#1 The strategy seeks trading opportunities through the combination of fundamental and technical analysis.
#2 It requires a trader to analyse the fundamental aspects of the traded currency to establish mid to long term trend first. Then it uses the price momentum,support and a resistance zones to spot market reversals.
#3 The strategy allows to enter the market at low risk and provide a large profit potential through advanced money management.
#4 All trades are planned in advance to give a trader enough time to enter the market every time. Most trades are placed as pending limit orders often executed during London’s session.
#5 The strategy works well on all major US Dollar crosses. It generates between 1-5 signals per month. All trades are entered and held for anything up to several weeks depending on the price action and the market fundamentals.
#6 The strategy has been traded in live markets for the last 15 months and its performance is clearly documented in the performance section
The strategy uses a few indicators only:
1. Stochastic Oscillator ( multi-time frame)
2. Support and resistance
3. Fibonacci retracements
After establishing your bias and long term trend through Commitments of Traders report, it’s time to switch to daily charts and look for a price reversal phase.
To define the price reversal you need to analyse the price on daily charts first and answer 3 simple questions:
1. Has the market been clearly falling or rallying recently?
2. Is the weekly and daily stochastic showing overbought or oversold levels on daily charts?
3. Is the price trading around majorsupport or resistance zones?
Example 1: USDJPY – Daily chart
In the USDJPY chart above you can see four examples of the price being in a reversal phase.
Setup #1 on the chart Weekly and daily stochastics are above 70 zone and the market has been in a substantial rally prior to that. A trader should be marking this zone as bearish and switching to intraday charts to seek a bearish reversal price pattern.
Setup #2 on the chart Similar to setup #1, price, after a few days of rally, it came back up to an overbought stochastics zone ( above 70) and is now trading around a major resistance zone. A trader will be marking this area as bearish and switching to intraday charts to seek a bearish reversal price pattern.
Setup #3 on the chart Once again, the momentum is now overbought and the price is forming a clear resistance. A trader will be marking this area as bearish and switching to intraday charts to seek a bearish reversal pattern.
Setup #4 on the chart The price declined and reached a support at 117 area. The momentum is now oversold. A trader will be marking this area as bullish and switching to intraday charts to seek a bullish reversal price pattern.
The above setups will be attempted only in the direction of the trend established by the trader during a fundamental analysis. The fundamentals were pointing to the downside in USDJPY. The first 3 setups would be considered and the 4th would be either ignored or entered as a counter trend position with a lower lot size.