Simple reversal strategy on h4/daily

[Stefan]

The strategy is made by Mfx. I only translate it from his original thread from Romanian into English. Also, I will only translate the strategy and not all the posts from the original thread. If you have questions, please put them here. I can not guarantee that Mfx will answer but if there is activity here, I'm sure that somebody will answer

So, watch this thread and the strategy will come in the following days.

[Stefan]

How this system works?

We trade between the lower and upper bollinger bands. We go with the trend from h4/daily and we don't go out from a transaction until we don't see a reversal signal that needs to be confirmed.

 

What is a reversal signal?

1) candlestick reversal patterns (evening/morning star, harami, engufling, etc)

2) fibbo ratios and fibo extensions with the corrective/impulsive waves and fibo clusters

3) classic patterns (head and shoulders, triangle, channel, wedge)

4) gartley/scott carney/pesavento patterns

5) we use gann formula to analyze the price: P=t^2 (price equal time square). This make this analysis using 2 known reversal methods: pyrapoint and dynamic gann levels

 

All of those points will be explained in the following posts.

[Stefan]

What we need to do for opening/closing trades?

1) we check for overbought/oversold conditions

If those conditions exists or not, we move only the SL. I will give an example later. If ob/os conditions exists, we analyze the chart in more details because the price may be forced to reverse.

2) we check for divergences on different oscillators. Divergences appear at the end of a large movement, so we need to pay attention to them. This can predict and confirm a price reversal. If we find divergences we don't need to do something special. We only need to narrow the SL and pay more attention to the transaction, the price can reverse anytime.

3) we look to see if we have reversal conditions by looking for candlestick patterns and by measuring price segments with fibo

4) if we have reversal patterns, we close the previous transaction and we open another one in the opposite direction. We set SL behind the pattern. TP will be set to a fibo target or as wide as we can (+500, +1000 pips), and we will modify it when the profit goes up ad passes certain fibo ratios.

5) if the reversal pattern was not good, we reenter in the previous transaction, following the previous trend. But we lower the risk because we already have ob/os conditions and we need to pay attention. On the next reversal pattern we do again the points 3), 4) and 5)

 

I hope that tomorrow I will have some time to translate more. Once again, sorry if my English is not so good.

[Stefan]

How to see the ob/os conditions? What indicators we use?

1) bollinger bands - when the price is around one of the lower or upper bollinger bands, the price is (or will be) ob/os

2) starc bands indicator is similar with bollinger bands

3) williams' percent range (level -20 for ob and level -80 for os; levels -5 and -95 are critical, the price can reverse anytime)

4) stochastic (5,3,3) (level 80 for ob and 20 for os) - if the levels are closer to 0 or 100, the conditions are more critical)

5) CCI - in the manual is written 100/-100 for ob/os conditions. Mfx looks for +200, +250 for ob and -200, -250 for os