Support and resistance level is the most effective area to find reversal signal on Forex market. In this strategy, we will discuss about this effective forex strategy with the help of CCI indicator. Above CCI 100 level, it indicates overbought area and below 100 level, it indicates oversold area. This strategy provides buy signal from support & oversold area and sell signals from overbought & resistance area.
1. CCI Click here for CCI indicator setup process
2. You need to know about support, resistance level. Read below articles to know how to draw and use support & resistance level.
How to Identify & Implement Support and Resistance Levels?
5 Simple Rules to Plot Perfect Support and Resistance Price Levels
9 Points to Remember while using Support and Resistance Price Levels
Buy Entry Setup Rules:
☑ First draw support level correctly.
☑ Support level should be strong on higher time frame.
☑ Then wait for price to come on the support level and pull back from the support.
☑ Need to formed reversal bullish candle on the support level such as pin bar, bullish engulfing or an others reversal bullish candles.
☑ CCI need to cross -100 level from lower to upper.
☑ If CCI starts moving up towards upside from oversold area, then it indicates buy signals.
Example of Buy Setup:
In the above example, we can see, price bounce back from support level and formed pin bar candle on the first setup. At the same time, CCI started upside movement which indicates buy signal according to this strategy. 280 pips was gained from that setup. Second and third setup was also profitable.
Sell Entry Setup Rules:
☑ First draw resistance level correctly.
☑ Resistance level should be strong on higher time frame.
☑ Then wait for price to come on the resistance level and reject from the resistance.
☑ Need to formed reversal bearish candle on the resistance level such as pin bar, bearish engulfing or an others reversal bearish candles.
☑ CCI need to cross 100 level from upper to lower.
☑ If CCI starts moving down towards downside from overbought area, then it indicates sell signals.
Example of Sell Setup:
In the above example, we can see that market price touched resistance level and formed bearish pattern and CCI also started movement towards downside. 240 pips was profit from first setup and others were also profitable according this simple strategy.
H1, H4. Can be used for scalping on shorter time frame.
All trendy pair.
Take profit and stop loss:
Take profit can higher for H4, for H1 or below, you can set 30-100 pips.
Stop loss can be set as 25-60 pips. You can set Stop loss on swing high or low.
This strategy is based on reversal trading system. So you need to know well about reversal candlestick pattern. If you can capture both condition, then you can surely make profit from this strategy. Remember one thing, you must follow money management rules
while following this strategy.
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