1-2-3-4 Reversal Trading Strategy (Part 2 of 2 Bearish)
1-2-3-4 Forex Reversal Trading Strategy
A 1-2-3-4 reversal chart pattern is build up of 4 definable points, known as point 1, 2 , 3 and 4. A typical 1-2-3-4 chart pattern is best traded after a strong currency pair up - or downtrend and can be defined by an easy set of trading rules.
A trader can confirm the reversal trade using a technical indicator such as DMI or MACD. (or other ones)
1-2-3-4 Basic Rules for Short Trades
Point (1): The high in an up trending currency market.
Point (2): A downward correction in the up trend, the lowest bar in the correction before the price moves back up to point (3).
Point (3): The high in the move up from Point (2) but a failure to make a new higher high(Point 1).
Point (4): Go short 1 pip below point (2)
Daily chart of GBPAUD shows and example of a sell 1-2-3-4 Reversal Trading Strategy, with a 1: 5+ Risk Reward setup. 50 pip stop and 285 target.
This would have been a six day trade, but can use this same strategy on lower time frames. I use the Fib Extension tool for profit targets, help alot.
A 1-2-3-4 reversal chart pattern is build up of 4 definable points, known as point 1, 2 , 3 and 4. A typical 1-2-3-4 chart pattern is best traded after a strong currency pair up - or downtrend and can be defined by an easy set of trading rules.
A trader can confirm the reversal trade using a technical indicator such as DMI or MACD. (or other ones)
1-2-3-4 Basic Rules for Short Trades
Point (1): The high in an up trending currency market.
Point (2): A downward correction in the up trend, the lowest bar in the correction before the price moves back up to point (3).
Point (3): The high in the move up from Point (2) but a failure to make a new higher high(Point 1).
Point (4): Go short 1 pip below point (2)
Daily chart of GBPAUD shows and example of a sell 1-2-3-4 Reversal Trading Strategy, with a 1: 5+ Risk Reward setup. 50 pip stop and 285 target.
This would have been a six day trade, but can use this same strategy on lower time frames. I use the Fib Extension tool for profit targets, help alot.