Trading on 1 hr chart is a swing
trading style based on Bollinger Bands. And as you know, swing trading is much different than
day trading.
Day Trading requires much deeper
concentration since each trade lasts for few minutes to a maximum of
few hrs at the most. So, you need to be quick in identifying the
trading opportunity and reacting to it. Swing trading on the other
hand will give you some breathing space to
trade.
Entering the trade
a. Currency pairs – All USD based
currency pairs.
b. Indicators used –
• Candlesticks
• Bollinger Bands – 1. setting of 20
period with deviation 2,
2. setting of 10 period with deviation of
2.
• Stochastic RSI – setting 18, 2, 2
• 200 EMA
For stochastic RSI, even the 14,3
setting would have worked well, But after testing more than 50
settings, I felt that 18,2 work the best.
Here are the rules of the trade for
trading on a 1 hr chart, which are quite
1. The low of current candle and
previous two candles should not be the lowest point in the last 30
candles.
2. The current or the previous 2
candles should have created a lowest low in the last 7-8 candles, but
should not have the highest value in last 7-8 candles.
3. The Difference between highest point
and lowest point in last 10 candles should be 45 or more Pips.
4. Confirmation Indicators –
• The Stochastic RSI oscillator
should have value of 40 or below
• The 10 period UPPER bollinger band
should be Inside (or let us say “Below”) or should have same
value as the 20 period Upper Bollinger band
As soon as you find a setup which meets
above rules, we’ll enter the trade after below mentioned guideline
is met -
We can enter the trade as soon as the
price goes past the mid-point of range of last 3 candles.
IMP: This cross of the midpoint of the
range should happen within next 3 candles for the trade to be taken.
Else the setup is not Valid and you must wait for next setup.
Just to mention again, “range” here
is calculated as difference between highest high of last 3 candles
and their lowest low.
So for example if in last 3 candles,
the highest high has been 1.4000 and lowest low is 1.3940, then range
is 60 pips. As soon as price crosses range’s mid point which is
60/2 = 30 pips, we can open a trade.
If you look at above chart, Point A and
Point B present good trading
conditions.
But if you look at Point C, it doesn’t.
Why?
Because Point C made the lowest low in
last 30 Candles and also the stochastic RSI is not below 40. Infact
it is more than 60.
The above chart shows 3 trade setups –
1. The 1st trade set up starts at point
A where all the entry rules as values of confirmation indicators
meet.
As soon as trade is entered, the stop
loss is placed 25 pips below the low of the candle at that time.
As soon as the trade is 35 pips in
profit, the stop loss is moved to entry price.
So from now on your trade can never end
in loss.
From there on keep moving stop loss
every 20 pips towards the direction of trade.
This trade would have ended at point 1
with 20 pips profit.
2. Same rules as above. The trade would
have opened at point 2.
This trade would have made 210 pips and
would have ended at point 2 where the market would have hit the
trailing stop loss.
3. The 3 rd trade setup is at point C
which would have ended at point 3 with
60 pips profit!
As you can see the system is highly
reliable and is very straight forward in use. Once you practice with
few times, you’ll start spotting the trade setups in matter of
30-35 seconds!
The above chart covers 2 trades on
USD/JPY currency pair.
1. The 1 st trade is marked at point A
meets all the trading rules. It exits at point A when the market
touches the trailing stop loss. It ends with 120 pips profit!
2. The 2 nd trade ends starts at Point
B and finishes at point 2 with amazing 260 pips profit.
Remember, such high profits are
possible only when you adhere to the money management principle which
is a key to have profitable trades!
Money Management Rules.
Here are the money management rules for
trading on 1 hr chart. Please go through these carefully –
1. As soon as you open the trade, place
the stop loss 25 pips below the entry price. But your stop loss
should not be more than 55 pips away from entry price.
2. Once you are 35 pips in profit, move
your stop loss to entry price.
3. From there on, keep moving your
trailing stop loss every 20 pips in the direction of trade.
4. You can exit the trade by following
any of these exit strategies –
a. 1 st Exit strategy can be that as
soon as you reach profit of 90 pips you can close the trade
b. The other exit strategy is that you
can keep your trade running and till the time market reverses and
hits your trailing stop loss
Note: A quick note I’ll make here is
that I would recommend you to use exit strategy 2 since on 1 hr chart
there can be some runs that can fetch more than 200 pips!
Also, be careful when the market
reaches 200 EMA. If there is any sign of reversal when currency pair
touches 200 EMA, close the trade immediately.
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