Fifth element and Power Ranger swing trading strategies

Fifth element and Power Ranger swing trading strategies

Fifth element

The main advantage of the fifth element strategy is that tells you ahead of time when the entry price will be, so you should spend lots of time in front of the screen waiting for the right to snatch a whaling sum of money.

Key Ingredients:

Timeframe – H1, H4.

Trading tools – fast EMA 12, slow EMA 26, MACD SMA 9

Currency pairs – EUR/USD, USD/JPY, GBP/USD. USD/CHF, USD/CAD. AUD/USD, NZD/USD.

Strategy concept

MACD histogram indicates the direction and momentum of the market. If the MACD histogram switches from negative to positive, this is a signal of the possible upward shift in momentum. You should wait for 5 positive bars on the histogram to confirm the momentum before going long on the fifth bar (that’s why this strategy is dubbed “fifth element”; it’s not after Luc Besson’s film). If the MACD histogram switches from positive to negative, this means that you should open short positions (the rule of the fifth bar remains in force).

Fifth element.png

Long trade setup

  1. Wait until the MACD histogram goes from negative to positive.
  2. Wait for 4 positive bars to appear on the histogram before entering the market long on the opening of the fifth bar.
  3. You should place the stop loss at the last low of the histogram.

You have 2 profit targets with risk to reward ratios – 1:1 and 1:2 accordingly. For example, the risk of you trade is 150 points, and the reward is 300 points if both targets are fulfilled. The risk to reward ratio is 1:2, which yields a tidy 6% return if we take a 3% risk.

Power Ranger strategy

The strategy works with the hourly and 4-hourly chart.

Trading tools – we use stochastic for this strategy with the following settings:

%K period = 10

%D period = 3

Slowing = 3

Price field = high/low

MA method = simple

Levels 20 and 80

Reminder – stochastic is an indicator that measures overbought and oversold conditions in the market.

Currency pairs – EUR/USD. USD/JPY, GBP/USD, USD/CHF. USD/CAD, AUD/USD, NZD/USD

The basic concept of the strategy is that a range should be formed after the market stops trading. Stochastic helps us to identify a possible range formation. We also should pay attention to the current market momentum to tell us whether we should go long or short. If the market is moving up, we may go long in the range. The entry point can be found with the help of Stochastic (it should be below level 20  - in the oversold area). If the market is moving down, we should go short in the range. The entry point can be found in the overbought area (above level 80) of the Stochastic indicator. The power ranges strategy has two profit targets – the first one should be taken within the range. The second target is located beyond the range in anticipation of a breakout.

Fifth element2.png

Long trade setup

  1. Identify an uptrend line
  2. Take a look at the stochastic for %K and %D to go below level 20 (oversold area).
  3. Find support and resistance of the range. You may enter long when stochastic steps into the oversold area (above 20 level)
  4. You should place your first profit target at the 75% mark of the range. The stop loss should be set at a risk to reward ratio of 1:2. After calculation, the stop loss must be placed below the support level. If not, the trade is considered invalid.

Beware! It doesn’t mean that you go long whenever the stochastic is in the oversold region or go short whenever the stochastic is in the overbought region. You should identify momentum before entering the market. 

 

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