Part 1: CandlePro Strategies

CandlePro is a powerful candlestick scanner, historical analyzer and a professional-grade trading framework.

It’s ability to recognize patterns, analyze similar past candlesticks and give you actionable information such as forecast strength, average 10-candle profit and the drawdown necessary to get to that 10-candle profit is pretty amazing. Like everything in forex, however, many beginners are just a few steps away from truly seeing behind the curtains and making the absolute most they can out of the information. CandlePro will help you trade better, faster and smarter but it is not a silver-bullet: you still have to put the time in to learn how to trade successfully! If you don’t, odds are you will spin your wheels on something else until you run out of equity and join the 95% of traders who fail in the first year.

To help you avoid that fate, I wanted to create an article that would help both new and experienced traders get the most out of CandlePro. One of the things I’ve talked about a lot is that while CandlePro can be used as a stand-alone strategy, you will get the biggest bang for your buck by combining CP with other common sense strategies and rules.

Most of you have already incorporated CandlePro into a strategy that works for you, using CP to help you make smarter decisions when placing your SL and TP, and using the signals as confirmation before entering. I hope to add to that approach in this article, covering a variety of strategies, tips and tricks to help you make the most of CP. I’ve decided to make this into a 2-part article as it kept growing and growing as I wrote it. Before we can truly dive into specific strategies we need to make sure everyone is brought up to speed on what a successful strategy looks like, and the components that go into it.

This first part will cover forex strategies introduction, a little background into successful forex strategies and the 5 necessary components of a successful strategy.

Before we look at the specific strategies, it is worth it to review the tried and true formula and components for developing ANY successful forex strategy. First off lets review what a forex strategy IS and IS NOT.

A forex strategy IS NOT a means to make lots of money as quickly as possible. That is called a “get rich quick scheme” and those do not exist in forex. In fact, I like to call those “get poor quick schemes”.

A forex strategy IS a means to improve your probabilities of success over a long timeframe. It is all about probabilities. The probability a trade will move in your direction. The probability it will hit your stop loss. Probabilities guide ALL trading, and with that comes the probability that you will lose a trade. The greenest of traders will act astonished when they follow a system and lose a trade or a handful of trades.

1) It must be identifiable – whatever your strategy is, it has to have a recognizable pattern. While that may sound like common sense this is a building block many beginners stumble on. Many beginners buy and sell on a whim, convincing themselves that they have a ‘feeling’ about the market. With CandlePro this is not an issue: candle signals are already identified for you, and CP analyzes past signals to give you historical data on the outcome of those signals!

2) It must be repeatable – it is one thing to identify a setup after it has already happened, it is quite another to identify a setup that will repeat itself on the charts enough to meet your financial goals and is not a “one-trick pony.” Again, CandlePro shines here: CP will automatically identify common candlestick formations that repeat across multiple pairs and timeframes.

3) It must fit within your trading personality – So you found a strategy that is identifiable and repeatable. Great! The problem is that it requires you to check the 5m charts 12 times each hour and you work a day job. The strategy that you ultimately decide is right for you must take into account your personality and availability. Some traders like the ‘set and forget’ nature of longer-term charts. Some traders like to trade before they go to bed and wake up to see the results. Others like to stare at the 1m/5m charts all day long, their finger constantly hovering over their mouse button to buy/sell on a moment’s notice. What kind of trading personality do you have?

4) Know your drawdown - A strategy must have defined rules for the maximum you can lose on a trade (drawdown). Notice that I didn’t say how much you can gain on a trade. Beginners often focus on how much they can earn – it is usually why many get into trading in the first place – but this is the wrong area of focus. Running out of equity can end your trading or worse. Gaining lots of equity is a good problem to have. Because running out of equity is the only thing you want to avoid and the only one with potentially negative consequences for your trading career the potential drawdown of any strategy is where you want to focus your thoughts. If you find a strategy that is repeatable, identifiable and fits within your trading strategy but has an extremely large stop-loss or (gasp!) no stop-loss whatsoever you should run hard and fast from that strategy. The idea that you could potentially lose ALL of your equity on one trade or even just a couple trades should scare some sense into you.

CandlePro can help you to identify the drawdown you are willing to accept within your strategy (found on the performance report), and help you to filter out signals that you would otherwise have acted on. Reward/Risk ratio is also very important and the ‘risk’ portion of that ratio is the potential drawdown of the trade.

5) Clear closure rules – everyone knows that a strategy needs an entry signal. If XYZ happens then I will go short. Where many traders fall short is when to close a position that isn’t behaving as expected. Your closure rules should not be “this doesn’t feel like it is going to make it. I’m going to close.” There should be a trigger. Candlesticks are a great choice – they are easily identifiable and, with CandlePro, you can set specific criteria. For example if you are short you could have a closure criteria that you will exit on a 1h bullish candle with a RR over 2:1.

Note: often times a beginner’s idea of how they want to trade differs greatly from how they actually trade as their experience grows.

** Part 2 (coming Wednesday) will cover “10 Strategies to use with CandlePro” and the “Psychology of Executing a Trade Plan Successfully” **