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  1. #1
    Junior Member

    Candlestick Pullback Strategy - 1/2/3...5 Minute Timeframe !!!

    Hi Traders

    Quick backstory.... I have traded Forex for 10 years and now Binary Options for last 24 months. I now make profits consistently but it has been a long journey to finding what works.

    I want to share my trading experiences with newbies, and hopefully, this may assist in reducing the learning curve time frame.

    Outlined below is a simple and effective trading strategy for short term expiry options. I trade only EUR/USD 1 minute chart but this will work for all markets and on all time frames.

    Candlestick Pullback Strategy

    Keep things simple, don’t make things complicated. So for me, the market does two things – on all time frames by the way – it either moves sideways (consolidates) or it moves in one direction (up or down) with momentum (trending).

    Here is an example of the EUR/USD chart showing periods of consolidation (sideways movement) and also trending (moving in one direction):



    The most obvious thing for me to do was wait for the market to start moving in a strong trend, wait for a pull back and then take a trade in the direction of the underlying trend. This a FAR easier for beginners to do than attempt to trade against the direction of the market.

    So how the heck can you work out when the market is in a strong move vs consolidating? Finding a way that could distinguish this was my first task. Here is a very simple way to do so:

    Use any charting package.
    Open a chart of any trading instrument, using any frame and add 3 exponential moving averages to this chart:

    5 period EMA (white line)
    8 period EMA (purple – double thickness)
    15 period EMA (sky blue – double thickness)

    These moving averages can be any colour you choose. I’ll use the colours specified above in my later explanations of how to use these lines to determine market momentum.

    You should see something like this:



    Let’s now examine how we can use this very simple template to identify when the market is in a consolidation or trending phase.

    When the three lines have no clear gap between them and are bunched together, the market is in a consolidation phase. Simple.

    When the three lines are wide apart the market is trending and a strong move is occurring. Simple.

    Ever heard the saying “the trend is your friend?” Well, it’s true – we set ourselves up for success by taking trades IN THE DIRECTION OF THE TREND. Trading this way gives us the greatest probability that price will close in our direction and we will end ITM.

  2. Thanks davis7 thanked this post
  3. #2
    Junior Member
    Ok, so we know that we should only trade in the direction of the trend.

    In order to establish if the market is trending, we wait for the three lines to open wide. That is simple enough. But what does “trading the pullback” mean?

    It looks like this…



    Price takes a break and moves back up briefly. Now let me show the best way to make a trade during a pullback…



    Chris Lori (pictured above), a very successful trader, taught me this when trading Forex. It applies in exactly the same way to trading Binary Options.

    Here is a magnified image of the same Pullback situation pictured above:



    Wait for price to move back up and TOUCH the purple line. It must touch the line. Provided the 3 lines are still WIDE APART while this touch is happening, you now have a VALID entry signal.

    Here is what Chris taught me…At the point where price meets the purple line, it was a GREEN candle because, at that stage, price was above the open of that candle. You want to make your PUT entry precisely when you have a fat green candle staring you in the face! Why? Simply because when you trade is filled, you want to be as close to that price point as possible, to give yourself a distinct advantage. There is a likely possibility that, due to the strong short trend (in this case), price will fall back down before the option expires, even if it still goes higher first. This approach sets you up for success.

    Most newbie traders would be too nervous to place an entry when price appears to be moving against them, but it is something to teach yourself to do. The natural approach would be to wait until price is already falling before making your PUT trade, but the problem with this is market very often pulls back after that initial drop and your trade expires OTM.

    For newbie traders looking to learn how to develop your own trading strategy, the suggestions above should get you going. If you can be patient, and wait for the best set-ups (when market is in a nice strong trend), you can achieve a 60%+ win ratio from this simple approach.

    Watch out for this:



    The white line acts as an early warning mechanism, that the trend is ending, when it turns back towards the purple line. When this happens, just sit on your hands and wait for the next trend to develop properly.

    I have not covered all aspects of what may happen. Divergence is a KEY issue to consider too.

    Newbies - my advice to you is get stuck into this template on a 1 minute chart and watch the dance of price, and how the 3 moving averages react. You will soon get comfortable in identifying the phases of consolidation and trend. From there you will quickly spot opportunities to place trades, based on price moving back to touch the purple line while in a strong trend.

    Good luck!

    If I can assist just ask.

    Thanks
    Shaun

  4. Thanks victrader, Floalma, davis7 thanked this post
  5. #3
    Active Member ehenderichs's Avatar
    Thanks for this explaination. Just a one questions though.

    In the last image you present a situation we should be carefull off. How I understood your strategy the warning is one candle late.
    I would have take a call trade as soon as previous candle touched the purple line. Am I missing something?

  6. #4
    Legendry Member willyw's Avatar
    @ShaunR, can you show us on our CT platform so other memebers can follow your strategy

  7. #5
    Master Member Bogdan G's Avatar
    Thanks Shaun, simple and clean.
    Insanity: doing the same thing over and over again and expecting different results. Albert Einstein (attributed)

  8. #6
    Active Member ehenderichs's Avatar
    Can you also explain the 15 EMA?

  9. #7
    Specialist Member Million Dollar Baby's Avatar
    Interesting strategy and logically explained. Clear entry/exit rules.

    I have never been in favor of short term trades (60 sec or so) but I think it is worth trying. It will take some time to get used to candle behavior but lets see how it goes.

  10. #8
    poe
    poe is offline
    Specialist Member poe's Avatar
    Did anyone backtest this and be ok with showing the results ?
    "He who makes a BEAST of himself, gets rid the pain of being a MAN" S.J

  11. #9
    Veteran Member Ronnel's Avatar
    Quote Originally Posted by poe View Post
    Did anyone backtest this and be ok with showing the results ?
    Yup this system works and for all time frames. Part of my training before was something very similar. I never backtested it so I can't comment on backtesting (I hate backtesting..) and just used it for live trading and it does work and I'm still using the same concept now but only naked... I used it for long trades, used it for medium and for normal scalping and even for very quick scalping that can last for only seconds. In my own opinion, this trading concept is much easier to use for longer trades but if one has the skills and he is fast then M1 is no problem.
    Duct Tape can't fix OTM

  12. #10
    poe
    poe is offline
    Specialist Member poe's Avatar
    Quote Originally Posted by Ronnel View Post
    Yup this system works and for all time frames. Part of my training before was something very similar. I never backtested it so I can't comment on backtesting (I hate backtesting..) and just used it for live trading and it does work and I'm still using the same concept now but only naked... I used it for long trades, used it for medium and for normal scalping and even for very quick scalping that can last for only seconds. In my own opinion, this trading concept is much easier to use for longer trades but if one has the skills and he is fast then M1 is no problem.
    Im still sceptical about this... MA work in mysterious ways when live :P , I wanna see a live example of this, not 1 but hundreds thing is as he said if im just gonna take the trade after I identify a small pullback on a trend the white line won't show that in real time ( u might see the line changing but u can't predict if its a false breakout or not), so many people will be taking the trade right after the candle touch touch the middle MA cuz they think the trend's strong so what if the white line does collapse ?.. Its very easy to represent that on a previous history, harder to do it live... thats my humble opinion.. anyways worth the try...

    If u or someone could show actual trades with before and afters that would be awesome...

    pd: I also hate backtesting btw... nothing like real trading.
    Last edited by poe; 02-10-2017 at 12:46 AM. Reason: one more thing: Do u really think 60 sec are safe ? Wouldn't be better go for 3-5 min ?
    "He who makes a BEAST of himself, gets rid the pain of being a MAN" S.J

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