Hi Guys,
i recently found a nice strategy. The Pro Trading Strategy was created by Navin Prithyani some years ago.
The Pro Trading Strategy will train traders on how to identify key Japanese candlesticks to define the proper time to enter the market. This strategy must be complemented by Support and Resistance lines and an exit trade methods.
LEARN TO IDENTIFY EXHAUSTION CANDLES
Exhaustion Candle: Same as “Hang Man” and “Hammers”, Navin calls them exhaustion candles because they represent a dying trend and a very possible market change in direction, the best of times to enter the market.
RULES TO DEFINE AN EXHAUSTION CANDLE:
- The candle must come after a trend
- The tail needs to stick out, long, at least twice as long as the body
- Body must close inside the area of the previous candle
- Is it coming in from a trend? An exhaustion candle has to come in after a trend, and that is why they exhaust, the sell or buy rally has exhausted or ended. They do not apply on ranging markets. To identify a trend you need at least 3 candles with lower highs or higher lows, no matter their shape.
- Does the tail stick out? The tail should be long, larger than the candle´s body. The longer the more power the exhaustion candle has to reverse the market. STAY AWAY FROM SHORT TAIL EXHAUSTION CANDLES, they tend to fail.
- Did the body of the exhaustion candle close within the previous candle? This part is tricky as new traders do not define well what is a candle, the body or the body + the tail and wick?? A candle is the whole thing, body + tail + wick.
Also, what is the close? The close is where that candle finished forming. To identify the close, if it is a green candle (buy or bull) the close is the upper part of the body; and if it is a red candle (sell or bear) then the close is the lower part of the candle´s body.
So the close of the exhaustion candle needs to be covered by the entire previous candle.
WHICH DIRECTION SHOULD YOU TRADE?
Pretend the exhaustion candle is an arrow, whichever direction the body (arrow head) is pointing that is where we expect the market to go.
WHEN TO ENTER THE PRO TRADING STRATEGY TRADE
This is something that is usually missing from the pro trading strategy videos. You want to enter the trade once the following candles break the neck line as shown in the photo.
The neckline is the point of influx, were the trade seems to definitely turn around. To determine the neckline simply draw a line at the highest point of the previous candle from the exhaustion candle.
This gives you confirmation that the exhaustion candle has worked as a new trend indicator.
WHEN TO TAKE PROFIT?
This is another thing that Navin doesn´t go into and you as a trader have to decide what technique to use. Here are some suggestions:
- 2 to 1 Take profit. Set your take profit twice as much as your take loss.
- Take profit at the next Pivot. Use a pivot indicator to visualize were the next pivot is targeted, this is a probable point were the trend might stop and most traders take profit.
- Use Fibonacci targets. Fibonacci gives you two targets, you might want to take half profit at 30% to secure profits and reduce the risk of loss if the trade goes the other way, and half the position on 80% to earn a nice profit overall.
- Define strong Support and Resistance Lines. Knowing how to set Support and Resistance lines is the most important aspect of Forex trading. As Navin himself says “You cannot trade Forex without mastering Support and Resistance lines”.
- Use a combination of all the previous. This way you define your own probable Support/Resistance line based on the congruence of the above indicators.
- In general all of the above work and most of the time they will pinpoint to the same zone location, as is essence they are all Support and Resistance tools.
WHERE TO SET STOP/LOSS?
If the tail is very long set it at its end. You might want to do it 5 or 10 pips more away from the tail just in case. But also take into account a Strong Support or Resistance line that is near the tail. In many occasions after the exhaustion candle shows up the market will continue the trend for a couple more candles before turning around.
*The following tutorial videos by Navin will guide you step by step on the Pro Trading Strategy and will give you enough practice material to master the technique.
http://ift.tt/2kp61JL