Penant/Flag detection: validating the buy-the-dip strategy!
Hello!
FX no shirabe, satori here.
Today, I tested whether trend flag detection can be used for breakout buying and pullback selling.
The indicator used isMT4 Pendants-Flag Detection Indicator.
A pennant/flag is a chart pattern that typically appears in the middle of an uptrend or downtrend,
and I think it could be used as a timing for buying on dips or selling on rallies.
The above chart is an example of pennant/flag detection on EURUSD 1-hour chart.
The signal is generated on the next bar’s open price after observing the close of the E in the above diagram.
For stop-loss reference level, how about using the D level, the first take-profit target as two-thirds of the DE range in pips, and the second take-profit target as two-thirds of the XE range in pips?
The above figure shows a selling example on USDJPY 1-hour chart.
If you set it like “AB range in pips > CD range in pips,” it is also possible to mainly detect triangles of consolidation.
The above figure shows a selling example on GBPJPY 15-minute chart.
When initializing, the detection count will be displayed in the message.
In the past 12 and a half years, the detection counts for pennant/flag on GBPJPY 15-minute and USDJPY 15-minute charts are as follows.
USDJPY
Bull 135 cases
Bear 117 cases
GBPJPY
Bull 208 cases
Bear 123 cases
The number of Bull (buy) cases for GBPJPY is about 70 more than Bear cases.
The above figure shows a buying example on USDJPY 1-hour chart.
Regarding the shapes to detect, as shown in the note below, it is possible to specify the number of bars and the vertical shape pips and width in detail.
If you want to lower E a bit more before buying, or want to extend the pennant/flag period defined by the width from A to E, you can also adjust it in the settings screen.
From the charts above, it seems the timing of entries has some similarity to line trading.
With E signals, the past high becomes the future low and the past low becomes the future high, i.e., a roll-change concept.
MT4 Pennant-Flag Detection Indicatoris on a special campaign until the end of July.
By testing with new indicators and EAs, various data accumulate, and we will incorporate them in future version upgrades of each product and new product developments.
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