Third Shortest Candlestick Forex Swing Trading Strategy

November 15, 2016

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Third Shortest Candlestick Forex Swing Trading Strategy

There are days that that candlestick becomes shorter or very short. These things happen because the market may be in a strong uptrend but soon, the market starts to slow down and this is reflected by the light of the candlestick becoming very short. It is also opposite with the downtrend, where bearish candlesticks show up then starts to get shorter as the market losses the downward momentum. This strategy is similar to the inside bar trading strategy but with this one, it also allows you to trade candlesticks that are not inside bars.

We are looking for a loss of momentum or a slowing down of the market. This can be seen on a 10hour timeframe or higher.

To trade this, you must look for the 3rd candlestick. To locate the 3rd candlestick, look for 2 previous candlesticks and should be long: The difference in pips between their “highs” and “lows” are big.

When I say short, I mean unusually short or extremely short and this depends on the timeframe you are viewing the candlestick in as well.

The 3rd shortest candlestick is your trade signal.

Trading Rules:

Start your candlestick count.
Any third candlestick that is extremely short is your signal candlestick.
Place pending stop orders on both sides of the shortest candlestick. This is to capture the breakout in any direction price moves.
Place your stop loss at 3-5 pips above the high of the candlestick if you have a sell stop order and 3-5 pips below the candlestick if you have a buy position.
Cancel the other side of the pending order when the other pending side of the order was triggered.
Take profit at the 1:3 risk and reward ratio or trail the stop.