Red Candle: A Very Simple, Low-Risk Long Strategy

May 19, 2012

In his book, Trading Strategien (nicht nur) fur Extrem Situationen (Trading Strategies (not only) for Extreme Situations) Philipp Kahler describes a very simple long-only strategy. If combined with heikin-ashi, it may improve the timing and confidence to activate the long entry.

Chart: Weekly with the Friday close above 52 week-average. The last price candle must be red (sign of a small pullback in an uptrend).

Entry: at the high of the red candle (valid only during the coming week). If no signal is triggered wait until end of Friday and reassess the situation.

Stop-Loss: the low of the red candle

Exit: 1 x Risk or 1.5 x Risk or 2 x Risk (depending on the personal taste)

(Note: Risk = High – Low for the red weekly candle; Reward is 1 or 1.5 or 2 times the risk)

Notice that the two  haDelta averages (lower pane) point to a bullish trend with a small pullback.

 

Red Candle: A Very Simple, Low-Risk Long Strategy 5/19/2012 XLP

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