A five minute time frame is best for this strategy. Currency pairs such as EUR / USD, EUR / JPY, GBP / USD and USD / JPY were selected as traded instruments. The indicators used in the strategy are standard and can be found in the list of technical indicators of the Metatrader 4 terminal.
The most important thing in this strategy is that the so-called pin bar is defined on the chart. It is defined as follows.
Most often, this pin bar is formed either at the tops or in the troughs of the trend. A pin bar is characterized by a very long shadow – either up or down, depending on the trend. If the pin bar is at the top, then the shadow should be as long as possible. In the case where the pin bar is formed in a trough, a long down shadow is required. The body of the pin bar should be as narrow as possible, that is, the opening and closing prices should be extremely close to each other. That is, the candlestick should look like the so-called “dodge”.
The following technical indicators will need to be set on the chart:
1. RSI with a settlement period 6. We need it to determine divergences.
2. Bollinger Bands indicator. It will be needed in order to find out about the existence of a trend, as well as to generate signals for deals.
3. Simple moving average with an averaging period of 50.
4. Exponential moving average with averaging period of 21
The strategy under consideration will generate two types of signals. The first signal is the presence of a formed pin bar on the chart. It can be formed both by trend movement and against the trend.
The second type of signals will be divergences. In the event of divergence, it is understood that a break in the existing trend may soon appear. At the same time, it is quite obvious that it is best when both types of signals coincide with each other.
Stop-loss in this strategy is set at the nearest extremes, and take-profit should be about 15 points.