Pennant Failure Trading System

This strategy is very versatile because you can use any timeframe and any currency pair you prefer. A pennant is a pattern formation which is very easy to identify on any chart. This pattern is formed by 2 lines. One line – the one that is above prices – is descending, and the other one – the one that is below prices – is ascending. The lines tend to converge forming a triangle. We use this strategy as a reversal pattern. For this strategy, we will use the MACD-Histogram to confirm the trade and to optimize our exit point.

Trading rules Pennant Failure Trading System:

for this strategy, you should draw the lines below and above prices and enter on the breakout of the pattern. If the pennant is at the top, we will try to find a short sell opportunity; if the pennant is at the bottom of the chart, we will try to find a good buying opportunity. To exit the trade, we will use the MACD-Histogram. If we are in a long position, we will wait until the MACD- Histogram is above its centerline and reach its peak. If we are in a short position, we will wait until the MACD-

Histogram is below its centerline and reach its bottom. Once MACD-Histogram upticks, we will exit the trade. The better way to see how any strategy really works is to look at some real charts.

Entry: Buy GBP/USD at 1.7603

Exit: 1.7777

Profit: 174 pips

In this GBP/USD 1 hour chart we have a pennant formation. As we are at the bottom of the chart, we are looking for a long opportunity. So, we will enter a buy order on the breakout of the pattern. In this case, the order should be placed at 1.7603. At this point, the MACD- Histogram is giving us indication that the bottom has been reached. After entering the trade, we will wait for the MACD- Histogram to cross up its centerline and then to reach a peak. This happens at 1.7777, where we should exit the trade.

Entry: Buy GBP/USD at 1.7413

Exit: 1.7536

Profit: 123 pips

In this GBP/USD 1 hour chart we have a pennant formation at the bottom. So, we are going to look for a good buying opportunity. We will enter the trade when there is a pennant breakout, which happens at 1.7413. Once again the MACD-Histogram is confirming the trade. The MACD-Histogram gives a sell signal (the indicator is above its centerline and reaches a peak) at 1.7536, giving us 123 pips profit.

Entry: Buy GBP/USD at 1.7365

Exit: 1.7469

Profit: 104 pips

In this particular GBP/USD 1 hour chart, we can see that the currency pair made a false pennant breakdown. After this false breakdown, prices started to go up, and gave us an entry point at 1.7365, when the breakout to the upside was triggered. The MACD-Histogram is confirming the trade, so we have the odds on our side. The MACD -Histogram gave us a sell signal at 1.7469, once it started to fall above its centerline. It is then time to exit the trade with 104 pips profit.

Entry: Short GBP/USD at 1.7848

Exit: 1.7681

Profit: 167 pips

In this GBP/USD 15 minutes chart, we have a pennant formation at the top. In this case, we will enter our short sell order at 1.7848. After entering the trade, we will wait for the MACD- Histogram to give an exit signal. This happened at 1.7681, when the MACD -Histogram started to rise below its centerline.

Entry: Short GBP/USD at 1.7510

Exit: 1.7457

Profit: 53 pips

In this GBP/USD 1 hour chart, we have a pennant formation at the top of the chart. We will place our short sell order on the pennant breakdown, which happens at 1.7510. As in the previous examples, the MACD-Histogram is confirming that we are in a top. After entering the trade, we will closely watch the MACD- Histogram to see when it gives an exit signal. This happens at 1.7457, after the indicator crossed down its centerline, reached its bottom and started to rise. We should then exit the trade with 53 pips profit.

Flag e Pennant indicator MT4 below the link for download.

https://drive.google.com/file/d/0Bwjv2Pbf48itUnZKVjhVS2RXMVU/view?usp=sharing