Today, at your request, we will analyze a strategy called “The Swing Point”. The trading system is based on trading “from levels” and allows the trader to work with candlestick patterns that indicate pivot points in the market.
We found this strategy itself on one popular forum and translated it especially for you. Today you will learn:
- What currency instruments can you work with “The Swing Point”;
- Which TF should be chosen for trading this strategy.
- What instruments is it based on, where to get them and how to correctly set them on the chart;
- What signals to enter the market are given by these instruments.
At the end of the article, you can find out about the results of my testing of the TS “The Swing Point”, during which I traded for several months. So let’s get started.
Selection of currency instruments and TF
According to the rules of this system, we can work with the following currency instruments:
- EUR / USD (euro / US dollar);
- NZD / USD (New Zealand dollar / US dollar);
- USD / CAD (US dollar / Canadian dollar);
- XAU / USD (gold);
- USD / JPY (US dollar / Japanese yen);
- GBP / CAD (British pound / Canadian dollar);
- GBP / NZD (British pound / New Zealand dollar).
As for the choice of timeframes for trading, I recommend choosing TF H1. H4. D1. However, the author himself warns that, working on the hourly TF, you will receive less profit.
The Swing Point Tools
The algorithm of this TS is based on data from only two indicators. These are copyright tools, they are not included in the standard MT4 package, or any other terminal. You will need to download them yourself as a ready-made template or separately. The downloaded indicator files with the “* .ex4” extension and the template file with the “* .tpl” extension must be placed in the “Indicators” and “Templates” folders, respectively. Both folders are located in the MT4 root directory, which can be reached from the terminal by following the path “File → Open data directory”.
In our case, we will put two indicators in the “Indicators” folder:
- “Sm3Candle BestlevelsHist_v3.1” is the first tool that plots support / resistance levels on the chart;
- “Sm3Candle SwingPoints_v3.2” is the second tool that marks the places on the chart where candlestick patterns are formed. We will use these patterns to look for market entry points.
Next, let’s briefly talk about how to set these instruments on the chart and get acquainted with their properties.
Setting indicators for “The Swing Point”
You can draw them onto the chart using the usual techniques known to every trader:
- Use the “Navigator” window;
- Install them by following the path “Insert → Indicators → Custom → (tool file)”;
- Download a ready-made tool template for this strategy.
f you want to install them and start trading immediately without wasting time setting up, use a ready-made template. Next, I will give you a link to a video review of this strategy, in the description of which you can take a ready-made template of tools for it. This is how the chart working window will look like in your terminal after installing special tools.
We also see the signals of the second indicator:
- these are blue or red circles showing us the direction for opening deals;
- purple or green dashes indicating the formation of the desired candlestick pattern.
It remains for us to consider the signals given by these indicators and find out the rules for entering them with buy / sell.
Purchase entry rules
- Here we should wait for specific signals. We are interested in a specific combination of three candles. It is this candlestick pattern that we will look for on the chart at significant levels:
- The price should approach a significant support level.
- The low of candle # 3 lies below the level of the lows of candle # 1 and # 2.
- The close of candle 3 is fixed above the price:
- closing of candle # 1, if it is bearish;
- opening of candle number 1, if it is “bullish”.
- We open a buy position at the level:
- opening of candle number 1, if it is “bullish”;
- closing candle number 1, if it is “bearish”.
Set Stop Loss at 50 points at 4 digits or 15 points below the low of candle # 2, choosing which is greater:
if the minimum of candle # 1 is below the minimum of candle # 2, set a Stop equal to 15 points, place it behind the minimum of candle # 1. The average Teik value, in this case, will be about 100-200 points.
When setting Stop Loss, be guided by the support / resistance levels. Big profit can be obtained if candle # 3 closed above candles # 1 and # 2.
The entry rules for selling are similar to those for buying, but they are mutually opposite:
- The price should be at a significant resistance level.
- The high of candle 3 is higher than the highs of the two candles to the left of it.
- The close of candle # 3 is fixed below:
- closing prices of candle # 1, if it is “bullish”;
- the opening prices of candle # 1, if it is bearish.
A sell position should be opened at the level:
- opening of candle # 1, if it is bearish;
- closing candle number 1, if it is “bullish”.
Stop Loss and here we put no more than 50 points or 15 points above the maximum of candle number 2, depending on which we have more:
- If the maximum of candle # 1 is higher than the maximum of candle # 2, then we put the Stop 15 points above the maximum of candle # 1.
The average size of the Take will also be 100-200 points here.
Do not forget to focus on significant support / resistance levels.