This trading strategy is also commonly referred to as the Stochastic Candles Trading. It was developed by in the year 2015. The whole trading system is a trend and momentum following strategy. It is one of the most powerful methods that are used in trading forex. Its efficiency ranges from 90-95%.
The system is designed by incorporating several indicators to identify the major trend and tell the trader when the best time for entry and exit is. This trading strategy also uses support and resistance indicators, which are mainly employed when it gets to placing stop loss and targets (take profit levels).
The trading system is developed for use with timeframes of H1 and higher timeframes. But when it come to the currency pairs to trade, you can use it to trade any currency pair.
This trading system uses quite a number of indicators as discussed below.
- Stoch Candles
This indicator is based on the stochastic indicator. It generates either blue or red candles. The blue candles shows an uptrend while the red candles shows a down trend.
- Trend Filter2
This indicator is based on the Based on Moving Averages. It generates either blue or red bars. The blue bars shows it is a good time to buy while the red bars shows it is a good time to sell.
This indicator also shows trend reversals. It gives alerts of reversals by displaying divergence.
- Signals
This shows the trend direction as well as the strength of the trend. It gives its signals in terms of dots. When it generates blue dots, it shows that there is a powerful upward trend. But when it generates red dots, it shows that there is a powerful down trend.
- Support And Resistance Indicators
The support levels are displayed as blue dotted lines while the resistances are displayed as red dotted lines.
- Trend Channel indicator
This is mainly for visually identifying the trend by providing visual confirmation for all the other indicators that are used in identifying major trend.
This is actually done by showing the overbought and the oversold regions.
When the lines are red, it shows that there is a possibility of the currency pair being overbought and a likelihood of a price reversal. On the other hand, when the line is yellow, it shows the currency pair is oversold, and hence a likelihood of a price reversal.
- Wave Arrows
This tells the trader when to exit the trades in case the conditions change before any of the stops is hit. It based on the Fractals indicator.
It provides is signals in the form of red and blue arrows. Red arrows says it’s time to close your buy orders while the blue arrows says it is time to close your sell orders.
Fig.1. The Swing pips trading strategy (the backgroung color is changed from black to white).
Trading rules for the Swing pips trading strategy
When to open a buy position/place buy order:
- The stoch candles should be blue in color.
- The trend filter bars should also be blue.
- The trend channel/polynomial regression lines should be showing an uptrend.
- The dots generated by the ADX MA indicator should be blue in color.
When to open a sell position/pace a sell order:
- The candles being formed should be red.
- The trend filter bars should be red also.
- The trend channel lines should indicate a down trend.
- The dots generated by the DAX MA indicator should be red in color.
Fig.2. Placing orders using the Swing pips trading strategy.
For every trade or order that is opened/placed, you should ensure that you have place a stop loss and a take profit for it. The support and resistance levels are used for this purpose. If it is a buy, place your stop loss at the nearest resistance and your take profit at the nearest support. The vice versa applies to the sell order/positons.
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