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Power Pin Reversal Stochastic Forex Trading Strategy

This document describes a trading strategy that combines the Stochastic oscillator indicator and pinbar candlestick patterns to identify reversal opportunities in the 5-minute forex chart. It provides entry and exit rules based on the Stochastic crossing above or below 20 and 80 levels and the formation of bullish or bearish pinbar candles. The strategy aims to take advantage of the higher probability of a reversal when these two widely followed indicators and patterns provide a confluence signal. It is described as a simple mean reversion approach that can generate high probability trades even without considering the trend.

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joseluisvazquez
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343 views7 pages

Power Pin Reversal Stochastic Forex Trading Strategy

This document describes a trading strategy that combines the Stochastic oscillator indicator and pinbar candlestick patterns to identify reversal opportunities in the 5-minute forex chart. It provides entry and exit rules based on the Stochastic crossing above or below 20 and 80 levels and the formation of bullish or bearish pinbar candles. The strategy aims to take advantage of the higher probability of a reversal when these two widely followed indicators and patterns provide a confluence signal. It is described as a simple mean reversion approach that can generate high probability trades even without considering the trend.

Uploaded by

joseluisvazquez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Power Pin Reversal

Stochastic Forex
Trading Strategy

I’ve been noticing that there has been some kind of


divide among traders.

Those who use price action and those who indicators.

In the past, indicators became the fad in the trading world.


Everyone started to look for the “perfect” indicator.

That elusive indicator that does no wrong. Some search


for it as though it is the Holy Grail of trading.

Some find their own Holy Grail, while many fail.

Lately, the search for the Holy Grail indicator has ceased
for many, but many say there is a better way.
It seems that price action trading has replaced all the
excitement that was once surrounding indicators.

Some say that indicators are lagging while price action isn’t.

Some say price action trading is better because it is more


immediate.

While these thoughts have a grain of truth in it, I don’t


think this is totally true.

When you come to think of it, both price action and the
indicators are all derived from the price chart.

A price chart which is also information coming from


the past.

I don’t care whether it is on the daily chart or the minute chart,


or even on the tick chart, it is still a record of the past.

This means that both indicators and price action


are lagging.

Only information on the Depth of Market is information


that could still affect the future.

Before you go off to search for the latest Depth of


Market strategy, pause for a moment.

Depth of Market on the forex market is just way too


much information.

The forex market is just too big, the pending orders on


the order books will just be way too bloated and quick to
move to be deciphered by the human mind.
Even though indicators and price action are lagging
information, don’t be quick to throw them out the window.

Trading is a Game Theory type of business.

People make decisions based on what they think others


are thinking.

And because many people are looking at indicators and


price action, many will be taking action based on them.

With this in mind, we could use information from


indicators and price action, which we think many will be
taking action on.

The more basic, the more people look at it. The more
people look at it, the better.

For this strategy, we will be marrying the two, a very


basic indicator and a very common price action
candlestick pattern – the Stochastic indicator and the
good old pinbar candlestick pattern.

Both are excellent for spotting potential reversals, and


both are widely used among traders. The perfect match.

The Setup: Power Reversal Stochastic Strategy

This strategy is a combination of a very basic mean


reversal strategy based on the Stochastic indicator and
the popular reversal pinbar candlestick.

Having in mind that both are indications of probable


reversals, this combination will have a higher probability
than if they were used as a standalone strategy.
Timeframe: 5-minute chart

Buy Entry:

Stochastics should be below 20 indicating an


oversold market condition
Fast stochastic should cross above the slow
stochastic A bullish pinbar candle should form
Enter a buy market order on candle close

Stop Loss: Set the stop loss at the low of the candle

Exit: Close the trade as the slow stochastic crosses


above 80

Sell Entry:

Stochastics should be above 80 indicating


an overbought market condition
Fast stochastic should cross below the slow stochastic
A bearish pinbar candle should form
Enter a sell market order on candle close

Stop Loss: Set the stop loss at the high of the candle

Exit: Close the trade as the slow stochastic crosses below


20

Conclusion

This is a basic mean reversion strategy that exploits


the power of confluence.

This time the confluence is between a traditional


stochastic indicator which is widely used by many traders,
and a pinbar candlestick pattern which many traders are
familiar of and use as a trigger.

Having this combination ends up with a high


probability trade.
Because this strategy is a pure mean reversion strategy, it
doesn’t take into account any information regarding the
trend.

Still, even without considering trend direction, because of


the strong individual probabilities of both the stochastic
and the pinbar, this strategy still ends up having a high
probability.

Butterfly Forex Trend Dominator


System

Simplicity is key to trading success!

Many traders have a common perception that trading must


involve complicated strategies and systems.

Get All The Butterfly Forex System Details Here


However, the reality is with so many strategies and indicators
being used, the trader has high chances of experiencing a state
of ” analysis paralysis”.

In such a situation, a trader may find it difficult if not


impossible to execute a trade. This is the ultimate recipe for
trading failure!

That’s why I want to introduce you to the Butterfly Forex


System!

The Butterfly Forex System is built on sound logic and


simplicity.

The chart is clean and anyone can easily spot high probability
buy/sell signals without having to double guess or over-analyse.

Example Chart

Get All The Butterfly Forex System Details Here

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