Trading strategy based on candlestick patterns
Marketplace: Forex;
Currency pairs: EUR/USD ;
Timeframe: Daily ;
Indicators : candlestick patterns;
Strategy: medium-term;
Protective orders: Breakeven, TakeProfit.
Strategy trading signals
1. Signal to open a buy deal - formation of a bullish candlestick pattern (but not against the downtrend). The signal to close a buy trade is the formation of a bearish reversal pattern.
2. Signal to open a deal on sale - formation of a bearish candlestick pattern (but not against the uptrend). The signal to close a sell trade is the formation of a bullish reversal pattern.
3. If a bullish reversal pattern is formed, but the level at the top prevents it, we do not open a buy trade until it is broken. Similarly, if a bearish reversal pattern is formed, but the support level at the bottom prevents it, we do not open a buy trade until it is broken. we're not open for sale.
4. Against the downtrend, you can open a buy trade only on the following bullish patterns - cloud gap, tower base, three inverted Buddhas.
5. Against the uptrend, you can open a sell trade only on the following bearish patterns - dark cloud veil, evening star, top of the tower, three Buddhas.
6. When opening a deal to buy stop loss order is set 10 pips below the bullish pattern.
7. When opening a sell trade, the stop loss order is set 10 pips above the bearish pattern.
8. If a buy trade is opened and a bearish reversal pattern appears on the chart, but the downward price movement may well be hindered by a bearish reversal pattern located directly below it. level of support (or support line), then do not hurry to close the deal. It would be reasonable to move the stop loss higher (under this level or support line). And vice versa, if a sell trade is opened and a bullish reversal pattern has appeared on the chart, but the price movement upward may well be hindered by the resistance level (or resistance line) located right above it, then, again, do not rush to close the trade. We should simply move the stop loss lower (set it above this level or resistance line).
Example of how the strategy works
Jan. 15 modeled after «вершина башня» a sale was made (down arrow on the chart). Stop-loss order is set above this pattern (cross on the chart).
On February 2, after the formation of модели «бычья харами» with confirmation the deal was closed with a profit of 400 pips - a tick on the chart. It is not necessary to buy, as the trend is downward. For the same reason it is necessary to refuse to buy on March 2 when the hammer appears.
On March 18, it appeared «падающая звезда» with confirmation - selling, which we close by the morning star on March 26 with a profit of 200 pips. We should not buy here - the trend is still downtrending.
On May 4, a continuation pattern was formed «три метода» - sale is opened. Stop loss is set 10 pips above the high price of the penultimate candle of the pattern.
This was followed by «чёрные вороны» - additional sales.
On May 19, a model was formed «бычье поглощение»It was followed by a high wave candlestick, which was followed by another candlestick with a white body. Ideally, all sales should be closed here, but above is the resistance level of 1.2625, which the price upward may not break through. Therefore, we should refrain from closing trades for the time being.
As expected, the price bounced downward from the resistance level. On June 10, a bullish reversal pattern was formed. «бычье поглощение» with confirmation. After breaking the resistance level of 1.2150 from the bottom up, it will be reasonable to close the sale. The profit amounted to 1800 points. Buying should not be done, as there is still downtrend.
On June 22, a model was formed «медвежье поглощение» with confirmation. A sell trade was opened. However, after a small decline, the price went sharply upward and a stop-loss order was triggered with a loss of 200 pips. At the same time, the conditions of the uptrend were formed and the support line was drawn.
On July 13, a continuation model appeared «удержание на татами» - purchase.
On July 22, a model was formed «просвет в облаках». At the same time the price bounced from the trend acceleration line upwards. We make an additional purchase.
On August 6, another model appeared «удержание на татами» - again additional purchase. Stop loss is set 10 pips below the low price of the penultimate candle of the model. Stop orders on previous purchases are also moved here.
The candlestick from August 10 has a black body and a long lower shadow, which led to the triggering of stop orders on previously opened buy trades with a total result of +450 pips.
On August 17, with a bounce from the support line, the model appeared «бычья харами» with confirmation - buy. But the deal was unsuccessful, the price fell and a stop-loss order was triggered with a loss of 150 pips.
On August 26, a model was formed «бычье поглощение» with confirmation is a repeat purchase.
On September 14, a bullish pattern was formed «три перевёрнутых Будды» - additional purchase after the price breaks the horizontal line of the model from below upwards.
Sept. 27 modeled after the last one «медвежье поглощение» we close all purchases with a total profit of 1200 pips.
«Медвежье поглощение» of October 11 has not been confirmed.
On October 15, it was formed «медвежья харами» with doubtful confirmation by a candlestick with a long lower shadow. It should not be sold, because the trend is upward.
«Бычье поглощение» from October 20 was not confirmed by the next white candle.
On October 28, another bullish takeover appeared, but it is risky to buy, as the confirming candle - «hangman«.
On Nov. 4, a model appeared «три белых солдата», но покупать по ней не следует, так как «второй солдат» не самый длинный.
On November 8, the pattern formed again «медвежье поглощение»this time with confirmation. But you can't sell against the uptrend. For the same reason we refrain from selling on the model «три чёрных вороны» от 9 ноября. К тому же эта модель в данном случае является разворотной, а не моделью продолжения. «Три чёрных вороны» как модель разворота статистически даёт плохие результаты при продажах по ней.
On November 18, a model was formed «утренняя звезда» - purchase. On November 22nd, a model «медвежье поглощение». Considering that it happened at the resistance level of 1.3735, the buy trade should be closed (loss of 20 pips) without waiting for the confirmation of the pattern. It should not be sold, as the trend remains upward.
30 ноября после пробоя линии поддержки восходящего тренда опять появилась модель «три чёрных вороны» – продажа. Однако по модели бычье поглощение с подтверждением от 2 декабря сделку приходится закрыть с убытком в 240 пунктов. Покупать здесь не следует, так как сложились условия нисходящего тренда, проведена линия сопротивления.
On December 7, a model was formed «медвежья харами» with confirmation, but it is doubtful to sell, as the price is located on the broken resistance line, which can now work as support.