Forex Strategy Intro
Understanding Forex Price Action Basics
To trade this strategy it is important that a trader understands price action basics. The first step of this is identifying trend direction. Typically this is done by looking for the impulse & correction moves that a forex pair cycles in.
When the market is bullish these cycles look like this.
When the market is bearish the impulse / correction cycle looks like this.
It is also important to be able to recognise different types of candlesticks. The types of candlesticks that will help you with this strategy are below - namely 11, 12 & 13. These are known as indecisive candles, and represent an exhaustion of a movement.
First you want to identify the direction of the trend. This is done by looking for lower lows & lower highs forming & the general direction of the market. In the example below we have identified a downtrend.
Once you’ve identified the trend there are three simple steps for identifying a trade opportunity.
- Wait for a pullback
- Wait for the pullback to exhaust / show indecision candles
- Wait for price to move in the direction of the trend
Once all the criteria for this strategy are met Tonisignals partners this strategy with a minimum 3:1 risk to reward, with the stop loss just above the recent high or low. We also like to move stop loss to break even once the trade has moved into profit.
This is how a trade looks.