2 Candle Gapping Forex Trading Strategy

The 2 Candle Gapping forex trading strategy is designed to catch breakouts in an efficient manner and by doing so, currency traders can profit immensely.

This breakout pattern is able to decode declines and appreciation in price with a high accuracy rate.

Chart Setup

MetaTrader4 Indicators: lukas1_Arrows_Curves.ex4 (Input Variable modified; SSP=12), MACD_Cross.ex4 (default setting)

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day

Recommended Trading Sessions: Any (24 hour trading)

Currency Pairs: Any pair

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Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Initiate a buy order if the following indicator or chart pattern gets displayed:

  1. If gaps appears on the activity chart, subsequently followed by two white or bullish candles (labelled 1 & 2) as seen on Fig. 1.0, it is signaling that the market is experiencing an overall bullish sentiment, thus supporting a buy entry.
  2. If the blue sphere of the MACD_Cross.ex4 custom indicator aligns below price bars, it is an indication that price is being pushed higher, as such a signal to buy the designated currency pair.
  3. If the blue upward pointing arrow of the lukas1_Arrows_Curves custom indicator pops up somewhat below the candlesticks with price trading around the upper outer band of the indicator, it is a signal to buy the fx pair of focus.

Stop Loss for Buy Entry: Place stop loss below trading support.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit once the following rules or conditions takes center stage:

  1. If a red sphere of the MACD_Cross.ex4 custom indicator pops up above the price bars as seen on Fig. 1.0, it is an indication of weaning bulls power, hence a trigger to exit or take profit at once.
  2. If the red downward pointing arrow of the lukas1_Arrows_Curves custom indicator is sighted after a buy order has been initiated, it is a trigger to exit or take profit forthwith.

Sell Entry Rules

Initiate a sell entry if the following holds true:

  1. If gaps appears on the activity chart, subsequently followed by two black or bearish candles (labelled 1 & 2) as illustrated on Fig. 1.1, it is pointing to an overall bearish market sentiment, thus a sell trigger.
  2. If the red sphere of the MACD_Cross.ex4 custom indicator aligns above the candlesticks, it is notifying traders to a possible downward price move, hence a sell alert.
  3. If the red downward pointing arrow of the lukas1_Arrows_Curves custom indicator pops up somewhat above the candlesticks with price trading around the lower outer band of the indicator, it is a signal to sell the asset of choice.

Stop Loss for Sell Entry: Place stop loss above trading resistance.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following holds sway:

  1. If a blue sphere of the MACD_Cross.ex4 custom indicator takes position below the price bars as seen on Fig. 1.1, it is an indication of halting bears power, hence a trigger to exit or take profit at once.
  2. If the blue upward pointing arrow of the lukas1_Arrows_Curves custom indicator pops up during a sell order, it is a trigger to exit or take profit without delay.

Sell Trade Example

Fig. 1.1

Free Download

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About The Trading Indicators

The lukas1_Arrows_Curves.ex4 is a custom indicator that displays a band around price, with arrows (blue and red) used in denoting trends (bullish and bearish).

The MACD_Cross.ex4 custom indicator is a modified Moving Average Convergence/Divergence oscillator that offers the best of both momentum and trend following, by deploying the signal line crossovers.

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