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fx trader, forex, Moving, Average, Indicator, Bounces, Strategy, GBPCHF, Daily Trade,
Chart 3. GBPCHF Daily trade set-ups with descriptions

 

GBPCHF -Daily timeframe. The first occasion when it tested the 20ema represented the confirmation of this moving average as a dynamic level of resistance. The following two bearish pin bars which rejected the 20ema after the pullback represented two separate sell opportunities.

Uptrend chart

In contrast, in an uptrend, we require a price action-based set-up like a bullish pin bar reversal or doji bar. In this case, traders will typically place their entry to buy above the high of the bar (plus spread + 1 extra pip) with their protective stop below the low (minus spread - 1 extra pip), in anticipation of the break of the activator bar’s high.

 

fx trader, forex, Moving, Average, Indicator, Bounces, Strategy USDNOK, uptrend
Chart 4. USDNOK uptrend with trade setups

USDNOK -Daily timeframe. The first occasion when it tested the 20ema represented the confirmation of this moving average as a dynamic level of support. The following bullish pin bar which rejected the 20ema after the pullback represented the buy opportunity.

Conclusion

This trend-based strategy gives us a clear and objective “tick-box” approach to trading continuations. Its rule-based approach makes it easy to follow for both newcomers to the market and seasoned traders alike. Even though the reward potential is typically lower, this is offset by a higher probability of success. While it is not suitable for range-bound markets, the logic and versatility which underpins this way of trading can be applied to any asset class and it is not simply confined to the foreign exchange market.

Rob Colville
Trainer and Founder of
The Lazy Trader

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