Candlestop 2 Forex Reversal Strategy

The Candlestop 2 Forex Reversal strategy introduces a refined price versus indicator setup that properly distinguishes winning from losing market conditions.

It is a straightforward reversal “counter-trend” strategy that offers great buy/sell trading signals along with an exit strategy.

The strategy works on any pair and timeframe. Feel free to experiment with its settings to suit your preferences.

Chart Setup

MetaTrader4 Indicators: candlestop2.ex4 (Inputs Variable Modified; TrailPeriods=10), macd-pattern-signals.ex4

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week

Recommended Trading Sessions: Any

Currency Pairs: Any pair

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Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Enter a bullish trade if the following indicator or chart pattern gets put on display:

  1. If price bar opens and closes above the lime dotted line of the candlestop2 Metatrader 4 forex indicator as illustrated on Fig. 1.0, the market is said to be showing more affinity for higher pricing, therefore a buy order will do.
  2. If the silver histograms of the macd-pattern-signals custom indicator gets aligned above the 0.00 horizontal level as depicted on Fig 1.0, price is said to be pressured higher i.e. a trigger to go long on the selected fx pair.

Stop Loss for Buy Entry: Place stop loss 3 pips below medium-term support.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit from all trades if the following rules or conditions takes precedence:

  1. If while a bullish trend is ongoing, price bar is seen to open and close below the lime dotted line of the candlestop2 custom indicator, bulls power is said to be weaning, as such an exit or take profit is recommended.
  2. If the macd-pattern-signals indicator displays a silver histogram below the 0.00 level while a bullish trend is running, it is indicative of diminishing bulls power, hence an exit or take profit will suffice.

Sell Entry Rules

Go short if the following setups gets displayed rightly on the activity chart:

  1. If price bar opens and closes below the magenta dotted line of the candlestop2 custom indicator as depicted on Fig. 1.1, the overall market sentiment is said to be bearish, thus a trigger to go short on the selected currency pair.
  2. If the silver histograms of the macd-pattern-signals custom indicator gets aligned below the 0.00 horizontal level as exemplified on Fig. 1.1, market is said to be in favor of lower pricing, as such a sell signal will suffice.

Stop Loss for Sell Entry: Place stop loss 3 pips above medium-term resistance.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following takes center stage:

  1. If price opens and closes above the magenta dotted line of the candlestop2 custom indicator during a bearish trend, more sellers are said to be leaving the market, therefore an exit or take profit stance is advised.
  2. If the silver histograms of the macd-pattern-signals indicator realigns to pop up above the 0.00 horizontal level during a bearish signal (see Fig. 1.1), it is indicative of weaning bears power, hence an exit or take profit is most probable.

Sell Trade Example

Fig. 1.1

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About The Trading Indicators

The candlestop2 pattern indicator is comprised of two dotted colored (magenta and lime) lines channel.

Price is said to be bullish when it is above the magenta dotted line and bearish when it is below the lime dotted line.

The macd-pattern-signals indicator is an oscillator that is designed to spot changes in the strength, momentum and direction of price.

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