Unlock Forex Success With Third Strike Strategy

The Third Strike Trading Strategy identifies high-probability forex reversal points where institutional money enters markets. This approach relies on trendline analysis by connecting two consecutive swing points (lows for buying, highs for selling) and entering when price approaches the trendline a third time.

Traders place tight stop-losses 10-20 pips beyond swing points while targeting previous support/resistance levels. Success requires proper trendline adjustments, entry confirmations, and disciplined risk management of 1-2% per trade. The principles unlock consistent profits when executed with precision.

The Third Strike Forex Trading Strategy is based on this reversal chart pattern where:

1. in a downtrend, price will be making those decreasing swing lows and then on the third swing low, it makes a drastic move upwards.
2. similarly, in an uptrend, price will be making peaks of increasing heights  and then on the third peak, it tends to make a drastic move downwards.
3. The key to finding out where this 3rd swing low or peak would be is to use a trendline.

Quick Overview

• The Third Strike Strategy identifies high-probability reversals by entering after price approaches a trendline for the third time.
• Draw precise trendlines connecting two significant swing points in established market trends for accurate entry signals.
• Place tight stop-losses 10-20 pips beyond swing points to minimize risk while maintaining favorable risk-reward ratios.
• Calculate position sizes based on 1-2% account risk per trade to ensure sustainable trading performance.
• Confirm entries with candle closures and align profit targets with previous support/resistance levels for optimal results.

Underlying Principles of Third Strike Trading

While many trading strategies rely on complex indicators and mathematical formulas, the Third Strike Trading method strips away these complications to focus on a fundamental market truth: price patterns repeat themselves.

At its core, this approach centers on trendline analysis and pure price action. Traders identify significant swing points—either two consecutive lows in downtrends or two consecutive highs in uptrends—and draw connecting trendlines.

When price approaches this trendline for a third time, it creates a high-probability reversal opportunity. This moment, the “third strike,” often marks where smart money enters or exits positions, creating powerful movement potential.

Mastering Buy Setups in Downtrend Markets

The identification of third strike opportunities begins with recognizing the perfect buy setup in downtrend markets. Traders must first confirm a clear downtrend with two consecutive lower swing lows before seeking buy entry signals.

Mastering third strike entries requires identifying established downtrends through consecutive lower swing lows before positioning for potential reversals.

To execute this strategy correctly:

• Connect the two lower swing lows with a precise trendline.
• Prepare to enter when price approaches this line for the third time.
• Decide whether to enter immediately upon trendline contact or wait for candle closure.

Trendline analysis forms the backbone of this approach. When properly implemented, these buy setups can capture significant reversals with minimal risk exposure through tight stop-loss placement.

Step By Step

1. market will be in a downtrend
2. lower swing lows will form
3. when two lower swing lows form, you connect them with a trendline and wait to see if price comes to touch that trendline on the 3rd point, if it does so go to step 4.
4. Buy immediately at market price as soon as trendline is touched or your can wait until the candlestick that touch point 3 has closed before using a buy stop order.
5. Place your stop loss at least 10-20 pips under the low of the the candlestick if you used the market order or if you use the sell stop order then place it at least 5-10 pips under the low of that candlestick.
6. your take profit target options would be the previous peaks or swing highs that the price made.

Executing Powerful Sell Strategies in Uptrends

Identifying profitable selling opportunities demands a systematic approach when trading in uptrend markets. The Third Strike Strategy provides a structured method for capitalizing on market momentum shifts.

To execute effective sell setups:

• Confirm an established uptrend with rising prices
• Identify two consecutive higher swing highs
• Connect these peaks with a precise trendline
• Enter when price touches this resistance line
• Place stops 10-20 pips above the entry candle’s high

Successful trend analysis involves patience—waiting for the third touch rather than anticipating reversals prematurely. This disciplined approach minimizes false signals while maximizing potential reward when uptrend exhaustion occurs.

Step By Step

1. market will be in an uptrend
2. higher swing highs (increasing peaks) will form
3. when two peaks form, you connect them with a trendline and wait to see if price comes to touch that trendline on the 3rd point, if it does so go to step 4.
4. Sell immediately at market price as soon as trendline is touched or your can wait until the candlestick that touch point 3 has closed before using a sell stop order.
5. Place your stop loss at least 10-20 pips above the high of the the candlestick if you used the market order or if you use the buy stop order then place it at least 5-10 pips above the high of that candlestick.
6. your take profit target options would be the previous swing lows that the price made.

See chart below for clarity on the trading rules and the reversal pattern I’m talking about here:

Avoiding Common Mistakes When Trading the Third Strike

Traders frequently fall into predictable traps when suing the Third Strike strategy, compromising otherwise profitable setups. Many give in to psychological barriers, second-guessing their entries when prices approach the trendline, resulting in missed opportunities.

A mistake is improper trendline adjustments, where traders force connections between non-significant swing points. This creates false signals and premature entries.

Other common errors include:

• Entering trades before confirmation
• Setting stop-losses too tight during volatile markets
• Ignoring the broader market context
• Abandoning the strategy after consecutive losses

Your Questions Answered

Which Timeframes Work Best for the Third Strike Strategy?

Timeframe analysis shows the Third Strike strategy works best on 4-hour and daily charts, while still effective on 1-hour charts. Higher timeframes provide more reliable strike timing for reversals.

Can This Strategy Be Combined With Technical Indicators?

Yes, technical indicators can improve the Third Strike Strategy’s effectiveness. MACD, RSI, or moving averages provide confirmation signals and validation of potential reversal points.

How Does Market Volatility Affect Third Strike Entry Points?

Higher volatility impacts Third Strike entry timing by creating faster trendline touches and potentially wider stop-loss placements. Lower volatility requires more patience but may offer cleaner, more precise entry points.

What’s the Typical Success Rate for Third Strike Trades?

Success rates for third strike trades typically range from 40-60% when incorporating proper success factors. Trading psychology remains important as traders must manage expectations while maintaining discipline through inevitable losing sequences.

Does the Third Strike Strategy Work in Ranging Markets?

The Third Strike strategy’s effectiveness diminishes in ranging markets as it’s designed for trending conditions. When price oscillates within a range, trendlines may produce frequent false signals, reducing strategy performance.