The pattern trader forex trading system is a 100% price action trading system that can be used as a set- and-forget type of trading system especially if you are a trader that don’t have time to sit and monitor your trades.
The idea of the pattern trader forex trading system comes from reading some of Mark Shawzin’s forex trading methods and techniques.
The good thing about the pattern trader forex trading system is that is is based on the daily timeframe and all you need to do each day is to check if the trading setup conditions are met, place your pending order and walk away.
Table Of Contents
- So What Is The Pattern Trader Forex Trading System?
- 1: Trend Reversals Off Major Support And Resistance Levels.
- 2: Daily Inside Bar (DIB) Or The Pin Bar (Trade Entry Signals)
- Timeframes Required To Trade The Pattern Trader System
- The Pattern Trader Forex Trading System Setup Example (Buy Setup)
- The Pattern Trader Forex Trading System Sell Setup Example
- Advantages of The Pattern Trader Forex Trading System
- Disadvantages of The The Pattern Trader Forex Trading System
So What Is The Pattern Trader Forex Trading System?
The pattern trader system is a reversal continuation type of trading system. What do I mean by that?
Well,what you do is to look for is a trend to reverse and then look as the trend change is confirmed, you look for a signal to buy or sell after the trend confirmation has been made. In order to do that, these two things must fall into place in that specific order:
1: Trend Reversals Off Major Support And Resistance Levels.
And that is done by specifically looking for chart patterns like:
- double bottoms, doubles tops, triple bottoms, triple tops etc.
- major support and resistance levels etc.
- price channels (horizontal or diagonal)
- head and shoulder patterns
2: Daily Inside Bar (DIB) Or The Pin Bar (Trade Entry Signals)
Once price bounces of these major reversal levels, that indicates that the trend is reversing. Do not rush to get into a trade yet.
You need to wait for any of these two candlestick to form: a daily inside bar or a pin bar.
You will use any one of these candlesticks this as your signal to place you pending buy stop order or sell stop order.
These daily inside bar/pin bar can take anywhere from 1 day to even 7 days to form after price starts reversing so you really have to be patient and wait. You can use the pattern trader system on any currency pairs.
Timeframes Required To Trade The Pattern Trader System
It is strong suggested that you only use the daily timeframe.
There tends to be a lot of “noise” on time frames smaller than the daily timeframe.
The Pattern Trader Forex Trading System Setup Example (Buy Setup)
Here’s an example of the pattern trader setup on the daily chart of USDCHF:
- note that price bounced of a major support zone/level and you can see the formation of tripple bottoms as a confirmation.
- price rallied up for a while and then temporarily retraced and the daily inside bar was formed as a result.
- the breakout of the daily inside bar saw prices move up 390 pips!
The Pattern Trader Forex Trading System Sell Setup Example
Here’s an example of the pattern trader system sell setup on the daily chart of AUDUSD:
- note the formation of the double top
- price confirms by moving down
- price slows down a bit with the formation of the daily inside bar
- breakout of the DIB see price moving down for about 300 pips!
Advantages of The Pattern Trader Forex Trading System
- Trend reversal is “confirmed” from major price reversal zones before a trade is placed
- Can be a setup and forget type of trading system you need a few minutes each day to check the daily charts for trading setups, place your pending orders and walk away. Come check later to see if your order has been activated etc. A very good forex trading system for those of you that have busy day jobs and cannot sit and watch your trades on your laptop/computer.
- Potential to make 100’s of pips profit in each trade because this is based on the daily chart.
- Good risk: reward ratio.
Disadvantages of The The Pattern Trader Forex Trading System
- Price will go where it wants to go so expect to have losses on this trading system, it is not the holy grail.