Forex trading strategies 10: Power Ranger Strategy

• Power Ranger Strategy Concept
– Using the common oscillator, the Stochastic to identify entry for early range trading.
• Time-frame
– H1 and above.
• Currency Pairs
– All currency pairs.
• Indicators
– Stochastic with the following settings :
– %K period = 10
– %D period = 3
– Slowing = 3
– Price field = High/Low
– MA Method = Simple
– Levels 20 and 80

CHAR WITH THE INDICATORS

• Long Trade Set-up
1. Draw an uptrend line based on a series of Higher Highs and Higher Lows.
2. On the Stochastic, look for %K and %D to go below level 20 (Oversold).
3. Determine the Support and Resistance of the range.
4. Enter when both the %K and %D is above 20 (%K is above %D).
5. Take Profit is between 50% to 75% of therange.
6. Stop Loss is at 1:1 risk-to-reward ratio and lower than the Support. If Take Profit is 50
pips, Stop Loss will be 50 pips.

Long Trade Example

Short Trade Set-up
1. Draw a downtrend line based on a series of Lower Highs and Lower Lows.
2. On the Stochastic, look for %K and %D to go above level 80 (Overbought).
3. Determine the Support and Resistance of the range.Power Ranger Strategy
4. Enter when both the %K and %D is below 80 (%K is below %D).
5. Take Profit is between 50% to 75% of the range.
6. Stop Loss is at 1:1 risk-to-reward ratio and higher than the Resistance. If Take Profit is
50 pips, Stop Loss will be 50 pips.

Short Trade Example

The Challenger
• Long Trade Set-up
1. After the “Power Ranger” Long trade hits Take Profit and the price goes back to the Support again.
2. Enter after price bounces above 10% of the range.
3. Take Profit is 50% of the range.The Challenger
4. Stop Loss is at 1:1 risk-to-reward ratio and lower than the Support. If Take Profit is 70 pips, Stop Loss will be 70 pips.

Long Trade Example

The Challenger
• Short Trade Set-up
1. After the “Power Ranger” Short trade hits Take Profit and the price goes back to the Resistance again.
2. Enter after price bounces below 10% of the range.
3. Take Profit is 50% of the range.
4. Stop Loss is at 1:1 risk-to-reward ratio and higher than the Resistance. If Take Profit is
70 pips, Stop Loss will be 70 pips.

Short Trade Example

Let’s Be Power Rangers!

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Forex strategy 9: Fifth element strategy

FIFTH ELEMENT STRATYGY

“I am using a wonderful strategy, but I have to constantly monitor the market in order not to miss a trade.” “Ah! I missed a trade again.” “According to my strategy, it looks like there may be a trade setup soon, but I have a movie date in the next hour. What should I do?”
Do these scenarios sound familiar to you?
Wouldn’t it be nice to have a strategy that actually prompts you when momentum of the market has switched to a new trend? In fact, the beauty of the fifth element strategy is that it tells you ahead of time when the entry price will be.
This is the third and final trend strategy in this segment. Let’s find out what’s so special about it.

Time Frame

The fifth element strategy works with the hourly (H1) or 4-hourly (H4) chart. This means that each candle on the chart represents 1 hour or 4 hours of price movement respectively.

Indicators

We use this indicator for this strategy:

Moving average convergence divergence (MACD) with default settings:
a. Fast EMA: 12
b. Slow EMA: 26
c. MACD SMA: 9
d. Apply to close.

Currency Pairs

This strategy is suitable for all currency pairs listed on the broker’s platform, especially the seven major currency pairs of:

EUR/USD
USD/JPY
GBP/USD
USD/CHF
USD/CAD
AUD/USD
NZD/USD

Strategy Concept

The MACD histogram indicates the direction and momentum of the market. When the MACD histogram switches from negative to positive, this indicates a possible upward shift in momentum. We wait for five positive bars on the histogram to confirm the momentum before entering a long trade on the fifth bar. No prizes for guessing why the name of this strategy
is called the fifth element!
When the MACD histogram switches from positive to negative, this indicates a possible downward shift in momentum. We wait for five negative bars of the histogram to confirm the momentum before entering a short trade on the fifth bar.

Long Trade Setup

We use the AUD/USD on the H4 time frame to illustrate a long trade. Here are the steps to execute the fifth element strategy for long:

1. Wait for the MACD histogram to go from negative (<0) to positive (>0). (See Figure 8.18.)
2. Wait for four positive bars to form on the histogram before going long on the opening candle of the fifth histogram. (See Figure 8.19.)
3. Set the stop loss at the last low of the histogram.
4. The trade will have two profit targets with risk to reward ratios of 1:1 and 1:2 respectively. (See Figure 8.20.)

From the long example in Figure 8.21:

Entry price = 1.0300
Stop loss = 1.0150
Profit target 1 =1.0450
Profit target 2 = 1.0600

The risk for this trade is 150 pips, and the reward is 300 pips if both targets are hit. The risk to reward ratio is 1:2, which yields a tidy 6% return if we take a 3% risk.

Short Trade Setup

We use the EUR/USD on the H4 time frame to illustrate a short trade.
Here are the steps to execute the fifth element strategy for short:

1. Wait for the MACD histogram to go from positive (<0) to negative (>0). (See Figure 8.22.)

2. Wait for four negative bars of the histogram before going short on the opening candle of the fifth histogram. (See Figure 8.23.)
3. Set the stop loss at the last high of the histogram.
4. The trade will have two profit targets with risk to reward ratios of 1:1 and 1:2 respectively. (See Figure 8.24.)

From the short example in Figure 8.25:

Entry price = 1.3400
Stop loss = 1.3547
Profit target 1 = 1.3253
Profit target 2 = 1.3106

The risk for this trade is 147 pips, and the reward is 294 pips if both targets are hit. The risk to reward ratio is 1:2, which yields a tidy 6% return if we take a 3% risk.

Strategy Roundup

The fifth element is an excellent swing trading strategy for beginners. The beauty of this strategy is that it does not require you to monitor the market for a long time. It also signals you well in advance as to when the entry of a trade is about to take place. As you know by now, the entry takes place on the fifth bar after the MACD histogram switches from negative to positive
or from positive to negative.
Five bars of the histogram is equivalent to 5 hours on the H1 time frame or 20 hours on the H4 time frame. This means you need to monitor the market only on a 5-hourly basis if you are trading the H1 time frame or a 20-hourly basis if you are trading the H4 time frame. Knowing that the entry is always on the fifth bar of the histogram means that you are in total
control of your time.
As an example, let’s say that you are trading the H1 time frame. You spot the MACD histogram switching from negative to positive. You glance at your watch and see that the time is 2:15 P.M.
The current bar is the first bar, and it corresponds to the 2 P.M. candle.
What would be the likely time that you will enter the trade? The answer is 6 P.M., because that would be the start of the candle that corresponds to the fifth bar of the histogram. You have ample time to catch a two-hour movie before heading home again to prepare for the trade!

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Forex trading strategy 8. Trend bouncer strategy

STRATEGY 8: TREND BOUNCER STRATEGY

The trigger of a trend can be anything from a political decision, to a central bank policy announcement, to the discovery of new resources, to a myriad of other possibilities. Trends move like waves in that they ebb and flow.
In an uptrend, you will find that, at a certain point in time, prices will pull back or retrace before continuing with the upward movement. Similarly for a downtrend, prices will retrace upward against the downward momentum before continuing their way down again.
This ebb-and-flow movement frustrates many trend traders, because
these retracements often stop out their trades while the market moves in their direction again later.
Experienced trend traders usually wait for the retracement to happen before taking a trade in the direction of the trend. This is how the trend bouncer strategy came about. The Bollinger Bands indicator provides an objective way of identifying the ebb-and-flow movement of a trend.
Since this is a trend strategy, we have more than one profit target.
In fact, we have three specific profit levels for this strategy. The strategy differs slightly from the trend rider in that there are specific levels for trend bouncer traders to exit with profits.

Time Frame

The trend bouncer method works with the hourly (H1) or 4-hourly (H4) chart. This means that each candle on the chart represents 1 hour or 4 hours of price movement respectively.

Indicators

We use these indicators for this strategy:
1. Bollinger Bands (moving average [MA] 12, deviation [Dev] 2)
2. Bollinger Bands (MA 12, Dev 4) Currency Pairs

This strategy is suitable for all currency pairs listed on the broker’s platform, especially the seven major currency pairs of:
EUR/USD
USD/JPY
GBP/USD
USD/CHF
USD/CAD
AUD/USD
NZD/USD

Strategy Concept

With the help of the Bollinger Bands, we can objectively identify the ebb-and-flow movement of a trend. When the candlestick hits the upper band of Bollinger Bands (MA 12, Dev 2), it indicates an upward momentum, and we prepare to go long. As prices retrace back to the MA 12 (the center line of the Bollinger Bands), a significant retracement has occurred, and it is a good time to enter for a long trade.
When the candlestick hits the lower band of the Bollinger Bands (MA 12, Dev 2), it indicates a downward momentum, and we prepare to go short. As prices retrace back to the MA12 (the center line of the BollingerBands), a significant retracement has occurred, and it is a good time to enter for a short trade. This trend strategy exits at three different targets.

Long Trade Setup

We use the GBP/USD on the H4 time frame to illustrate a long trade. Here are the steps to execute the trend bouncer strategy for long:

1. Wait for the price to hit the upper band of the first Bollinger Bands (MA 12, Dev 2) and retrace back down to the center MA 12. (See Figure 8.10.)
2. When the price touches MA 12, enter for a long. (See Figure 8.11.)
3. The stop loss is the lower band of the second Bollinger Bands (MA 12,Dev 4). (See Figure 8.12.)
4. The trade will have three profit targets with risk to reward ratios of 1:1, 1:2, and 1:3 respectively. (See Figure 8.13.)

TREND BOUNCER STRATEGY

TREND BOUNCER STRATEGY

Forex trading strategy

Forex trading strategy

FIGURE 8.10 Price Hits Upper Band of First Bollinger Bands (MA 12, Dev 2) and
Retraces Down to the Center MA 12
FIGURE 8.11 Price Touches MA 12
FIGURE 8.12 Set Stop Loss and Profit Targets
FIGURE 8.13 Trade Hits Profit Targets

From the long example in Figure 8.13:

Entry price = 1.5334
Stop loss = 1.5244
Profit target 1 = 1.5424
Profit target 2 = 1.5514
Profit target 3 = 1.5604
The risk for this trade is 90 pips, and the reward is 270 pips if all three
targets are hit. The risk to reward ratio is 1:3, which yields a tidy 9% return
if we take a 3% risk.

Short Trade Setup

We use the NZD/USD on H1 time frame to illustrate a short trade. Here are
the steps to execute the trend bouncer strategy for short:

1. Wait for the price to hit the lower band of the first Bollinger Bands (MA 12, Dev 2) and retrace back up to the center MA 12. (See Figure 8.14.)
2. When the price touches MA 12, go for a short. (See Figure 8.15.)
3. The stop loss is the upper band of the second Bollinger Bands (MA 12, Dev 4). (See Figure 8.16.)
4. The trade will have three profit targets with risk to reward ratios of 1:1, 1:2, and 1:3 respectively. (See Figure 8.17.)

From the short example in Figure 8.17:

Entry price = 0.8214
Stop loss = 0.8260
Profit target 1 = 0.8168
Profit target 2 = 0.8122
Profit target 3 = 0.8076

Forex trading strategy

TREND BOUNCER STRATEGY

Forex trading strategy

Forex trading strategy

The risk for this trade is 46 pips, and the reward is 138 pips if all
three targets are hit. The risk to reward ratio is 1:3, which yields a tidy 9%
return if we take a 3% risk.

FIGURE 8.17 Trade Hits Profit Targets

Strategy Roundup

Understanding how trends move in ebbs and flows allow traders like you and me to identify the direction and timing of our entries. We enter during the “ebb” and let the “flow” ride us to our profit targets.
Unlike the trend rider strategy, the trend bouncer strategy has three predetermined profit targets. Traders who like to bank in profits in various stages prefer this strategy. The strategy is rooted in trend trading. With a momentum indicator like the Bollinger Bands, you will greatly increase your odds at being profitable in the long run.
Remember that smart money typically follows the trend. This strategy helps us to hop on board early when we identify the trend.

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