In the last article, we have seen how you can use a magic candle trading strategy for buying, now in this article, we will see the same strategy for selling.
The magic candle trading strategy is one of the most profitable trading strategies and it works in any market including forex, crypto, equity, and commodity.
The major trend performs an important role in any market. To make money with the magic candle trading strategy, you need to trade in the direction of the trend. There are many ways to determine the trend, but the most simple way among them is to use 200 EMA.
When the price is trading below 200 EMA, We can say that the market is in a downtrend. when the market goes up temporarily to a resistance level, we call it a pullback. After the pullback, the market starts going in its original direction.
How to trade magic candle trading strategy for short selling?
1..Make sure the price is trading below 200 EMA. Never sell when the price is trading above 200 EMA. Here 200 EMA indicates the long-term trend and the long-term trend lasts longer so our winning probability is high.
2. Now wait for the market to go up to the resistance level. The resistance level could be the horizontal line, trendline, or dynamic resistance like 200 EMA or 50 EMA.
3. Notice the candles that are going up. They are making higher highs. Now wait for a red candle whose high is less than the previous candle’s high and the same candle’s low is less than its previous candle’s low. We call this red candle a magic candle.
4. The correct sell entry plays an important role in this strategy so place the sell entry below the low of the red candle. Make sure you keep a little bit of buffer while placing the sell entry below the low of the magic candle.
5. Stop plays an important role in every trade. It keeps you safe from big losses so never trade without the stoploss. In the magic candle trading strategy, the stop loss can be placed above the swing high. That is the safest location to put the stop loss because there is less probability that the price would reach there and hit your stop loss.
5. The most important point is profit booking. If you book a small profit, you probably will not make huge money from the forex market so profit should always be booked at the next support level. If you follow this strategy, you may get at least 1:3 profit.
Important points to remember
- Make sure the price is trading below 200 EMA.
- Wait for the price to go up to the resistance level.
- Wait for the magic candle to be formed at the resistance level.
- The high of the magic candle should be lower than the high of the previous candle.
- The low of the magic candle should be lower than the low of the previous candle.
- Place the sell entry below the low of the magic candle.
- Place the stop loss above the swing high.
- Book the profit at the next support level.