In a previous article we explained some basic day trading strategies for Forex and other markets, mainly based on price action.

Continuing with the series on daytrading strategies based exclusively on Price Action (the most common price patterns), we are now going to present another series of strategies based on classic price patterns of technical analysis.

You can access the first article in the series at the following link: The Best Forex Daytrading Strategies I

Day Trading Strategy # 6: (Trading with momentum in the middle of a range)

-Price pattern detected: If the market is trending up and a price range forms, we will look for a candlestick that closes higher (bullish candlestick) within the range. Similarly, if the previous trend is bearish, we will look for a candlestick that closes lower (bearish candlestick) within the range. Then we wait for the price to make a brief retracement, if this retracement occurs there are high chances that it will reach the opposite level of the range.

-Entry order type: In the case of an uptrend, we will place a buy limit order slightly below the closing price of the candlestick that closes higher. Conversely, in the case of a downtrend, we will place a sell limit order slightly above the closing price of the candlestick that closes lower. If after a few hours the price does not reach the limit order, we will cancel it.

-Profit Target: The take profit target is placed on the next support (sell trade) or resistance (buy trade).

-Stop Loss: It is placed at a level that allows a profit to loss ratio of 1:1 or higher.

Example of the strategy in the EUR/AUD

After a slight rise, the price staked in the range between 1.5300 and 1.6100. The currency pair forms a powerful candlestick that closes higher, also exceeding previous highs and closing at 1.5779. At that time we placed a buy limit order 30 pips below at 1.5749 with a take profit target at 1.6050 and the stop loss below 1.5700.

Trading strategy with momentum

Daily price chart of EUR/AUD with a buy trade opened in the middle of a price range

Day trading Strategy # 7: (Key Reversal in the Main Trend Direction)

-Price pattern detected: In this strategy, we look for a price reversal candlestick that closes in the direction of the main trend after a price retracement.

-Entry order type: In the case of a bullish trend, we will place a buy stop order above the maximum price of the Key Reversal candlestick, while if the previous trend is bearish we will place a sell stop order below the minimum price reached by the reversal candlestick. If after a few hours the price does not reach the stop order, we will cancel it.

-Profit Target: The take profit target is placed on the next support (sell trade) or resistance (buy trade).

-Stop Loss: It is placed at a level that allows a profit to loss ratio of 2:1 or higher.

Example of the strategy in the EUR/AUD

After a sharp rise in the price, the market makes a bearish correction and subsequently resumes its upward trend. In the last impulsive movement a Key Reversal candlestick is formed that has a significant wick to the downside. However, the candlestick manages to close higher at 1.5715 with a maximum at 1.5740. We place a buy stop order at 1.5741 with a profit target slightly below 1.6000 (next resistance) and a tight stop loss at 1.5690 (slightly below the support).  In this way, the trade offers a profit to loss ratio of 5:1.

Buy trade in the direction of the primary trend

Daily price chart of EUR/AUD with a buy trade opened in the direction of the main trend

Day Trading Strategy # 8: (Double bottom pattern with Inside Day)

-Price pattern detected: In this methodology we look for an Inside Day after a possible Double Bottom pattern occurs. It is a low probability pattern, although normally the benefit vs. risk makes it worth trading.

-Entry order type: Once the Inside Day occurs, we place a buy stop order at the high of the previous candlestick. If after a few hours the price does not reach the buy stop order, we cancel it.

-Profit Target: The take profit target is placed on the next important resistance.

-Stop Loss: It is placed at a level that allows a profit to loss ratio of 2:1 or higher.

Example of the strategy in the GBP/CHF

In this example we see the formation of a possible double bottom pattern in the 1.4000 to 1.4100 zone along with an Inside Day after the price bounced higher from lows. We placed a buy stop order at the high of the candlestick prior to the Inside Day at 1.4207 with a profit target of 1.4600 and a stop loss below the low of the candlestick that has reached the last low at 1.3985. The profit to loss ratio of this trade is 2:1.

Buy trade with the double bottom strategy

Daily price chart of GBP/CHF with a buy trade opened with a Double Bottom pattern

Day Trading Strategy #9: (Triple Key Reversal within a Price Channel)

-Price pattern detected: For this trading strategy we look for the formation of 3 Key Reversal candlesticks that are touching the bottom line in a bullish price channel or the top line of a bearish channel.

-Entry order type: In the third Key Reversal candlestick that is formed, we place a buy stop order at the maximum price (bullish case) or a sell stop order at the minimum of the key reversal candlestick (bearish case). If after a few hours the stop order is not reached, we cancel it.

-Profit Target: The take profit target is placed on the next important resistance (buy trade) or support (sell trade).

-Stop Loss: It is placed at a level that allows a profit to loss ratio of 2:1 or higher.

Example of the strategy in the GBP/AUD

As we can see, the currency pair is in a clear downtrend moving within a bearish price channel. In the last periods, three Key Reversals candlesticks have been formed, so we place a sell stop order at the low of the candlestick at 2.0316, with the take profit target at 2.0000 (last minimum reached within the channel) and a stop loss at 2.0425. This gives us a profit to loss ratio slightly higher than 3:1.

Buy trade with a price channel

Daily price chart of GBP/AUD with a sell trade opened inside a bearish price channel

Day Trading Strategy #10: (Double Key Reversal with Inside Bar)

-Price pattern detected: For this trading strategy we seek the formation of 2 Key Reversals candlesticks in a consolidation area and then an Inside Bar.

-Entry order type: We place a buy stop order at the inside bar high if the previous trend is bullish. Likewise, if the preceding trend is bearish, we place a sell stop order at the inside bar low. If after a few hours the stop order is not reached, we cancel it.

-Profit Target: The take profit target is placed on the next important resistance (buy trade) or support (sell trade).

-Stop Loss: It is placed at a level that allows a profit to loss ratio of 2:1 or higher.

Example of the strategy in the AUD/USD

The price is in a congestion zone between 0.7000 and 0.7150, where two Key Reversals candlesticks are formed within the range in which the market is consolidating. Right after the second Key Reversal an Inside Bar is formed where we place a buy stop order at the maximum located at 0.7128, with a profit target at 0.7250 (next resistance) and a stop loss located slightly below the Inside Bar minimum at 0.7060. The profit to loss ratio of this trade is close to 2:1.

Inside bar trading strategy

Daily price chart of AUD/USD with a buy trade opened with the formation of an inside bar