Simple But Effective Forex Trading Strategy
This trading strategy is a combination of horizontal lines at the level of support or resistance and price action.
The combination of horizontal lines at the support or resistance levels and price action may be one of the forex trading strategies that is simple but effective enough to be applied. (Note: Price action is a way of trading by observing and analyzing the forms of pin bar formation that occurs on the candlestick chart).
After a horizontal line is established for the dominant support and resistance, we wait for the pin bar formation to form around the level.
The Importance of Horizontal Lines
Maybe we feel uncomfortable with the many indicators on the trading chart, and want to be able to trade with as few indicators as possible but quite valid. Well if that’s what we want, maybe try this way, horizontal line and price action. Professional traders always look at important levels on the horizontal line. They already know that these levels are very significant and have an impact on the direction of price movements.
Horizontal lines can be used as a reference to establish stop loss levels, and will be effective when combined with price action by looking at the pin bar that is formed.
Application of Horizontal Lines and Price Action On Trending Market Conditions
Consider the following example, on each swing point we can observe the formation of the pin bar that is formed. In reality, swing points are often accompanied by pin bar formation which indicates a reversal of the current trend. In the case of an uptrend like in this example, the pin bar on the swing point indicates a downtrend correction direction reversal, or commonly called the end of the correction, so the overall trend remains up. For markets that are downtrend, the process that occurs is the opposite.
Application of Horizontal and Price Action Line on Sideway Market Conditions (Range Bound)
For market conditions that are sideway ( range bound ), we just pay close attention to the pin bar formation that is formed at the support and resistance levels (blue circles in the image below). We determine the timing to start the entry if it has really visible signal pin bar that ensures that market conditions are still sideway, and still in the trading range . Stop loss and profit target can be determined at a level close to the support or resistance in accordance with the direction of the entry position we take.
“Event Area ‘On the Horizontal Line
Event area is the area around a horizontal line indicating strong signals for entry based on price action. From the pin bar formation that is formed, there can be a break or retest at a certain price level indicating that the level is significant. For entry it should be confirmed with the pin bar formed.
In the following example, the broken inside bar has a strong signal to sell, after a retest confirming that the horizontal line is true is a significant resistance (blue circle in the figure). We can sell at the level slightly below its retest point.
Trading Example With Horizontal Lines and Price Action
In the following example, EUR / USD is initially sideway at level 1.4100-1.4000 (event area), then break down when pin bar and inside bar are formed. After the retest , the price moves back down.
Notice the pin bar and inside bar that are formed and show the levels where we can entry.
So by combining the support / resistance levels and the pin bars that are formed in the surrounding area, we can know the signals when the right time to enter the market.