Trend line & Envelopes Strategy - Learn How That Works

Author: Consultant Finmaxfx
Today, we will introduce you to another strategy which is specially designed for the hottest currencies pair at the moment EUR/USD the Trendline & Envelopes. In this article, you will find the guide to apply this strategy on Forex market and witness the efficiency.

What is Trendline & Envelopes?


The Trendline & Envelopes Strategy can arguably be applied on a wide range of currencies pair, but only with the EUR/USD that the strategy gives an average of 3 entry points per month with considerable profit.

The strategy adopts the True Range Envelopes and X-Wave-elliot custom indicators in fine tuning the signals.

The following indicators are required for the chart:

  1. Indicator Envelopes with a period of 14;
  2. Indicator Stochastic with parameters 5,3,3;
  3. Time Timeframe being set at (H1) is recommended.

How to use Trendline & Envelopes Strategy?


The Envelopes indicator decreases and shows its maximum values (the selected extremes). If after the next extreme the indicator rewrote its last minimum value, then it can be used to build a trend line. As soon as the red line (lower) is above the trend line, we can form a zone where entry point might stays. The price ranges from the red line to the blue line, and there is a zone when the price is rolled back, we will look for a buy signal.

The first method of entry: find a candle with a small body and long tail downwards in the price range:

  1. At the opening of the next candle is a deal to buy;
  2. Stop loss 10 points below the lower limit of our range.


The price is in the zone defined by us, and the Stochastic indicator below the level 50 turns up:

  1. At the opening of the next candle, open a purchase order;
  2. The stop-loss, in this case, is 15 points below the lower limit of the chosen range;
  3. As soon as the lower limit of the Envelopes indicator comes up from the price range defined by us, the transaction is transferred to a breakeven;
  4. Take-profit is equal to 80 points.

Trend line & Envelopes Strategy - Learn How That Works


If you like this strategy, you might also be interested in this Bollinger Band Trading Strategy


Conditions for sales


The reversed features from the purchase conditions applied for sale condition.

The first method of entry: find a candle with a small body and long tail upwards in the price range:

  1. The opening of the next candle is a sale transaction;
  2. The stop loss is 10 points above the upper limit of our range.


In the determined price range, the Stochastic indicator is above 50, it turns down:

  1. At the opening of the next candle, a sale transaction is opened;
  2. The stop loss, in this case, is 15 points higher than the upper limit of the chosen range;
  3. As soon as the upper limit of the Envelopes indicator goes down from the price range defined by us, the transaction is transferred to a breakeven;
  4. Take-profit is equal to 80 points.

If both signals coincide, then this only strengthens the determined entry point:

Trend line & Envelopes Strategy - Learn How That Works


Important rules when applying this strategy:

  • Opening one position at a time is a high recommendation;
  • Do not enter the market until the candle of confirmation is totally closed;
  • The maximum risk for each transaction should not be more than 5% of your total balance;
  • The order should be set expired in a maximum of eight hours.

Pros and cons


Pros:

  • Provides a detailed guide to trade.

Cons:

  • Takes time to track potential points for ordering.

Conclusion


The Trendline & Envelopes is an effective technical strategy with a considerable return and simplicity. Given the H1 time interval, this strategy is incredibly suitable for intraday traders. In addition to a great strategy, to remember exactly the signal movements and adhere strictly to the mentioned rules are compulsory for a success in this market.
See also:
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