is higher. This is the initial stop that can and will be moved as new market information happens. Traders will constantly need to update stop loss orders to lock in gains.
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| * The high of the newly formed pivot can also be used.
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| * The initial stop must be placed on whatever time frame that the 3-5 candle pop short sell setup was found and traded.
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| '''Profit Target (see Figure 2.3):'''
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| * Establish a minimum target prior to entering the trade at or slightly below the prior pivot low or the next area of support. The objective of the target will depend on the how deep the prior retracement was and how aggressive it moved up.
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| * Take into consideration how strong the pivot was and determine if the market should continue lower.
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| * Traders may want to only take a portion of the trade off the table if it has been determined that the market has a high probability of moving lower than the prior pivot low.
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| https://i.imgur.com/TAQuy8K.png
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| Figure 2.3 – Profit target of the 3-5 Candle pop
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| '''Trailing Exit Procedures:'''
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| * After 2 candles are complete the stop may be moved from the initial stop loss area.
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| * You may choose to start trailing your stop loss above each candlestick once the market or stock has moved down at least 75% of the way to the profit target. This is a good idea to help protect your hard earned gains. There is nothing worse than watching a good winning trade turn into a stop out for a loss. Protect your gains, not all trades will make it to the profit target.
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| * Traders can drop one time frame lower and start trailing above each pivot on that lower time frame to lock in gains.
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| * If the trader has been in the position for a few candles and momentum increases in the direction the market is moving, consider dropping one time frame and trailing above each bar until stopped out.
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| * Once you have taken part of the position off for a profit you should never lose money on the trade. Any stop loss adjustment that you make at this point should always be for a profit.
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| * It is always a good idea to take part of your profit at the profit objective. This relieves the emotional need to take a profit and it allows the trader to think clearly. However, you never really know how far a move will go so having some of your position still on can lead to substantial gains in the event you catch really large move lower.
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| '''3-5 Candle Pop Notes:'''
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| * The 3-5 candle pop has better odds of achieving the profit objective if the candles do not overlap each other. Overlapping candles have less predictability than candles that are moving fluidly in a single direction. Overlapping candles lead to congestion areas that typically lead to erratic movements.
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| * The preceding 3-5 candle pop should be controlled and not as steep as the prior decline in order to be shortable setup.
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| * The 3-5 candle pop can be traded in all time frames.
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| * There can be more than 5 candles in the up move but at some point the trader will need to make a judgement call on whether this is becoming a consolidation or a failed attempt to move lower. The longer the up move takes place the lower the odds of follow through higher on any down move.
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| * It is always more reliable to have any number of power events on in conjunction to increase the accuracy of this setup.
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| =='''The Breakout'''==
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| The breakout attempts to take advantage of any financial instrument that is in a strong stage 2 uptrend. There are two potential areas that traders can enter a long buy position with great reliability.
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| '''The Breakout Criteria (see Figure 3.1):'''
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| * A base or consolidation must be forming somewhere in an ongoing stage 2 uptrend with no major overhead supply or resistance to the left that could slow or halt a new move higher.
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| * A void between this new base or demand point and the next congestion or supply point should exist. A nice price void.
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| * More power will be given to this setup if there is a major or minor moving average that is rising towards the low of this new base. The low of the base could be pushed higher by the minor 10 SMA while above the major 20 SMA. Or it could be 2 major moving averages like the 20 SMA and the 200SMA.
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| * The new consolidation should be above its major moving averages in order to be considered lower risk. If it is extended too far from its major moving average the odds of a failed breakout increase.
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| * Volume should be lower in the base than in the prior rally if you are trading a stock or a market. If volume is higher in the base than it was on the up move it could put that up move into question and the market could be distributing, ready to transition into an ugly stage 4 downtrend.
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| * More power is added if the breakout occurs at or near a reversal time but is not necessary.
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| * Refer to the section in Market Mechanics on Breakouts for more information.
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| https://i.imgur.com/ZpXbs0q.png
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| Figure 3.1 – Criteria of The Breakout.
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| Keep in mind that although the 20 and 200 SMAs are used in this example you could also use any combination of major and major or major and minor moving averages you want. A general rule of thumb is to use shorter moving averages on the lower time frames like the 1/2, 5 and 15 minute times frames while using longer moving averages on the higher time frames. A combination of having higher time frames and lower time frames is always the best.
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| '''The Breakout Initial Entry (see Figure 3.2):'''
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| * The Initial Breakout: The market moves above the resistance created in the base.
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| * Buy slightly above the base. It’s a good sign to see volume pick up soon after entry if you are trading stocks or a market that has volume.
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| * For very aggressive and advanced traders you can place a buy around the area where the moving average starts to push the market higher. A bottoming tail at this moving average is a very bullish signal that the breakout will occur Keep in mind that this is a pre-emptive entry and can result in a larger amount of stop losses being take but when the market is in an aggressive uptrend this will often work and may produce higher profits.
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| https://i.imgur.com/C3r3fF2.png
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| Figure 3.2 – The first breakout takes place when price breaks the high of the newly created base. The initial stop is placed below the low of that base.
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| '''Initial Stop on the First Breakout (see Figure 3.2):'''
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| * The initial stop loss will be placed below the low of the base.
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| * Do not place it at the exact low. Give it a bit of room to wiggle. Many times the market will come down and test the low of the base again before it continues higher. You don’t want to be stopped out in a good move because you were trying to save a penny or two. Placing stops is a bit of an art that will become easier with real trading experience.
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| * Always attempt to place a stop in a spot that the market should not go to if you are correct in your assessment of the market.
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| '''Initial Profit Target for the First Breakout:'''
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| * The profit target is a bit more difficult to define than the stop loss is. There are more variables involved. Some breakouts take off and never look back, some come back to the base and some fail. It would be impossible to figure out which breakout will do exactly what which is why we need to be reasonable and objective about where the profit target should be and how we will take profits.
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| * It is always a good idea to have 2 profit targets or have one profit target and a method of trailing. We have found that it is a very professional way to trade by taking a reasonable profit on the first half of your position and defining a trailing method for the other half in case the market continues to move in your favour.
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| * Traders can take the length of the base and project it upward to get the initial potential profit target.
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| * Any area of resistance or supply that may be strong enough to halt the breakout.
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| * Remember that profit targets are areas and not exact numbers so don't be too rigid in your profit target.
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| '''The Second Breakout Entry (see Figure 3.3):'''
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| * In the second breakout the market moves above the high made on the initial breakout. Buying at this point is not the safest place to buy but it does confirm the strength of the breakout and is a confirmation that the market is likely going to continue higher.
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| * The best place to buy on the second breakout is buying above the high of the first reversal candle as shown in figure 3.3. The stop loss will be placed below the low of the reversal candle.
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| * The initial profit target of the second breakout will be the high created after the first breakout.
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| * If you placed a buy trade at the initial breakout point and you did not take our any profits you might consider selling part of your position at the first retracement high to lock in profits.
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| https://i.imgur.com/Ux3x42T.png
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| Figure 3.3 – Shows the full breakout including the second breakout and second breakout stop loss.
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| '''Trailing Exit Procedures:'''
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| * After 2 candles are complete you may move the stop. Traders should give the market a bit of time to prove it will move higher and confirm the breakout. Don't expect the breakout to always start moving instantly as soon as you enter the trade. Sometimes the market will take its time.
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| * You may choose to start trailing your stop loss under each candlestick once the market or stock has moved at least 75% of the way to the profit target. This is a good idea to help protect your hard earned gains. There is nothing worse than watching a good winning trade turn into a stop out for a loss. Protect your gains, not all trades will make it to the profit target.
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| * Once you have taken part of the position off for a profit you should never lose money on the trade. Any stop loss adjustment that you make at this point should always be for a profit.
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| * It is always a good idea to take part of your profit at the profit objective. This relieves the emotional need to take a profit and it allows the trader to think clearly. However, you never really know how far a move will go so having some of your position still on can lead to substantial gains in the event you catch really large move higher.
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| '''Notes:'''
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| * A rising 20 SMA can be an explosive catalyst to start the first breakout of the base. At the price point of contact with the rising 20 SMA the stock should breakout higher. If it does not then beware of this breakout as it could be the first warning sign that the trend is over or your analysis is not correct.
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| * If the prior rally took the market far away from its major moving averages it may be a warning sign that the market is running out of momentum to continue higher. If the market has a failed breakout or simply breaks down there could be a viable shorting opportunity (refer to failed patterns section).
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| * Generally, wide moves away from the major moving averages can lead to a snap back to the major moving average. When the move back is sideways, meaning the moving average had enough time to catch up to price, and the major moving average goes flat instead of pushing the stock higher; a trend reversal may be near. Be alert to potential changes | |
| * The best time to take breakouts on stocks if the advance decline line is above 2000, and advance decline volume line is rising at a 45 degree angle. TICK should be bullish and TRIN should be bullish.
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| ='''Intermediate Technical Trading Strategies'''=
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| =='''The Trend Trade'''==
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| This strategy works best when combined with [[Fundamental and Sentiment Trading Strategies]].
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| The trend trade attempts to capture a trade in the direction of the overall market trend. This is a trade that should be in line with the current sentiment driving the particular currency and tends to be a day trade because it uses pivots and pivots change every trading day.
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| Trade Setup: | |
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| * In an uptrend wait for the market to pull back.
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| * Apply the [[Technical_Analysis#Fibonacci | Fibonacci]] retracement tool from the extreme low to the extreme high.
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| * Apply trader pivot points. | |
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| What we are looking for is a confluence of one of the [[Technical_Analysis#Fibonacci | Fibonacci]] retracement levels to match with one of the pivot points in the buying zone.
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| There should be less than 10 pips between the Fib level and the pivot point. The fewer amounts of pips between the 2 levels the better the setup.
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| The pros are that you can use a small stop loss and have good pinpoint accuracy with the entry. The cons are that price may not pullback for you to get a trigger. Sometimes a confluence will be hard to find.
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| The same trade management would apply to this trade as pretty much all other trades. We would look to target just before the prior extreme high and place the stop in an area that the market should not hit if you are correct in your analysis.
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| The trade works in the exact same manner in reverse for a short trade.
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| =='''The Profile Trade'''==
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| This strategy works best when combined with [[Fundamental and Sentiment Trading Strategies]].
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| The profile trade strategy involves buying or shorting the break of the most recent [[Technical_Analysis#Fractals | fractal]]. We talked earlier about how you can take advantage of the market profile changing as a way to get you back into the fundamental trend after it has had a period of price action going against the overall big picture.
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| Trade Setup:
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| * Identify the most recent [[Technical_Analysis#Fractals | fractal]] swing high and wait for the price to break that high by one pip then enter a long position. This applies to fundamentally strong pairs. | |
| * Identify the most recent [[Technical_Analysis#Fractals | fractal]] swing low and wait for price to break that low by one pip then go short if the fundamentals are pointing down. | |
| * The stop loss placement goes on the other side of the opposite most recent [[Technical_Analysis#Fractals | fractal]] swing.
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| One of the best way to use this strategy is with the overnight trades. For example, if there was a strong news release and the London traders moved a currency up through the London session then look to get in on a break of a [[Technical_Analysis#Fractals | fractal]] swing high during the US session. The break of the high during the US session gives us confirmation that the US traders are going to buy the pair up as well.
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| This strategy is best on a 5 minute chart for intra-day trading but can be on any time frame.
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| The 4 hour time frame is a nice time frame to get an idea of how price is behaving in relation to the big picture. Sometimes a break of the 4 hour [[Technical_Analysis#Fractals | fractal]] back in the direction of the fundamentals can signal to us that the market is done moving price in the opposite direction and ready to start trading the pair back in line with the big picture.
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| =='''5 Minute Candlestick Trade'''==
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| Another strategy that you can use is one that has a high probability of success and is also extremely simple. The caveat is that it can only be used when there is an extreme deviation or surprise that the markets absolutely did not see coming.
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| The easiest way to see whether or not this has occurred is to research each risk event and find out what the market is expecting so that if the opposite happens you know that it will cause a large sustained reaction. The key word here is sustained because lots of minor deviations cause reactions but these are typically quickly retraced and within a few hours things are all back to normal and it’s as if nothing happened at all with the exception of a spike on the charts. Lots of new and retail traders get sucked into those moves and end up buying at the top or selling at the bottom only to watch the market move against them dramatically.
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| An example of a time that we can apply this trade is when a central bank announces a rate adjustment when the market was expecting no change. In these circumstances it’s hard to see a trade ever losing but these instances are also rare.
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| Another example is if something really unexpected happens completely out of the blue. For example, if a central bank member was giving a speech and then said something totally unexpected and out of character this would also get the market moving in a sustained manner.
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| This trade setup should not be used on small data points that have a deviation from the expected figure because it is better to trade those on pullbacks.
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| We also need the sentiment at the time in the right order to get any kind of tradeable move such as positive sentiment that is suddenly and instantly changed to negative from whatever the news was. As long as the event was extremely unexpected and has a direct impact on the markets expectations for the central bank’s monetary policy then you are probably good to consider this type of trade setup.
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| The method for taking advantage of this is rather simple. You make sure that you enter the market right before or at the close of the first 5 minute [[Technical_Analysis#Japanese_Candlesticks | candle]] after this surprise event has taken place. Stops can be placed either the halfway point of the [[Technical_Analysis#Japanese_Candlesticks | candle]] or just above or below the 5 minute [[Technical_Analysis#Japanese_Candlesticks | candle]] away from your entry. This will be something that you perfect over time with practice with this type of trade.
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| Targets should be based on normal things such as old highs or lows and [[Technical_Analysis#Average_Daily_Range | average daily range]] of the pair. You can also hold for longer if there is a solid fundamental reason supporting the move and the market has a clear expectation of where the price of the pair could get to in the long run.
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| The main point is that you should be getting in within 5 minutes of the initial event to ensure that you make some pips from it. This requires you watching and listening to the news feeds intensely but when you get a few trades like this each month it will be worth it.
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| ='''Advanced Technical Trading Strategies'''=
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| Content in progress...
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