Areas of market consolidation near the resistance and support levels and how to use them in trade.
Cherry-blossom trading strategy
For those who can’t imagine their lives without drinking sake, eating Japanese meals and trading in the Asian sessions, smart people invented a “cherry-blossom” strategy that is considered to be very profitable and risk-averse. Let me show you how it works.
To use it you should plot the Fibonacci retracement levels to the chart. The “cherry-blossom” is based on the assumption of the continuation of a trend. The trends are usually formed in the course of American and European sessions, whereas in the Asian session the prices are moving sideways trying to consolidate, or the quotes move in the opposite direction of the main trends.
According to the “cherry-blossom” strategy, we should enter the market as soon as the daily candlestick closes (at the very beginning of the Asian session) and buy/sell in the direction of the trend established during the previous trading sessions (American and European ones).
First of all, you should look at the size of the candle (it should be at least 30 points long). Then, you should plot the Fibonacci levels from the low to the high (in case of the bullish trend) and place orders at 23.6, 38.2, and 50% levels. Stop-loss should be set below the low of the candle, and take-profit – below the high of the candle.
If at the end of the day you still have some open positions, you should wait for the next day so that your orders are closed. If after two days, your positions are still open, you should remove your orders from the chart manually. All pending orders that were not activated should be removed at the end of the current session. On Friday we stop trading.
On the chart below, you can see the bearish candlestick with a long body in 70 points (on our chart this candle is divided into several bars because we use H1 timeframe for clarity). It means that we should trade short. The order should be placed above the high of the daily candle, and take-plot should be plotted a bit higher than the low of the candle. From the picture, we can see that all three orders had been activated. And the position closed at “take-profit” level.
For example, you’ve noticed a bullish candlestick with a size in 35 points. What you should do is to place three orders (Buy limit) at the 23.6%, 38.2%, and 50% levels. We can see that only the upper order has been activated.