Ok here is the system it's very simple and easy to implement and can be used in any markets and on any time frames as per your risk appetite.
I personally trade of the 1M charts mostly on Eur/Usd and Gbp/Usd.
INDICATORS:
1) Bollinger Bands with default parameters and add a 20 SMA if your bollinger band indicator is without a middle band.
2) Volume
RULES FOR M TOP FORMATIONS:
1) The 1st close must be outside the upper band
2) Then the price should correct a little and close below the middle band or 20 SMA
3) The price should touch the High but not close above the upper band and again correct and close below the middle band with an increase in volume.
Note: Price must have been in an uptrend before the M Tops occur. Try it in range bound markets and it doesn't give great results.
STOP LOSS
Keep the stop loss at the high but sometimes reward is so big and risk is too little so in such cases increase your stop loss to risk/reward ratio to 1:2
I personally trade of the 1M charts mostly on Eur/Usd and Gbp/Usd.
INDICATORS:
1) Bollinger Bands with default parameters and add a 20 SMA if your bollinger band indicator is without a middle band.
2) Volume
RULES FOR M TOP FORMATIONS:
1) The 1st close must be outside the upper band
2) Then the price should correct a little and close below the middle band or 20 SMA
3) The price should touch the High but not close above the upper band and again correct and close below the middle band with an increase in volume.
Note: Price must have been in an uptrend before the M Tops occur. Try it in range bound markets and it doesn't give great results.
STOP LOSS
Keep the stop loss at the high but sometimes reward is so big and risk is too little so in such cases increase your stop loss to risk/reward ratio to 1:2
Attached Image(s) (click to enlarge)
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