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GBPJPY 4H DOJI SANDWICH STRATEGY (CONTINUATION OR REVERSAL)Best H4 Forex Strategy The H4 trading strategy revolves around a very common chart pattern known to the technicians as the Doji candlestick. Our forex H4 trading system combines some high probability setups that we’ve found work best on the 4-hour time frame. A detailed guide to the Doji Candlestick pattern can be found on the internet. As far as the probabilities of the trade working using this special Doji setup and the magnitude of the trade working it’s extremely high. We’re going to demonstrate how the Doji Sandwich setup paints the change in market sentiment. The Doji chart pattern can take many different shapes and forms. The main characteristic of the Doji is the small body where the open and the close are very close together. However, the hanging man, shooting star, bullish and bearish Harami, inverted hammer and dark cloud are considered to be variations of the standard Doji pattern. So, we’re going to also use the above-mentioned chart patterns to spot buying and selling opportunities. The Doji candle pattern is only one part of the overall Doji Sandwich trade setup. Let me explain… The Doji Sandwich is very easy to identify as it’s a 3-bar reversal pattern comprise of: One large candle that closes near the higher end (or lower end) of its price range. Followed by the Doji candle. Another large candle is of the same magnitude as the first candle. Note* The last candle must be in the same direction (bullish or bearish) as the first candle. The term “sandwich” comes from the fact that the Doji candle appears sandwiched between two larger candles. And, this is what makes the H4 forex trading strategy very effective. This will produce a high probability reversal setup. When you combine the Doji candle with the nearby candles we have a recipe for success. This simple trade setup on the 4h chart, will almost double your success rate. On Wall Street there is a saying: “If something doesn’t work, it disappears very quickly.” But, that’s not the case with the Doji Sandwich setup as it has stood the test of time. We’ll demonstrate the profitability of the setup using live trade examples. Now, here is the thing: The truth about trading is that no matter what trading setup you use, there will always be false signals. So, in order to harvest the bad forex signals from the good forex signals, we’re going to use some extra technical tools. Filter Your Trading Setups with Stochastic Indicator The overbought and oversold conditions are based upon the stochastic indicator. See the best practices on how to use the stochastic indicator here: Best Stochastic Trading Strategy- Easy 6 Step Strategy. Note* We use the default settings for the stochastic indicator. As a general rule, if you can spot a reversal signal when your stochastic indicator is in an overbought/oversold area, we’re very close to see a trend reversal. The Doji Sandwich pattern meets all of our requirements: The first candle and the third candle are more or less of the same length and point in the same direction (bullish flag chart pattern). Second, the middle candle is a Doji candle. Moving on… Spotting a chart pattern is only half of the equation; we also need an entry technique for our H4 trading strategy. The Entry Technique There are two ways to enter this trade: You can buy (sell) as soon as the 4th candle opens. Wait until the high (low) of the third candle is broken. We have used both types of entry techniques to take advantage of high probability trades. Here is the thing… Once you’re in a trade, you still need to have a plan to manage your trades and not leave it to luck. For trade management, we’re going to throw in some additional technical indicators. How to Manage Your Trade? This is important so don’t bypass this trading gem. The following moving averages are used by the H4 trading strategy: The 200 moving average. The 50-period simple moving average SMA. Every major money manager in the world uses those moving averages to make informed decisions about their portfolios. Now… Here is how we use the 200 moving average: The 200 MA is only used for long-term guidance and to decide how long are we going to stay in the trade. For example, if we have a bullish Doji sandwich pattern but well under the 200 MA, we’re going to treat this trade as a short to medium-term trade. However, if the pattern develops above the 200 MA, we want to stay with the trend and ride that wave to squeeze as much profit as possible. The chart shows the Doji Sandwich pattern being printed well below the 200 MA in which case we’re going to treat this trade as a short-term trading opportunity. Now, you might be wondering: “How to use the 50-period moving average?” The 50 MA is there for guidance purposes only. What we look after is for the price to break above the 50 MA either within the first candles after we entered the market or during the development of the Doji Sandwich pattern. Next… We’re going to answer how to protect your bottom line and exit with a nice profit. Stop Loss and Exit Strategy First, the protective stop-loss trading strategy is placed below the Doji candle, which is the middle candle of the 3-bar pattern used. More, once we break and close above the 50 moving average, the stop loss than can be trailed below the 50 MA to further reduce the risk. Next… We have several options to take our profits: First, if we’re below the 200-MA, we get out once the stochastic indicator is in overbought territory. If we’re above the 200-MA, we need to be more creative as to capture a larger portion of the trend and combine the action of both MAs. Best 4H Forex Strategy – Advanced Setup If you like this 4h price pattern, we’re sure you’ll also like if we share with you a second alteration of the 4h Doji Sandwich. Everything remains the same, only two things change. Let me explain… For example, if you’re looking for a bullish reversal the first candle is a bearish candle, while the last candle of the 3-bar formation is a bullish candle, like in the 2nd trade. Note* In the case of a bearish reversal the first candle is bullish while the last candle is bearish. Here is one more hint: If the third candle closes above the high of the first candle then this is setting the stage for a very high probability trade. Try it for yourself and look on your charts for the Doji sandwich pattern. Final Words – H4 Trading Strategy In summary, the H4 forex trading strategy is ideal for looking for trading opportunities around the clock. Keep in mind that the H4 trading strategy requires a solid understanding of how the market operates. The trading rules outlined throughout this guide should be enough to help you navigate all types of trading environments. So, here is a summary of what you’ve learned: The H4 time frame lets you benefit from both worlds (intraday PA and larger TF). The H4 chart carries more weight in FX trading due to how each day is broken is trading sessions. The Doji Sandwich is a 3-bar reversal pattern. You have learned an intuitive entry technique along with trade management tactics. The best H4 forex strategy will increase the odds of your success even further. Thank you for reading! H4 FOREX TRADING STRATEGY USING THE DOJO SANDWICH Learn the H4 forex trading strategy a cash-rich system to benefit from both the intraday price fluctuations and the larger time frames. Throughout this guide, we’ll outline a detailed plan around the best H4 forex strategy and what are the best trading tactics to implement on the 4-hour chart. What time frame you trade on will largely determine how you calculate your support and resistance levels, your risk level and determine the trend direction. Our goal is to focus on the 4-hour time frame namely because: 1 - It allows you to actively trade the markets around the clock 2 - It combines the benefit of the intraday charts along with the big picture trends Probably the 4 hour chart is the best time frame for simple swing trading. If you have a 9 to 5 job, or a family that keeps you busy, but you still want to make money from the forex market, we recommend trying the H4 trading strategy. We’re going to reveal the Doji sandwich pattern in the next sections, so continue reading. Without further ado, let’s first layout the foundation of what is H4 in forex and then move on to show you our H4 forex trading strategy. Table of Contents 1 What is H4 in Forex? 2 Why the 4 Hour Time Frame is Important 3 How to Use the 4 Hour Chart to Confirm Your Trades 4 Best H4 Forex Strategy 4.1 Filter Your Trading Setups with Stochastic Indicator 4.2 The Entry Technique 4.3 How to Manage Your Trade? 4.4 Stop Loss and Exit Strategy 4.5 Best 4H Forex Strategy – Advanced Setup 5 · Final Words – H4 Trading Strategy What is H4 in Forex? Now, probably most of you already know that in the forex trading and technical analysis realm, H4 is simply an abbreviation for the 4-hour daily time-frame. The 4-hour time frame is an intraday TF where each corresponding candle encompasses exactly 4 hours of trading activity from open to close. The 4h chart also comes as the standard default time-frame with most top trading platforms so, it’s readily accessible. The 4h time frame carries a distinctive role, especially in the forex market. Unlike stocks which are opened for trading for a limited 8-hour window, in forex trading, the foreign exchange market never sleeps. So, in the stock market, the 4h TF is useless as one full day of trading will be comprised of two 4h candles. However, in the forex market, one full day of trading activity is comprised of six 4h candles. What is even more important, one 4h candle point out to a half of each major trading sessions. In the forex market, the Sydney, Tokyo, London and New York session have their unique price action. And, this is where FX traders can focus on new trading opportunities. Moving on… We’ll explain the main benefits of using the 4h trading system. Why the 4 Hour Time Frame is Important Trading on the 4h time frame is not only suited for those with limited time on their hands or the beginner traders. Check out our guide on the best trading strategy for beginners. There are other benefits of trading 4h time frames that can’t be found on other time frames, including: You’re no longer a slave to the markets and have more freedom. The impact of risk events on the 4h chart is less visible. Timing the market is not that critical, giving you more wiggle room for error. Larger profit potential. And, of course, benefiting from combining the benefits of intraday TF with larger time frames. Now… One of the biggest mistakes traders makes trading the 4-hour chart is that they don’t pay attention to the fact that different brokers have different closing times for the 4-hour candle breakout strategy. This is a time-critical forex trading consideration. And, that can make the difference between winning and losing. How to Use the 4 Hour Chart to Confirm Your Trades Since time in the forex market is broken in several trading sessions and forex brokers run on different time zones, the 4h candle will close at a different time of the day. Nowadays, most forex brokers run on the GMT+3 time zones but, if you want to be safe, better check with your broker. The main disadvantage of the different FX broker server times is that you will get different 4h candle closing. Every new candle on the 4h time frame is formed every 4 hours. This in turn will lead to different price actions on your 4h chart. To resolve this issue, and have a more accurate representation of each trading session we use the New York close time to define when a new 4h candle is printed. In forex trading, the New York close is considered the standard closing time for the day. Learn how to master forex trading with our complete guide. If you’re serious about trading, you need to use forex charts with the New York close. Let me explain… The daily closing price in any market, be it forex, stocks, commodities or cryptocurrencies displays who won the battle between buyers and sellers for that session. Traders who are planning to use the h4 forex trading strategy need to have the correct New York closing charts. If you want the identical price action on your charts as we have them, you should use the New York close charts. Now… If you use the correct New York close charts, you should see each 4-hour candle close at 5:00 PM, 9:00 PM, 1:00 AM, 5:00 AM, 9:00 AM and 1:00 PM. If you’re using the Central Time, you should see each 4-hour candle close at 4:00 PM, 8:00 PM, 12:00 AM, 4:00 AM, 8:00 AM and 12:00 PM. On the other hand, if you’re using the Pacific Time, you should see each 4-hour candle close at 2:00 PM, 6:00 PM, 10:00 PM, 2:00 AM, 6:00 AM and 10:00 AM. Taking care of this type of detail while it might seem unimportant it can make the difference between winning and losing. Traders can use these 4-h candles to find potential new trading opportunities. You’ll only need a 10-minute window of time upon the close of each of the 4h candles to analyze your favorite currency pair and spot new opportunities to make money.
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EURUSD 4H FADE ENGULFING STRATEGYEngulfing Trading Strategy The engulfing pattern is fairly regular in its occurrence. Appearing regularly means that a lot of the time, it simply won’t work. Statistically speaking, candlestick patterns have a high failure rate, which is why we come with the idea to fade the engulfing bar pattern. Of course, candlesticks can indeed be useful--but advanced trading strategies will require you to look beyond these basic charts and think deeper. To develop an effective engulfing trading strategy, we need to establish a proper framework to stack the odds in our favor. Step #1 Spot a Sideways Market The first thing we want to look for is a sideways market where no one is in control. This is very important because it’s setting the stage for price manipulation. The premise behind the typical price manipulation is based on the core idea that smart money needs buyers when they want to sell and they need sellers when they want to buy. In this regard, our goal is to identify price areas where the trading volume is flat. Usually, in ranging markets, volume remains mostly flat. Since the market is range-bound around 75% of the time, it will be easy to spot a sideways market, especially on the intraday charts which are prone to exhibit more noise. The natural flow of the price dictates that sooner or later we’re going to see an expansion in volume, which brings us to the second step. Step #2 Localize the Engulfing Pattern The ranging price action needs to be followed by the engulfing pattern. Going on with our EUR/USD chart, we can spot a bearish engulfing pattern. Since we’re still in a range the sellers of the engulfing pattern need to overcome a lot of support/resistance levels that were built-in during the consolidation phase. What happens is that the sellers who got tricked to enter the bearish engulfing pattern are now trapped inside a consolidation zone. One of the first signs that selling the engulfing pattern was a bad idea could be that we didn’t have enough profit margins. Smart money love to create these types of price deceptions. How these price deceptions work is very simple. The smart money needs to create a sudden price movement so that it attracts the retail eye to enter the market. Once the retail trade bites the bullet, smart money only needs now to bid the market higher and cause everyone to panic. This in return will trigger more sell stops on the upside and subsequently, the upside move gets amplified. Now, you might be asking yourself why all the fuss to trick the retail traders? Well, it comes down to two things: The market is a zero-sum game, so every transaction needs to have a counterparty. And, secondly, smart money needs liquidity to execute their big trades. Now, you get the idea of why smart money can use the textbook patterns to trick the retail traders. Next, we need to establish how the engulfing trader strategy works. Step #3 How to Fade the Engulfing Pattern We have a clear signal to enter the market when to price breaks above the high of the bearish engulfing pattern. Normally, traders would sell at the break of the low so we’re doing the exact opposite. Once the price deception is completed, we can see smart money buying aggressively. As a general rule, once we break the high of the bearish engulfing pattern, we should see momentum picking up to the upside. If we see this type of price behavior we’re almost sure we have got a good trade. The next step is to establish how to manage risk, i.e. where to hide our protective stop loss and when to exit the market. Step #4 Where to Place Stop Loss The stop-loss strategy is quite simple. We hide our protective stop loss below the bearish engulfing bar. If this indeed was a price manipulation set by the smart money, then the price should not break below the bearish engulfing candle low. However, since we can’t be 100% in control of what the market does in the eventuality it breaks below the low we want to get out, which is the stop-loss order job to do for us. Step #5 Where to Take Profit Now, in terms of take-profit…. If you want to take your trading to the highest point of success, you need to be able to maximize your profits with each trading opportunity. The good news is that our take profit strategy is quite easy to implement. You’ll have to take profits along the way and scale-out of your position as the trend matures. This ensures you’ll benefit from the entire price move. Conclusion – Engulfing Bar Trading Strategy In summary, the engulfing pattern trading strategy gives you a chance to trade along with the smart money and profit from trapped retail traders. Most traders will lose money when trading candlestick patterns but with a little bit of twist, you can turn the odds in your favor. And, that’s precisely what our easy guide to trading the engulfing pattern is aiming for. Here is a summary of what you have learned so far: The textbook engulfing pattern and how it works. How to interpret the price manipulation around the engulfing bar. How to trade along with the smart money. Only fade the engulfing pattern that develops inside a sideways market. How to maximize your profits by scaling out of your position. Engulfing Trading Strategy - The Fade The engulfing trading strategy will give you the skills you need to become a better trader. Through this guide, we’re going to take a deeper look into what exactly is the engulfing pattern and how understanding this particular pattern can improve your outcomes as a trader. Furthermore, we’re going to show you how to master the engulfing bar trading strategy with a simple twist. Don’t worry if you already know how engulfing trading works, we have some additional information for you as well. This will strengthen your existing knowledge about the engulfing candle trading strategy and help you find new opportunities to succeed as a trader. How we interpret the engulfing pattern can provide us with a further understanding of the current market sentiment, whatever form it might take. In return, this can help us better assess the probabilities of success behind each individual bearish and bullish engulfing pattern. Table of Contents 1 What is the Engulfing Pattern? 2 How to Trade Engulfing Pattern 3 Why the Engulfing Pattern Works? 4 Engulfing Trading Strategy 4.1 Step #1 Spot a Sideways Market 4.2 Step #2 Localize the Engulfing Pattern 4.3 Step #3 How to Fade the Engulfing Pattern 4.4 Step #4 Where to Place Stop Loss and Take Profit 5 Conclusion – Engulfing Bar Trading Strategy What is the Engulfing Pattern? In technical analysis, the engulfing pattern is multiple candlestick patterns (2-candle pattern) that can signal a trend reversal or a trend continuation depending on where it develops in relation to the prevailing trend. While you can find this candlestick price formation by using the engulfing pattern indicator, you can easily spot the pattern with your naked eye. There are two types of engulfing patterns: Bullish engulfing pattern. Bearish engulfing pattern. Being able to identify the engulfing pattern can help us time the market. So, how do we identify the bullish engulfing pattern? The bullish engulfing pattern is a combination of one bearish candlestick followed by a bullish candlestick that engulfs the entire body and wicks of the first candle. This shows that, generally, the broader market is moving in a positive direction. Naturally, it signals a potential reversal of the prevailing trend. On the other hand, the bearish engulfing pattern is the opposite of the bullish engulfing pattern. The bearish engulfing pattern can signal the possible start of a new downtrend. While these engulfing patterns do occur in the opposite direction, they are still governed by the same underlying principles. Moving forward, let’s see the different ways how to trade the engulfing pattern. How to Trade Engulfing Pattern To exemplify how the engulfing pattern works, we’re going to showcase how to trade a bearish engulfing pattern. The opposite will be true for the bullish engulfing pattern. Understanding the difference between bullish patterns and bearish patterns will be key to leveraging engulfing patterns to your advantage. As per the textbook rules, we first need to wait for the second candle of this price formation to close. A close below the low of the first candle shows a stronger bearish signal. Secondly, the engulfing pattern gets confirmed once we break and close below the low of the second candle. The way we trade it can be broken down into two strategies: Either sell right away when we break below the low. Or, a more conservative approach would be to wait for a candle close below the low. Note* As a general rule, only enter once the pattern is confirmed. Using strict risk management rules, we can hide our stop loss above the high of the second candle. Usually, the engulfing pattern can boost attractive risk-reward ratios so you can capture profits at least 3 times your risk. Now, before we reveal the better way to trade the engulfing pattern trading strategy, it’s important to understand what’s going on behind the scene. What do we mean by this? Simply put, we want to know the psychology behind the engulfing pattern. Why the Engulfing Pattern Works? How we interpret the psychology behind the engulfing pattern plays a big role in whether or not the pattern will work out. Price Action Strategy is the ultimate indicator telling you what’s going on in the market. In terms of the market sentiment, it’s the only reliable source because the best technical indicators are all based on price action. When we look at raw price action we can tell who is winning the bulls and bears battle. The engulfing candle simply signals a big shift in the market sentiment. So, let’s see what the bullish engulfing pattern is telling us from the supply and demand perspective. The apparent shift in the supply-demand balance is revealed by the second candle, which shows that the buyers have stepped in and managed to overcome the sellers. However, as we know it, the price can move higher even from a lack of sellers (supply-side is dry out). That’s the reason why you’ll see that, many times, the candlestick patterns failing more often than not. The key idea here is that you need to be very selective and only trade the engulfing pattern when it develops at extreme ends of a trend. Truth to be told, the engulfing pattern rarely develops at the end of a trend. Most of the time, you’ll notice this chart pattern popping a lot of the time in the middle of the trend or in a sideways market where a lot of price manipulation happens. But, what if we can use the engulfing bar trading strategy to take advantage of the price manipulation?
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