Let's take a look at the two AUD/USD charts below. If the trend is in the same direction as the major trend and the 4-hourly chart trend, we can open a position with " buy the dip or sell the rally" method, where we buy when the price pulls back or sell when it bounces. Observe the trend direction on the hourly chart.Confirm the major trend by using the 4-hourly chart.The trend on the daily chart is the major trend. Identify the trend direction on the daily chart by observing the price movement in regard to the 200 EMA.This strategy uses a daily chart, a 4-hourly chart to determine the trend direction, and an hourly chart to open a trade. Identifying trends with 200 EMA is very simple: when the price is below the 200 EMA, it can be assumed that the direction of price movement is in a downtrend, and when the price is above the 200 EMA, it can be said that uptrend is in place. The 200 EMA is a popular indicator in forex trading. From the chart above, A is more accurate than B, and B is more accurate than C. Moreover, the further the retracement is from the EMA crossover, the less accurate the signal is. Also, if the trend is too strong, the retracement may not touch the EMAs, and traders will miss out on the perfect entry level even though the price has moved towards the trend direction. However, this strategy may give false signals in a sideways market where the trend is weak. In addition, trading in a higher time frame will generate better accuracy. The probability of success is quite high provided that traders enter at the right time, which is at the first retracement after the EMA crossover. The advantage of this strategy is that it is easy to implement. The exit level can be determined through various ways, such as by moving the stop loss to break even, using a trailing stop, setting the risk/reward ratio at 1:2 or 1:3, using Fibonacci retracement or expansion levels, or by identifying the closest support and resistance level. Place the stop loss 1-5 pips below the low of the previous retracement.Observe for candlestick reversal pattern, and long the currency when pullback occurs and the price breaks the previous bar's high.Wait for a retracement where the price moves down and touches the 9 EMA or both the EMAs.Wait until the 9 EMA crosses the 18 EMA to the upside, which signals an uptrend. ![]() The chart below is an example of a buy setup in an uptrend.
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