Reversal 2 Forex Candlestick Strategy


Reversal 2 Forex Candlestick Strategy

This is another candlestick system.

Set up a 15 minute chart on GJ and change to candlestick.

Forex Indicators:

  • Parabolic SAR, default settings;
  • 5 LWMA (close price); this is the signal line
  • Add 20 LWMA (close price);
  • Add RSI (5); add levels 10, 20, 70, 80
  • Candelstick Pattern

Two conditions to enter:

1) As a general rule, enter a trade when RSI is between:

  • 70 and 80, but preferably above 80 if I go short, and
  • 20 and 10 but preferably below 10 when going long.

2) Look at the candles pattern and enter only if you see a trend reversal pattern.

  • enter if BOTH 1) and 2) are present at the same time.


  • Refer 5 and 20 LWMA and parabolic SAR to exit positions.
  • There are 3 indicators for a bit more accurate targeting that can be used for short entry/exit: 5 and 20 LWMA, and parabolic SAR.
  • After you open a trade, you should look for EITHER 5 OR 20 LWMA line, whichever is first (usually, 20 MA is your first target,
    but there are situations when SAR is between these 2 MAs.
  • The next target after 5 and 20 MAs cross is parabolic SAR
  • (but sometimes 20 LWMA).

Tips & Tricks:

  • Candlesticks and RSI are the most crucial indicators. RSI is used for advanced warning system next to candlestick. RSI (5) is the fastest signal and will signal reversal way before anything is visible on any other indicator.
  • As you gain experience reading the RSI you may decide to take certain “risks” and enter earlier while the RSI is not in optimal position.
  • The RSI (5) on the 15 min timeframe has a range of about 100-125 pips, no matter when you enter, you will know when to get out of the trade..
  • The range of the RSI (5) on 5 min timeframe is between 35-40 pips no matter where you enter, but more like 35). So if an optimal entry on 15 min is missed, then a shorter timeframe can be used for taking a profit less than 100 pips.
  • If you know to read candles then you can go ahead before the RSI gives it signal. You can use Japanese Candlesticks Charting techniques by Steve Nison for reference.
  • Use MTF_RSI (5) and MTF_PSAR for 30 min on my actual 15 min chart.
  • Trade may end if you get signals from 2 different timeframes.
  • Be careful with RSI divergences.
  • Do not trade the news unless you REALLY know what you’re doing. Close the trade if it happens.
  • Avoid going against the trend; for instance, if the trend is up and RSI is between 70 and 80, you will be tempted to enter a short. Well, don’t, UNLESS candlestick configuration really suggests that. You’ll see that in most cases, RSI will drop somewhere around 50 (while price will stay almost the same!) and then will go up again.

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