The demark forex trading strategy is a price action trading system that has really good risk:reward ratio if a trade works out as anticipated.
The creator of this trading system is a guy called Tom Demark.
The demark trading system is actually a trendline breakout trading strategy but with a slight variation:
the most recent highs (peaks) and lows (troughs) are used to draw the trendlines.
Timeframes: any can be used but I suggest you use 15 minute timeframe and above.
Currency Pair: You can use this trading system to trade any currency pair.
Forex Indicator: none required.
Anything else?: You should know how to draw trendlines.
Demark Forex Trading Strategy Rules
- find 2 most recent highs or lows and draw a trendline.
- wait for the breakout of the trendline to happen. A breakout happens when a candlestick closes above/below a trendline and that candlestick that does that is called a breakout candlestick.
- if the lower trendline is broken, place a pending sell stop order 2 pips below the low of that breakout candlestick. Or if the top trendline is broken then place a pending buy stop order 2 pips above the high of the breakout candlestick.
- Stop loss should be placed 5-10 pips below/above the low/high of the breakout candlesticks or just a few pips outside of the most recent low/high for sell and buy trades respectively.
- for take profit target: you may use the risk:reward ratio of 1:3 to calculate it or use a previous swing high and swing low for buy and sell trade respectively.
Advantages Of The Demark Forex Trading Strategy
- good potential to catch the start of a new trend and ride it.
- this forex trading system also allows you to hop into a trend that has already been progressing for a while.
- good risk:reward ratio
Disadvantages Of The Demark Forex Trading Strategy
- the breakout candlestick sometimes can be very long which can make your stop loss distance very large as well so in such a case, best option is not to trade that setup.
- this is not the forex holy grail trading system, false breakouts will happen.
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