Double Pipes Pivot Swing Forex Trading Strategy

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Double Pipes Pivot Swing Forex Trading Strategy

Double Pipes, one of the most overlooked candlestick patterns, yet is very powerful in its own right. Most traders have seen it. Many momentum traders might have even been consistently trading against it and have consistently lost to it. But what is it really, and how do we make money out of it?

The Double Pipes Patterns

The double pipes patterns consist of two different patterns, the pipe tops and pipe bottoms. These patterns are basically reversal patterns, but what makes it peculiar compared to other reversal patterns is that it is a reversal of a strong momentum candle.

A typical momentum candle is a candle with a full body with little to no wick and is significantly larger than the preceding candles. Many momentum traders would immediately trade in the direction of the momentum candle and maybe rightly so.

However, there are also several instances wherein right after a strong momentum candle is another strong momentum candle that totally goes against the prior momentum candle, wiping out most, if not all of the ground that price has moved in just one candle. This is what a double pipes pattern is.

Pipe tops are bearish reversal patterns with the first candlestick being a bullish momentum candle and the second candlestick being a bearish momentum candle. Pipe bottoms on the other hand are simply the inverse of pipe tops. Pipe bottoms are bullish reversal patterns having the first candlestick as a bearish momentum candle and a second candlestick as a bullish momentum candle.

Trading against these types of patterns is not a good idea. These patterns have momentum behind it, enough to reverse the prior momentum move. The chances of getting a reversal right after is quite high.

Pivot Points as an Area for False Breakouts

Pivot points are indicator-based supports and resistances that many traders look at. Because these are areas of supports and resistances, these areas are prime locations of reversal. However, there are times when a momentum candle would pierce right through it. There are different ways to interpret it and position ourselves as a trader. Breakout traders would think of it as a breakout of a key area. But there are also instances when the breakout turns out to be false, also known as “fake-outs”.

If price does a fake-out on a pivot point, that is significant. This is because many breakout traders who have entered the trade prematurely would have their stop losses on the opposite side of the pivot point or level. As price squeezes them out and starts hitting those stop losses, price would gain momentum going to the other side.

Trading Strategy Concept

This strategy is about trading double pipes that signify a false breakout on significant pivot point levels. This means trading pipe bottoms on pivot point supports and pipe tops on pivot point resistances. Whenever we see such pattern taking shape, we place our trade setups accordingly.

However, we will not be taking the trade on the candle close. We will be waiting for the breakout on the extremes of the double pipe patterns. If trading a pipe bottom, we will be placing a buy stop order at the high of the pattern. If trading a pipe top pattern, we will be placing a sell stop order at the low of the pattern. We then wait. If price hits our orders within two candles, then our trade setup is valid. If it doesn’t then price may be starting a range or could continue its previous direction.

Because these momentum candles are extremely long, we will not be using the highs or lows of the candle for our stop loss. Instead, we will be using the 50% of the pattern as a basis for the stop loss. If price retraces back to the 50% and we get stopped out, that invalidates our trade setup.

Indicators:

  • PivotMonthly

Timeframe: 4-hour chart only

Currency Pair: any

Trading Session: any

Buy (Long) Trade Setup

Entry

  • Price should be tagging either the pivot point (golden rod) or either of the three support levels, S1, S2 and S3 (red)
  • A pipe bottom pattern should take shape with candles that are significantly larger than the previous candles
  • Place a buy stop order at the high of the pattern

Stop Loss

  • Set the stop loss at the 50% of the pattern

Take Profit

  • Take Profit 1: Set at the next pivot point level that allows for more than 1:1 reward-risk ratio
  • Take Profit 2: Set at the pivot point level after the take profit 1 target

Sell (Short) Trade Setup

Entry

  • Price should be tagging either the pivot point (golden rod) or either of the three resistance levels, R1, R2 and R3 (royal blue)
  • A pipe top pattern should take shape with candles that are significantly larger than the previous candles
  • Place a sell stop order at the low of the pattern

Stop Loss

  • Set the stop loss at the 50% of the pattern

Take Profit

  • Take Profit 1: Set at the next pivot point level that allows for more than 1:1 reward-risk ratio
  • Take Profit 2: Set at the pivot point level after the take profit 1 target

Conclusion

Pipe tops and pipe bottom patterns are commonly used in different trading instruments. It also occurs in different timeframes. Using it in tandem with the Monthly Pivot Points as a swing trading is even more powerful.

This trading strategy allows us to trade at a more than 1:1 reward-risk ratio with a significantly good probability of success.


Forex Trading Systems Installation Instructions

Double Pipes Pivot Swing Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator(s) and template.

The essence of this forex system is to transform the accumulated history data and trading signals.

Double Pipes Pivot Swing Forex Trading Strategy provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.

Based on this information, traders can assume further price movement and adjust this system accordingly.

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How to install Double Pipes Pivot Swing Forex Trading Strategy?

  • Download Double Pipes Pivot Swing Forex Trading Strategy.zip
  • Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
  • Copy tpl file (Template) to your Metatrader Directory / templates /
  • Start or restart your Metatrader Client
  • Select Chart and Timeframe where you want to test your forex system
  • Right click on your trading chart and hover onTemplate
  • Move right to select Double Pipes Pivot Swing Forex Trading Strategy
  • You will see Double Pipes Pivot Swing Forex Trading Strategy is available on your Chart

*Note: Not all forex strategies come with mq4/ex4 files. Some templates are already integrated with the MT4 Indicators from the MetaTrader Platform.

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