The pattern trader forex trading strategy is a 100% price action trading system that can be used as a set-and-forget type of trading strategy, especially if you are a trader that doesn’t have time to sit and monitor your open trades.
The idea of the forex pattern trader trading strategy comes from reading some of Mark Shawzin’s forex trading strategies and techniques.
The best thing about the pattern trader forex trading strategy is that it is based on the daily chart timeframe, and all you need to do each day is to check if the forex trading setup conditions are met, place your chart pending order, and walk away.
So What Is The Forex Pattern Trader Trading Strategy?
The pattern trader strategy is a reversal continuation type of trading system. What do I mean by that?
Well, you look for a trend to reverse and then look as the forex market trend change is confirmed; you look for an entry signal to buy or sell after the market trend confirmation has been made. To do that, these two things must fall into the right place in that specific order:
Trend Reversals Off Major Chart Support And Resistance Levels.
And that is done by explicitly looking for forex chart patterns like:
- Double tops, double bottoms, triple bottoms, triple tops, etc.
- Significant support and resistance levels etc.
- price channels (horizontal or diagonal)
- head and shoulder patterns
Daily Inside Bar (DIB) Or The Chart Pin Bar (Trade Entry Signals)
Once the price bounces off these primary reversal levels, the trend is reversing. Do not rush in to get into a trade yet.
It would be best to wait for any of these two candlesticks to form: a daily inside bar or a pin bar.
You will use any of these candlesticks as your signal to place your pending buy stop order or pending sell stop order.
These daily inside bar/pin bar chart candles can take anywhere from 1 day to even seven days to form after the price reverses, so you have to be patient and wait. You can use the forex pattern trader strategy on any currency pair.
Timeframes Required To Trade The Pattern Trader Strategy
It is strongly suggested that you only can use the forex daily timeframe.
There tends to be a lot of “noise” on time frames more minor than the daily timeframe.
The Pattern Trader Forex Trading Strategy Setup Example (Buy Setup)
Here’s an example of the forex pattern trader setup on the daily chart of USDCHF:
- Note that the price bounced off a significant support zone/level, and you can see the formation of triple bottoms as a confirmation.
- Price rallied upward for a while and then temporarily retracted, and the daily chart inside the bar was formed as a result.
- The breakout of the daily chart inside the bar saw prices move up 390 pips!
The Forex Pattern Trader Trading Strategy Sell Setup Example
Here’s an example of the pattern trader strategy sell setup on the daily trading chart of AUDUSD:
- note the formation of the forex double top
- price confirms by moving downward
- price slows down a bit with the formation of the daily chart inside the bar
- Breakout of the DIB sees price moving down for about 300 pips!
Advantages of The Pattern Trader Forex Trading Strategy
- Trend reversal is “confirmed” from major chart price reversal zones before a trade is placed.
- It can be a setup and forget type of trading strategy. You need a few minutes to check the daily charts for trading setups, place your pending orders and walk away. Check later to see if your forex market order has been activated etc. It is a perfect forex trading strategy for those who have busy day jobs and cannot sit and monitor their open trades on their laptop/computer.
- Potential to make 100’s of pips good fx profit in each trade because this is based on the daily chart.
- Reasonable risk: reward ratio(R: R).
Disadvantages of The The Forex Pattern Trader Trading Strategy
- Price will always go where it wants to go, so expect to have losses in this trading strategy; it is not the holy grail.