The railway tracks pattern forex trading strategy is another price action trading strategy that is based on analyzing the lengths of two candlesticks of similar lengths and one of the candlestick must be bullish and the other one is bearish.
When you see them together they look like railways tracks and thus the name…
There are two types of railway track pattern: bullish and bearish.
Consider the railway tracks pattern as trend reversal patterns.
Bearish Railway Track Pattern
- a bearish railway track pattern has the first candlestick bullish and the second candlestick pattern bearish.
- that fact that there’s a sudden change from bullish to bearish candlestick should be a good indication that there might be a bearish trend forming if you see it in levels of resistance, downward trendlines, fibonacci levels etc.
Here is an example of bearish railway tracks pattern on AUDUSD daily chart:
Bullish Railway Track Pattern
- a bullish railway tracks pattern has the first candlestick bearish and the second candlestick bullish.
- they fact that there’s a sudden change, should alert you to the possibility of a bullish trend starting especially if you see this pattern form in level of support, upward trendlines, fibonacci levels etc.
Currency Pairs To Trade?
You can trade any currency pairs with this trading system.
Timeframes Required To Trade?
I suggest you use the daily, 4hr and 1 hr timeframes only.
Any Forex Indicators Required?
You don’t need any forex indicators for this.
I suggest you only trade railway track patterns that form on support and resistance levels, trendlines and major fibonacci levels.
If they form any level on the chart with no significance then avoid trading them.
Buying Trading Rules Of The Railway Tracks Pattern Forex Trading Strategy
- place a pending buy stop order 1-2 pips above the high of the bullish railway tracks pattern or to allow for larger spreads, increase to 3-5 pips.
- place your stop loss 2-5 pips below the low of the pattern or increase it a little bit more if you want to avoid getting stopped out prematurely.
- for take profit, you can use risk:reward 1:3 or you can also use previous swing highs as your take profit target levels. Additionally, you can use trailing top loss and ride out the trend if you want.
Selling Trading Rules Of The Railway Tracks Pattern Forex Trading Strategy
- place a sell stop pending order 1-2 pips below the low of the bearish railway tracks pattern
- stop loss can be placed 2-5 pips above the high of the railway tracks pattern.
- risk reward of 1:3 can be used to calculate your take profit target level or if you want to aim for a little bit more, use previous swing lows as your take profit target levels. Or you can also use trailing stop to ride out the trend.
Advantages of The Railway Tracks Forex Trading Strategy
- good risk:reward ratio
- railway tracks pattern are fairly easy to spot if you are looking for them.
- you can get into a trade at the very start of a new trend and ride it out for maximum profits if your analysis is right.
Disadvantages Of The Railway Tracks Forex Trading Strategy
- Not all railway track patterns are created equal so do not take every railway track pattern that forms on your charts. The ones you should be trading are those that form on levels of significance like support and resistance levels, fibonacci levels and major trendlines and channels etc.
- false spike can happen only to take out your stop loss and head in the direction that you anticipated the market to go in the first place. Such is the nature of forex trading so be prepared for that.
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