Price Trap Breakout Forex Strategy

The Price Trap Breakout forex strategy seeks to capture bullish/bearish signals that appear in a downtrend/uptrend around major support/resistance zones respectively.

Once the setup fits the criteria, then we should be keen on expecting where price got trapped.

Chart Setup

MetaTrader4 Indicators: HMA_v2.ex4 (Input Variable modified; HMA_Period=40) Fibonacci Retracement Tool, PRSI_PCCI.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

Currency Pairs: Any pair

Download

Download the Price Trap Breakout Forex Strategy

Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

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

  1. If the bear trap candlestick pattern (represented by candlesticks 1 & 2 on Fig. 1.0) forms around a major Fibonacci retracement level, it is an indication of upward price pressures i.e. a buy signal.
  2. If the light blue dots of the HMA_v2 custom indicator forms somewhat below the candlesticks, it is a signal to buy the designated currency pair.
  3. If the blue line of the PRSI_PCCI custom indicator break above the 0.00 level, it is a trigger to buy the currency pair of focus.

Stop Loss for Buy Entry: Place stop loss 1 pip below immediate support.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following rules or conditions takes precedence:

  1. If a resistance price pattern form around a Fibonacci level, it could be a clue to a possible weaning bulls pressure, hence an exit or take profit is advised.
  2. If a tomato colored dot of the HMA_v2 custom indicator forms on the activity chart, an exit or take profit is recommended.
  3. If the blue line of the PRSI_PCCI custom indicator break below the 0.00 during a buy alert, bulls power is diminishing, hence an exit or take profit is advised.

Sell Entry Rules

Enter a sell order if the following holds sway:

  1. If the bull trap candlestick pattern (illustrated by candlesticks 1 & 2 on Fig. 1.0) forms around a major Fibonacci retracement level, it is an indication of downward price push i.e. a sell signal.
  2. If the tomato dots of the HMA_v2 custom indicator forms somewhat above the candlesticks, it is a trigger to sell the selected forex pair.
  3. If the blue line of the PRSI_PCCI custom indicator break below the 0.00 level, it is a prompt to sell at once.

Stop Loss for Sell Entry: Place stop loss 1 pip above immediate resistance.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following takes center stage:

  1. If price pattern refuses to break below a Fibonacci level, it could be a clue to a possible weaning bears power, hence an exit or take profit is recommended.
  2. If a light blue dot of the HMA_v2 custom indicator forms on the activity chart during a sell signal, an exit or take profit is recommended.
  3. If the blue line of the PRSI_PCCI custom indicator break above the 0.00 during an ongoing sell alert, bears power is halting, hence an exit or take profit is advised.

Sell Trade Example

Fig. 1.1

Free Download

Download the Price Trap Breakout Forex Strategy

About The Trading Indicators

The HMA_v2 custom indicator displays a dotted line on the chart, wherein the color of the dots are altered in relation to buy/sell signals.

The PRSI_PCCI custom indicator is a technical study that is based on the CCI and RSI indicator.

A bull/bear trap can come in varying forms but at the core of it, we are searching for a candlestick that is extremely bullish/bearish, break the resistance/support zone, and then turns bearish/bullish respectively.