RichTL BOMB Strategy

Consolidation periods and patterns in the currency markets can explode, leading to great profit opportunities. Sometimes suggestive of indecision, consolidation periods are great for capturing potential because the burst of directional action that follows can last for an extended period.

Understanding and trading on consolidation patterns will give the currency trader in the know two “edges”. First, the trader can hold his or her initial position for a shorter amount of time, thus minimizing the risk of holding positions in the case of higher rollover interest. Second, the profit potential from such a position can be big, as long as the trader follows strict, disciplined money management rules. Without money management, the trader might as well be playing with fire. Here we look at two different consolidation patterns and give you a step-by-step explanation of how to trade them.

In this section, we will learn how to find/define market consolidations objectively and how to trade them.

We will be using our famous indicator again, yes RichTL…

But how does RichTL help us find consolidation patterns? Let us go over some examples.

When RichTL swings are large in volume, the market would be trending making big swings. However, when the swings are shy and low in volume, then we know that the market is taking a break, consolidating, preparing for a reversal or continuation big moves.

We will be looking for areas where RichTL dots come together forming a narrow range.

Notice how RichTL was making big swings before 20 August? Then between 20 August and 5 September RichTL started to make swings/dots giving us an alert that the market is settling down and losing momentum.

It is like you are filling a balloon with water, sooner or later, price will explode by breaking either side.

We want to see at least 3-4 swings/dots before considering it a valid setup and start looking for breakout opportunities. (the more the better)

In the two examples above, we have what we are looking for. RichTL was making big swings, then swings start getting weaker creating a narrow formed with at least 3-4 dots.

After the third RichTL dot, our setup becomes valid, thus we can draw our BOMB zone. (in gray)

Now we know what setups to look for.
How to trade them?

Once we spot a valid RichTL BOMB setup, we look to the left and identify the last swing high and swing low and draw our lines.
Our entry would be a candle close above/below one of the lines.

In the last example, price broke the previous swing low, by a momentum candle closing below it. Thus we could have entered a sell trade in this case.

Our stop loss is on the other side, just above the swing high in this case.

Our take profit would be double the size of the stop loss or the nearest strong support/resistance level.

More Examples? here we go!

Remember: RichTL is not a stand-alone strategy, but can definitely add more confluence for an existing potential setup.

Do not make trading decisions based on RichTL solely; it is always better to have confluence.

NB: Orange Dots are added to RichTL-v2

All Strategies are Good; if Managed Properly!

Leave a Reply

Your email address will not be published. Required fields are marked *