Strategy Forex candlestick patterns
Strategy Forex candlestick patterns is designed to trade on Japanese candlestick on time intervals of 30 or 60-minute in the direction of the prevailing trend and allows traders to define forex their risk levels and to take profits, taking advantage of the specific structure of the pricing model, forex.
There are a large number of candle models, which include one to six candlesticks, trading signals and feed on the emerging bull or bear the developments on the forex market. These price patterns appear on the market very often, and they are easy to identify and define .
Figure 1 shows the 4 basic and well-traded " candlestick patterns ", which were formed on the 30-minute chart currency pair EURUSD.
Figure 1. 2 trading signals for the opening of trading positions for the purchase and 2 trading signals for the opening of trading positions for sale.
Regardless of your chosen time range, and the selected model candle , all the candlestick patterns the same principles of risk management . Before you open a long trading position, place a protective safety stop-loss order 10 pips below the current model and a candle order to lock the desired profit 10 pips below the high of the previous candlestick, which has a maximum above the 2 previous and 2 subsequent candles .
This rule applies to work with short trading positions. Protective safety stop-loss order is for 15 pips above the high of the candle model, and therefore warrant the profit at 10 pips above the low of the previous candlestick, in which at least below the minimum of 2 previous and 2 subsequent candles.
This forex strategy deals with risk measurement and management of available capital when working with candlestick patterns on the example of 2 well-known pricing models: the morning star in a bull market and bear the "peak tweezers" - tweezer top .
bullish morning star.
"Morning Star" - the pattern of the bull market , which often appears on the chart at the end of downtrend . "Morning Star" in the ideal consists of 3 candlesticks (Figure 2). The first of them - this is a long bearish candle . The second candle - small, similar to the top : may be black or white, which forms a "window" under the previous candlestick body. third candle - a long bullish candlestick, closing it to the top of the range of the previous bearish candle . 1st long bearish candle indicates the strength of a turn down. 2-I also pointed to the fact that the strength of bears temporarily exhausted. And finally, a long white candlestick shows that the strength of the bulls is back and provides control over the market. Usually, this pattern will most likely indicates turn on heralds markets and rally .
Figure 2. "Morning Star" - the purchase must be carried out at the opening of the next candlestick. Closure of the same bull candle should be at the top of the bearish candle - to Ryan from 0 to 40% from the top.
rules for open transactions.
When the candle on the market this pattern:
1. Trade position to buy should be opened at the opening of the candle, which follows a long white candle. Note: sometimes the candle model "morning star" contains much more than three candlesticks. In this case, between the 1st and last longer bear the long bull Japanese candles occurs more than 1 h (some) short of candles.
2. Safety stop-loss is located at 10 pips below the low of the pattern is formed.
3. Determine the maximum of three, preceded or followed by two much lower highs and place an order on profit-taking under the maximum, which provides up to 1.5-2 times higher than the trade risk.
In trend, sent down - this pattern is called the "evening star". for this pricing model used all trading rules contrary to the rules "morning star". Trading position on the sale opens at the end of the pricing pattern, protective safety stop-loss order is 15 pips above the high pattern of "Evening Star", hence the warrant of profit-taking at 10 pips above the previous low (which is needed to determine exactly the same way as described in Section 3).
In Figure 3 you can see an example of a pattern "morning star". You should always wait until the last candle closes this pattern , if you do not, then you risk a deal on the market prematurely. Safety stop-loss is 10 pips below the pattern, because experience shows that once at such a time-frame, the price deviates by more than 10 pips up or down the bulls or the bears can gain back his strength and make a difference in the forex market. A warrant for the closure of profit is 10 pips below the last maximum (or minimum over the last), because the bulls are trying to move the market price of the last maximum. Once the new maximum will be tested with high probability we can expect a retracement in the market.
Figure 3. "Morning Star" - the purchase is made at the opening of a new candle. Protective safety stop-loss is 33 pips below the opening of trading positions. Old high 1.233, exit at 10 pips below the previous high of 1,232 with a profit of 55 pips.
pattern "Top tweezers"
"Top forceps" - the pattern of a bear market , which often appears at the end of the trend, signaling a possible with the pullback in the market or trend reversal. Its fairly easy to identify on the chart. Model of itself resembles a pair of tweezers - two candlesticks with very small bodies and with long shadows over them (Figure 4). Between the two forceps should not be any other candles. Rules open trading positions on the same pattern as the pattern for the "evening star".
Figure 4. On the left you can see the ideal model. On the right - much more realistic model. Shadow of candles - At least 60%, and the body of the candle - a minimum of 40%.
1. Trading position to sell opens at the closing of this pattern .
2. Protective safety stop-loss is 15 points above the high graphical model.
3. On the chart are three recent low, which is preceded by two much higher wage and followed by two more high-wage, after which a warrant for profit-taking is at 10 pips above the minimum candlestick, which gives a minimum return 1.5-2 times higher than acceptable risk.
"Dona forceps" - is the opposite pattern "spikes tweezers" (see the first model in Figure 1). Accordingly, for trading on the model of candlesticks rule is reversed. In Figure 5 you can see the "tip of forceps" in the currency pair USDJPY. In this case, the pattern of candles consists only of two candlesticks, the reversal came on the market soon after its formation.
Figure 5. Pattern of "Top of forceps".
Money Management for trading on a graphic candlestick patterns.
Even with the best forex trading strategy, any trader will still be ruined, if not always to use its capital management strategy and will not know the basic conditions for successful forex trading .
A large number of successful FOREX traders to make the right trading decisions in only 50-60% of the cases of 100%. Given this chance winning the conclusion of the transaction, it is important that at every dollar that you're going to take risks, have been at least $ 1.5-2 profit potential. The only question is, how much of your capital, you can use when opening a trade position forex?
Very often the rules of risk management to risk not recommend more than 4-5% of your trading deposit at the conclusion of any transaction. A professional traders and money managers typically use some degree of risk 0.25-2% of the equity for each transaction.
For example, if your deposit is 10.000 USD, and the risk you have chosen 2% of capital per sledku, you must use a safety stop-loss should not exceed 200 USD with the desired take-profit open warrant for each of at least 400 dollars (that is, profits should privyshat at least 2 times your risk.) Most of USD 200 mean 20-point stop-loss (at a price point - $ 10 - a deal for a lot). Correspondingly, if you want to afford to stop loss of 100 points, the price of 1 point respectively to be in 5 times smaller - that is, 2 $ , and this is a lot size corresponds to the transaction - 0.2 lots. If you always adjust the size of each bargain - you will have confidence that tomorrow you will have something to trade forex.
Candlestick patterns + Capital Management.
Trading Forex strategy we are considering will allow you to expose well-costed stop-loss and Teyk-profits on profit-taking with the appearance of these candlestick patterns.