Donchian Channel KVO Forex Scalping Strategy

0
1138
Donchian Channel KVO Forex Scalping Strategy

Trading strategies could be classified based on a trader’s holding period, the timeframe being traded, or the average targeted pips gained. Trading strategies could either be scalping, day trading, swing trading and position trading.

Scalping is a type of strategy wherein traders aim for small quick profits. Scalpers would usually trade on the lower timeframes, such as the 1-minute, 5-minute or 15-minute charts. Trades are often held for just a few minutes at a time.

Day Trading is held a notch longer than scalping. With Day Trading, traders would trade a security, commodity, or a currency and close the trade within a day. This allows for a bit more room for price to move, allowing traders to earn a few more pips.

Swing Trading is held much longer. Swing traders would usually trade on the 4-hour or daily charts and would hold trades for a few days to more than a week.

Finally, Position Trading. This is the type of strategy wherein traders would hold a security for several months much like investors would. This is the type of strategy which institutional traders use.

All these types of strategies have their own merits and disadvantages. Scalping allows traders to predict smaller moves that could easily be obtained, while higher time frame trading would allow traders to see the bigger picture. Scalping allows lesser exposure to adverse market movements, while Swing Trading and Position Trading would care less about price fluctuations because of the price movements they are aiming for. Scalping allows for more trades within a day, while Swing and Position Trading would allow for a few trades within a week or a month.

Although scalping might not appeal to many because of its perceived difficulty, traders who have mastered this craft could quickly grow their accounts exponentially due to the number of trades that they could take within a week.

Donchian Channel KVO Forex Scalping Strategy is a strategy that focuses on the lower time frames and aim for quick small profits.

Donchian Channel

The Donchian Channel is a trend following indicator developed by Richard Donchian.

This indicator is formed by determining the median between the highest high and lowest low for a certain period. The indicator is then displayed as a channel with three lines. The top line is based on the highest high, while the bottom line is based on the lowest low. The mid line is then drawn based on the median between the highest high and lowest low.

This indicator is useful in identifying trends and trend reversals, volatility and momentum.

Momentum traders would trade this indicator whenever a new high or a new low is formed. Trend reversal traders could trade this strategy based on the crossing of price over the mid line after a prior trend is broken.

Klinger Volume Oscillator (KVO)

Klinger Volume Oscillator (KVO) is a momentum indicator developed by Stephen J. Klinger.

This indicator was developed with the goal of being sensitive enough to detect trend reversal signals, while at the same time being accurate enough in detecting longer-term trends.

KVO is a unique oscillator because it considers volume and momentum. It then indicates price movements and provides trend reversal signals based on the crossing over of its histogram or line over zero.

Trading Strategy

This trading strategy trades on confluences of trend reversal signals between the KVO indicator and the Donchian Channel.

To trade this strategy properly, traders should also have some knowledge about price action and candlestick patterns. Trades should be analyzed if a security is gaining momentum based on how the candlesticks form.

Price should then cross over the midline of the Donchian Channel indicating a trend reversal.

Then, the histogram bars of the KVO indicator should cross over zero.

These signals should be closely aligned in order to qualify as a valid trade signal.

Indicators:

  • Limiteddonchianchanel (default setting)
  • KVO
    • FastEMA: 44
    • SlowEMA: 65
    • SignalEMA: 23

Preferred Time Frames: 1-minute, 5-minute or 15-minute charts

Currency Pairs: major and minor pairs

Trading Sessions: London and New York sessions

Buy Trade Setup

Entry

  • Candlestick patterns should show signs of price rejection of the lower band or a bullish momentum.
  • The histogram bars on the KVO indicator should cross above zero.
  • Price should cross above the midline of the Donchian Channel.
  • These bullish signals should be closely aligned.
  • Enter a buy order on the confirmation of the conditions above.

Stop Loss

  • Set the stop loss on the fractal below the entry candle.

Exit

  • Close the trade as soon as a histogram bar on the KVO indicator crosses below zero.

Donchian Channel KVO Forex Scalping Strategy

Donchian Channel KVO Forex Scalping Strategy 2

Sell Trade Setup

Entry

  • Candlestick patterns should show signs of price rejection of the upper band or a bearish momentum.
  • The histogram bars on the KVO indicator should cross below zero.
  • Price should cross below the midline of the Donchian Channel.
  • These bearish signals should be closely aligned.
  • Enter a sell order on the confirmation of the conditions above.

Stop Loss

  • Set the stop loss on the fractal above the entry candle.

Exit

  • Close the trade as soon as a histogram bar on the KVO indicator crosses above zero.

Donchian Channel KVO Forex Scalping Strategy 3

Donchian Channel KVO Forex Scalping Strategy 4

Conclusion

The lower timeframes are difficult timeframes to trade on. Price could be choppy at times because big institutional trades could have a significant impact on a candle. Sudden spikes could occur, and price could whipsaw into a sudden reversal. However, there are ways in order to trade the lower timeframes successfully.

This strategy could provide profitable trading setups. However, the conditions in this strategy should just be used as a confirmation of a price action analysis. Traders should learn to observe for signs of trend reversals based on candlestick patterns. As soon as you could master that, then you could start making money out of the forex market.

Recommended MT4 Brokers

XM Broker

  • Free $50 To Start Trading Instantly! (Withdraw-able Profit)
  • Deposit Bonus up to $5,000
  • Unlimited Loyalty Program
  • Award Winning Forex Broker
  • Additional Exclusive Bonuses Throughout The Year

XM broker

>> Sign Up for XM Broker Account here <<

FBS Broker

  • Trade 100 Bonus: Free $100 to kickstart your trading journey!
  • 100% Deposit Bonus: Double your deposit up to $10,000 and trade with enhanced capital.
  • Leverage up to 1:3000: Maximizing potential profits with one of the highest leverage options available.
  • ‘Best Customer Service Broker Asia’ Award: Recognized excellence in customer support and service.
  • Seasonal Promotions: Enjoy a variety of exclusive bonuses and promotional offers all year round.

fbs broker

>> Sign Up for FBS Broker Account here <<

Click here below to download:

Save

Save



Get Download Access

LEAVE A REPLY

Please enter your comment!
Please enter your name here