If the Forex market didn’t act according to certain patterns then trading would be just a gamble. All trading strategies are built on probabilities that a particular event will be caused by a specific trigger. Today we are talking about the “Cherry Blossom" strategy that works on such patterns. It may not seem quite ordinary but it works and is therefore worth your attention.
Basic Settings
Like any other strategy, “Cherry Blossom” works under certain conditions:
- Timeframe: H1
- Currency pairs: USDJPY, AUDUSD, AUDJPY, AUDNZD, NZDUSD, NZDJPY
- Trading Time: Asian Session
- Trading Days: Monday to Thursday
- Additional tools: Fibonacci levels
Patterns of the “Cherry Blossom”
Those who trade on the trend know that it tends to continue. That’s the regularity we will use along with a few nuances. As you already understood, we will trade at the very beginning of the day during the Asian session, that’s why we use such trading instruments as Japanese yen, Australian dollar, and New Zealand dollar.
The probability that the next day the price will continue to move in the same direction as on the previous day is higher than the probability of a reversal. We can confidently talk about a pronounced trend if the daily candle has passed at least 30 points in one direction. Thus, if you see a bearish daily candle when you open your chart during the Asian session then the price will most likely continue to drop. If there is a bullish candle at least 30 points long then the price will continue to rise.
The Details of the Strategy
So, open a 1-hour chart for one of the currency pairs from the list above. Next, for your convenience, it is worth setting vertical dividers to see the exact start and end of the trading day. To set those trading day separators in the MetaTrader 4 terminal, press the Ctrl + Y keys.
We will begin to act at the close of the daily candle exactly at midnight. First of all, look at the size of this candle. The distance from its opening to closing point must be at least 30 pips. If the candle is smaller, then switch to another trading instrument. You have nothing to do with this one.
That’s the moment when you should draw the Fibonacci levels. We will use them to determine entry points. It is necessary to stretch the lines from the low to high of the daily candle in the case of an uptrend or from high to low for the downtrend.
Now it's time to place orders. We will use the pending ones. Depending on the direction of the trend, you need to select buy or sell orders. Place them at the following levels:
- 23.6
- 38.2
- 50
To determine the type of order, pay attention to the location of the price at the time of placing that order. For example, for an uptrend:
- Set Buy Limit if the price is below the level from the list above
- Set Buy Stop if the price is above the level
Make sure to set Stop Loss and Take Profit levels as well. Their location will be determined by the highs and lows of the daily candle. For example, for an uptrend, Stop Loss is set below the low and Take Profit below the high.
What Else to Remember
- You can use the moving average instead of the daily candle to confirm the trend. If the line goes up then set buy orders. If it goes down, set the sell orders.
- Not all your pending orders will be executed but those that work will probably close with a profit.
- If you have open positions when switching to another trading day, then you should not set the pending orders. Wait for the position to close. If it doesn’t close for a couple of days, then it makes sense to close it manually and move on to the Cherry Blossom strategy.
- Make sure to delete all pending orders at the end of the day if they weren’t executed.
- If at least one of your pending orders is closed by Take Profit then the rest must be deleted.
To Summarize
The key to this strategy is that you enter into trading after the close of the daily candle. This increases the chance that the market will continue to move in the same direction and not make sharp reversals. Even if you don’t use the “Cherry Blossom" in its finished form, you can still apply some of its nuances to your other strategies. I wish you luck in conquering the market.