I am looking at trading the DAX today on the 4-hour time frame.
Yesterday, we saw a major drop from the top of the daily resistance level. Price dropped around 2.5%.
As we are still trending upwards and making higher highs and higher lows, we are now looking for an opportunity to go long.
I have been testing a new strategy involving Bolinger bands, a fib retracement which I use to find my entry, and a fib extension which I use to find my targets. This might be a great time to test it out in a live market.
THE LONG SETUP
I like to wait for the price to pierce the bottom of the Bollinger bands. Once I see that price has pierced it, I then look for some sort of reversal candle. Something like a DOJI candle. If I see this, I then wait for the next candle to be a bullish engulfing candle, confirming that bulls are indeed buying in this area.
Once this 4-hour engulfing candle closes, I throw on the fib retracement tool from the bottom of the engulfing candle to the top. I wait for the price to retrace back to the 0.236 level. This will become my entry zone. Once the price retraces to this level, this is where I will go long. I then put on the fib extension tool.
This tool has three clicks. The first click is at the bottom of the engulfing candle, the second click is at the top of the engulfing candle. The third and last click is just a horizontal extension of the second click moved out to the right so we can see the levels.
Now normally, these two levels that appear on the chart can be used for two possible targets. However, I like to use the middle Bollinger band as a guide for a target as well as the top of the Bolinger bands. But, we need to get a minimum of a one to two risk to reward. If the top level coincides with the 1.618 fib level, then that’s perfect confluence.
I normally place my stop a few pips below the bottom of the engulfing candle.
Now, I do not like pin-pointing bottoms. This is why this strategy needs to be trend following. The engulfing candle helps confirm that the bulls are still intact. I would also like to see the engulfing candle close above the yellow resistance zone, although it doesn’t have to. However, if it does, this will show even further confluence to this setup.
As I write this, the current 4-hour candle has around 50 minutes left until it closes.
Let's watch and see what happens with this.
Hope you all have a good Thursday.
See you all on the next one.
The Vortex Trader.
Yesterday, we saw a major drop from the top of the daily resistance level. Price dropped around 2.5%.
As we are still trending upwards and making higher highs and higher lows, we are now looking for an opportunity to go long.
I have been testing a new strategy involving Bolinger bands, a fib retracement which I use to find my entry, and a fib extension which I use to find my targets. This might be a great time to test it out in a live market.
THE LONG SETUP
I like to wait for the price to pierce the bottom of the Bollinger bands. Once I see that price has pierced it, I then look for some sort of reversal candle. Something like a DOJI candle. If I see this, I then wait for the next candle to be a bullish engulfing candle, confirming that bulls are indeed buying in this area.
Once this 4-hour engulfing candle closes, I throw on the fib retracement tool from the bottom of the engulfing candle to the top. I wait for the price to retrace back to the 0.236 level. This will become my entry zone. Once the price retraces to this level, this is where I will go long. I then put on the fib extension tool.
This tool has three clicks. The first click is at the bottom of the engulfing candle, the second click is at the top of the engulfing candle. The third and last click is just a horizontal extension of the second click moved out to the right so we can see the levels.
Now normally, these two levels that appear on the chart can be used for two possible targets. However, I like to use the middle Bollinger band as a guide for a target as well as the top of the Bolinger bands. But, we need to get a minimum of a one to two risk to reward. If the top level coincides with the 1.618 fib level, then that’s perfect confluence.
I normally place my stop a few pips below the bottom of the engulfing candle.
Now, I do not like pin-pointing bottoms. This is why this strategy needs to be trend following. The engulfing candle helps confirm that the bulls are still intact. I would also like to see the engulfing candle close above the yellow resistance zone, although it doesn’t have to. However, if it does, this will show even further confluence to this setup.
As I write this, the current 4-hour candle has around 50 minutes left until it closes.
Let's watch and see what happens with this.
Hope you all have a good Thursday.
See you all on the next one.
The Vortex Trader.