Trend Acceleration - the Key Strategy RulesWednesday, 12 July 2017 06:54
The Trend Acceleration is a popular trading strategy on the Forex market. It combines high profitability and simplicity: within this method of trading, you don’t need to use cumbersome indicators nor make the complex analysis. All that a trader needs is to find a certain candlestick on the chart and open a deal. Following all the rules, the strategy provides a high level of profit.
Features of the Strategy
You can use such a method trading any currency pairs. Most traders use it on the most popular pairs, such as GBP/USD and EUR/USD, since the signal bars appear most often on such currencies.
According to many traders, this tactic demonstrates the best results on the H1 time frame. However, note that the search for a candle is performed on the D1 charts. The signal candles look like this:
Such candles appear on the chart after the reversal of the trend. The correct bullish signal candle should correspond to several parameters:
- The body size should be almost equal to the previous candlestick.
- No upper shadow or very short one.
- The lower shadow is long, and exceeds the size of the body. The minimum is at the same level as the minimum of the previous bar.
Bearish candle has the following properties:
- The body size is equal to the previous bar or slightly smaller.
- The upper shadow is longer than the body. Its maximum is at the level of the previous bar.
- No bottom shadow or the minimal one.
Application in Trade
First you need to find the right candlestick on the chart with the timeframe D1. Immediately after the signal appeared, it’s necessary to open the Buy Stop or Sell Stop orders on the H1 timeframe. These orders are located at five points below or above the signal bar.
Occasionally, at the beginning of the day, the level of the value of an asset can turn sharply. In this case, traders analyze the H1 timeframe. If there is also a signal bar on this chart, a buy or sell order is set at the closing point. If you have pending orders, you should close them. In general, for effective transactions making, you will need only two timeframes.
It’s worth noting that the setting of the Buy Stop and Sell Stop orders in 5 pips is suitable for quotations with four digits to the right of the decimal point. For other currency pairs, more calculations are required.
After you see the signal, you can create the position. If at this time you have pending orders, the Stop Loss should be set at 40 pips. If you find a signal bar on the H1 timeframe, it's best to set this order at 50 pips.
To calculate the level of take profit, you need to take the range of the signal candle as a basis, and add another 40 pips to it.
If you follow actions described above, it already gives the trader the opportunity to open the profitable positions, without using the extra tools. However, you can combine this strategy with other tools of technical analysis.
For example, to find a trend reversal easily, you can use the Parabolic SAR. Its points on the chart will prompt those places where the signal candles appear. However, it should be noted that this tool works with a delay.
The use of the Standard Deviation indicator shows quite good results. This tool easily determines the strongest impulses of the asset value. Within this strategy, the indicator should be set for a period of 20. Before the work, you need to find the overbought and oversold areas. Next, you see the curve of the indicator, and find the points at which it’s as close as possible to the extremes of the price chart. This tool finds the required turning areas not so easily as the Parabolic SAR, but it shows much more accuracy.
This strategy is suitable both for beginners of the Forex market, and for experienced traders. It’s quite simple, and doesn’t require a lot of calculations, nor installing the cumbersome indicators, nor the developed analytical skills.
Particular attention should be paid to determining the signal pattern on the chart, as well as to the correct installation of Stop Loss orders. In general, the tactic involves the use of fixed Stop Losses, but with sharp volatility surge, such an approach can lead to losses. In this case, it’s recommended to apply a trailing stop.
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