Timeframes: 1hr and larger
Currency Pairs: Any
Forex Indicators: Nil
BACKGROUND BEHIND THE RAILWAY TRACKS CHART PATTERN
What is a railway tracks pattern? Well:
- the railroad tracks pattern is made up of only two candlesticks
- they must be of of almost the same lengths and they look like parallel railway tracks.(See forex chart below with the 2 candlesticks highlighted in blue).
- if the first candlestick is bullish, the 2nd candlestick will be bearish and vice versa.
This is a sudden change in market sentiment…Why do you think caused this to happen?
What happen here was that those traders who enter SHORT forming the long bearish candle realized that they are in the wrong side of the market and they immediately exit their trades and then get into the opposite side of the market causing the formation of the long bullish candle.
If you are in an uptrend, the situation will be opposite to what you is happening above.
RAILWAY TRACKS PATTERN FOREX TRADING STRATEGY RULES
(Refer to the chart above).
- After a bullish railway track pattern forms, place a buy stop anywhere from 2-5 pips above the high of the pattern.
- Place your stop loss anywhere from 2-5 pips below the low of the pattern.
- Set your take profit to 3 times what you risked (if you risked 20pips then you should aim for 60pips profit target). Or another option is to trail stop your trades.
- After a bearish railway track candlestick pattern forms, place a sell stop order anywhere from 2-5 pips below the low of the the pattern.
- Place your stop loss anywhere from 2-5 pips above the high of the pattern.
- Set your take profit target to 3 times what you risked or you can also you trailing stop to lock in profits as trades move into profit.
Here are few important tips on trading the railway tracks pattern forex trading strategy:
- The railway track pattern is only applicable when you are in a trend as it is considered a reversal pattern.
- which means, you should be looking for the railway tracks pattern in support and resistance levels, touch of trendlines, major Fibonacci levels etc.
- If you see this formation when the market is moving sideways, you should ignore it as it does not have any value.
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