It is well-known that the candlestick analysis is an excellent complement to other analytical methods of trading at Forex; however, not many strategies are based solely on this method of analysis. Regardless, I believe the strategy “Two candlesticks” will find supporters, and may be some more strategies will be invented on the basis of the candlestick analysis.

This strategy is applicable for all trading instruments. Daily interval is the basic time interval; and, this strategy also helps achieve good results on the charts H1 and H4.

Conditions for opening sell transaction


Trading strategy based on the pattern “Two Candlesticks”

  • In a lull period in the market (3-4 preceding candlesticks are in the sideways channel) sharp impulsive upward movement evolves, forming a white candlestick, the body of which is bigger in size than that of the preceding candlesticks. Or, tails of the candlesticks are either too small compared to the body, or they do not exist at all.
  • On the next candlestick we can observe similar impulsive movement downwards. The size of the candle body is comparable to the size of the first candlestick. At the moment of closure of this candlestick the desired candlestick pattern is formed.
  • After that we place a Sell Limit at the Fibonacci level 50%, which is stretched from the maximum of the candlestick to the minimum.
  • Stop Loss is placed at the maximum of the candlestick pattern.
  • Take Profit is set at the distance equal to the body of the black candlestick measured from the entry point to the market.
  • The order shall be activated not later than the next 3-4 candlesticks have been formed; otherwise the order is cancelled.

Conditions for opening a Buy transaction


Trading strategy based on the pattern “Two Candlesticks”

  • In a lull period in the market (3-4 preceding candlesticks are in the sideways channel) impulsive sharp downward movement evolves, forming a black candlestick. The body size of this candlestick is bigger than that of the previous candlestick. Tails of the candles are either too small compared to the body, or they do not exist at all.
  • On the next candlestick we can observe similar impulsive movement in the opposite direction. The size of the candle body is comparable to the size of the first candlestick. At the moment of closure of this candlestick the desired candlestick pattern is formed.
  • On the next candlestick we can observe similar impulsive movement in the opposite direction. The size of the candle body is comparable to the size of the first candlestick. At the moment of closure of this candlestick the desired candlestick pattern is formed.
  • Stop Loss is placed at the minimum of the candlestick pattern.
  • Take Profit is set at the distance equal to the body of the white candlestick measured from the entry point to the market.
  • Activation of the order shall take place not later than the formation of the next 3-4 candlesticks; otherwise the order is cancelled.

Supplement

  • It is possible to apply more aggressive strategy. In order to increase profit gained by utilizing a candlestick pattern, we can place the second order at the Fibonacci level of 38.2%.
  • Stop-Loss of the second order is placed at the Fibonacci level of 76.4%.
  • Take profit, as well as the transactions, is placed from the level of 50%.