Trading terminal: MetaTrader 4.
Currency pairs: any trend, mainly GBPUSD, EURUSD, USDCHF, EURJPY, GBPJPY, XAUUSD.
Indicators : none.
Chart time parameter: daily D1.
The frequency of entry points: once a day.
In our today’s review we will present the simplest, but at the same time profitable and popular trading strategy for Forex traders, which is called Red Green Candle.
What could be better for a trader, especially for a beginner, than a simple and clear trading system with a high rate of profitable transactions? In addition, many probably have heard and understand that the simpler a trading strategy is, the more effective it is. This statement is logical, since a complex trading strategy is difficult to understand and even harder to master, optimize, and also work with it accordingly.
Initially, the system was based on another popular strategy Color Bar, which sold for $ 2,000. Sly sellers decided to make a profit with the new version of the trading strategy by changing only some parameters. But experienced traders immediately noticed the similarities and published trading systems in open access for everyone to learn and start working on a simple strategy.
Features of the trading system for forex Red Green Candle
The main principle of the trading system is the analyst of price changes. What can we say with confidence about price changes? There are two directions, and the trend is always striving for continuation. It is based on these two most obvious postulates that we will make a profit using the current trading system.
Trading strategy is designed for a primitive method, trading in the direction of the previous day after the turn. Thus, for trading, open the daily chart and look for a trading instrument whose daily candle closed in the opposite direction of the previous daily candle.
Rules for entering the purchase
We are looking for a trading instrument with the last daily candle closed in a bullish direction, considering that the previous day was descending. We place a pending Buy Stop order 1 point above the high point of the previous upward daily candle. We put a protective stop-loss under the low of the day signal candle (bull) with a margin of 3-5 points. The take profit in a trade will be equal to the same distance from the entry point to the stop. If the established order did not work during the day, we remove the order and look for new entry points.
Rules of entry into the sale
To enter a downward position, one should find an asset whose daily candlestick closed with a bearish bar (red) and the previous one was bullish (green). Set a pending order to sell Sell Stop 1 point below the low of the daily signal candle. A protective stop order is placed 3-5 points higher than another extremum of a signal candle, i.e. above the high red daily candle. The goal in the transaction will be similar to the stop-loss level, so we measure the distance from the entry point to the stop and set aside the same in the downward direction, where the take order will be set. If the entry order was not fulfilled in a day, then we remove it and look for other options for transactions.
Risk Management Rules for the Red Green Candle Strategy
Taking into account the possibility of simultaneous trading in different instruments, the lot size of positions should be divided in such a way that the daily risk does not exceed 10% of the deposit amount. Thus, if you decide to enter into transactions for 5 different currency pairs, no more than 2% of the amount of funds should be used at each entrance.
To close a position, also when using the Red-Green Candle strategy, the option of placing a take profit at a factor of 168 along the Fibonacci lines will be suitable. In this case, the line should be from the point of stop to the point of entry.
Also, after passing the price of this mark, you can transfer the stop loss to breakeven.
If a new entry signal was formed in the opposite position, despite the fact that the open deal has not yet completed, you can enter the second deal, taking into account compliance with all the rules of the system and MM.
During the publication of important macroeconomic data, as well as the release of any news, you can increase the level of take profit to two stop-loss distances.
If you wish, you can use at your own risk and risk, various methods of deposit acceleration . For example, an increase of twice the used lot, with losses for three consecutive days or a similar increase in lot if two days in a row are closed with a profit.
On Friday evening you should not open positions, and remove all pending orders, since from the beginning of the new week there can be a gap on the charts.
If one of the day’s candles, did not quite reach the take profit, and closed, then it is better to get out of the transaction and take a guaranteed profit.
The Green-Red Candle trading strategy is representative of the simplest, highly effective technique that is based on the continuation of the previous day’s trend. This trading system is suitable for novice traders who, due to lack of experience, will not be able to work properly with complex strategies, as well as those who combine trading with other activities and cannot watch the terminal around the clock.