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7-Forex Trading Strategies

Strategies for trading the Forex are compared here. Whether it’s a simple candlestick formation or a complex formation that forms over many periods, you need a plan. It is best to keep it simple.

A penant is a formof consolidation. We do not trade penants, we wait for a breakout.
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A trading channel occurs when the market is trending but seems to stay within a channel.

Trading Channel

Trading Channel

The lines of support and resistance are not horizontal, but this is still consolidation. We trade from support to resistance. The channel can also be very steep.
trading channel

trading channel

It is important to draw the trading channels on your charts and keep an eye on them. They will show you when to expect a trend reversal. Also, pay attention to when the candles break out of the trading channel.

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70% of the time the market is in consolidation, only 30% of the time is it trending. A trending market is making higher highs and higher lows (uptrend) or lower highs and lower lows (downtrend).

When we are in consolidation we draw lines of support and resistance. If the distance between support and resistance is 60 pips or less, we have small consolidation.

We cannot trade small consolidation. We must wait for a breakout.

Waiting for a breakout of small consolidation

Waiting for a breakout of small consolidation

If the candles break out north (above the resistance line), wait for the first bullish decision candle, 75% body (25% wick) and enter after that candle is formed. Place your stop 10 pips below the support line or below the last low.
the candles break out south (below the support line), wait for the first bearish decision candle, 75% body (25% wick) and enter after that candle is formed. Place your stop 15 pips above the resistance line or above the last high.

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Trendline break from the sell zone into the buy zone

Trendline break from the sell zone into the buy zone

When the trendline is broken, wait for the first decision candle AFTER the candle that breaks the trendline.

Make sure this decision candle is large (not small) and the body of the candle is at least 75% of the candle (25% wick). The wick may touch the trendline, but the body of the candle cannot. Then enter at the close of this decision candle.

Place your stop 15 pips above the high (going short) or 10 pips below the low (going long).

Place your limits based on the fibs or support/resistance.

Never forget equity management! Do not risk more than 50 pips in a trade.

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Buy an Sell Zones

Buy an Sell Zones

You start by identifying the trendline.

If the candles are above the trendline, you are in a buy zone. If the candles are below the trendline you are in the sell zone.

While you are in the buy zone, you will want to enter long (bullish) when you see a low formed and a good bullish candlestick formation (morning star, engulfing bullish, tweezer bottom, piercing line).

 While you are in the sell zone, you will want to enter short (bearish) when you see a high formed and a good bearish candlestick formation (evening star, engulfing bearish, tweezer top, dark cloud).

Place your stop 15 pips above the high (going short) or 10 pips below the low (going long). Place your limit based on the fibs or support/resistance.
 
I am really grateful to have mentors who have gone over this with me many times. Each time they do, the concept becomes more and more clear in my mind. My mentors are Market Traders, http://www.markettraders.com/landings/forexIQ/forexIQ.aspx?id=THEFOREXMOM(Blog), and they have been so great!

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