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5# Extreme Volatility Trading System

Submit by Joy22

 

In this strategy, we are going to look for good volatility. It

is a very simple strategy but you must follow the rules in

order to maximize your profits and minimize your losses.

When during a trading day, suddenly a big candle appears

it means that the volatility increased. So, there’s a good

chance that a good trend starts to develop or gains

strength. Usually, this trend will be in the same direction as

the candle where the volatility appeared.

In conjunction to this factor, if this candle is breaking the

high of the day or the low of the day then, the probability

of a strong trend is even higher. If we believe a good trend

is developing, that means we need to search for trades in

order to profit from our beliefs.

What you need to do in order to follow this strategy is to

begin to look at the size of the candles that are now

beating a new high or new low for the day.

Rules:

When you see a candle that is big (much bigger than every

candles of the day until now) – but doesn’t have 100 pips

or more of length – and is now making a new high for the

day, you should enter a buy order 1 pip above the high of

the previous candle. You will also enter a stop loss order 1

pip below the low of the same candle.


When you see a big candle (much bigger than every candles of the day until now) – but doesn’t have 100 pips or more of length – and is now making a new low for the day, you should enter a short sell order 1 pip below the low of the previous candle. You will also enter a stop loss order 1 pip above the high of the same candle. Please note that the orders must be placed only once the big volatility candle is finished.

You must exit the trade if your stop loss is reached or if the Awesome indicator gives you an exit signal. As usual, don’t look just at prices; look at some indicator to confirm your trade. For this strategy, we will use the Awesome indicator. As you will see in the examples

presented below, you can use the Awesome indicator to confirm the direction of the trend and to refine your entry and exit points.

Let’s take a look at some examples:

Entry: Buy GBP/USD at 1.7942

Stop Loss: 1 pip below the high volatility candle

Exit: 1.8010

Profit: 68 pips

In this GBP/USD 15 minutes chart, you can see the big

candle that made a new high for the day. The horizontal

line at the top of that high volatility candle represents your

entry opportunity. You should enter a buy order 1 pip

above the high of this candle, at 1.7942. If you take a look

at the Awesome indicator in the bottom of the chart, you

see that it is already above the centerline but it is still

rising; so, the uptrend is healthy. As soon as you enter the

trade, you should place a stop loss order 1 pip below the high volatility candle low. This will protect you against

severe losses.

When you enter the trade, you should closely monitor the

Awesome indicator. This indicator will help you decide when

it is time to get out of the trade. You should exit the

position at 1.8010, where the indicator turns red. This

means that bears are gaining strength and the price will

probably fall. As you don’t want to give your profits away,

exit the trade with 68 pips profit.

 

Entry: Short GBP/USD at 1.7692

Stop Loss: 1 pip above the high volatility candle

Exit: 1.7614

Profit: 78 pips

The horizontal line on the chart marks the new low of the

day reached by a high volatility candle. This candle had

almost 100 pips in volatility, near our limits. What is

particular interesting about this candle is that it has a big

upper shadow. This means that, at some point, the bulls

had more power than the bears, but suddenly, they lost

their power, and were smashed down by bears. This is one

of the best opportunities you can find in this strategy.

You should place a short sell order for GBP/USD at 1.7692,

just 1 pip below the new low of the day. If you notice, the

Awesome indicator is pointing in the same direction of your

trade. Don’t forget to place your stop loss order 1 pip above

the candle that just made the new low for the day.

When the Awesome indicator turns green, this means that

you should exit your position. This happens at 1.7614

leaving you with 78 pips profit.

 

 

Entry: Short GBP/USD at 1.7306

Stop Loss: 1 pip above the high volatility candle

Exit: 1.7260

Profit: 46 pips

As you can see on the GBP/USD 15 minutes chart, the

horizontal line indicates the new low of the day made by

the high volatility candle. As you already know, you should

enter your short sell order 1 pip below the new low of the

day, at 1.7306. If you look at the Awesome indicator, you

see that it is below its centerline but it’s red, meaning the

trend is down. This helps us to acknowledge that we are on

the right side of the trade.You should also insert a stop loss order 1 pip above the

high of the high volatility candle in order to protect your

capital.

At the moment you enter the trade, you must closely watch

the Awesome indicator. When it turns green, it is time to

exit the trade. This happened at 1.7260. Time to close the

trade with 46 pips profit.

 

 

 

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Forex Volatility Strategies