The Bearish Pennant Trading Strategy is an effective forex trading strategy that is based on the bearish pennant pattern.
With the Bearish Pennant Trading Strategy, you do not require any other forex indicators. Its all based on Price Action Trading.
The Bearish Pennant Trading Strategy only requires you to be familiar with how to draw trendlines & secondly, be able to spot the Bearish Pennant Chart Formaton when its happening right in front of you.
This forex swing trading system is similar to the Bullish Pennant Trading Strategy except for one thing only: its the complete opposite.
Here’s what A Bearish Pennant forex chart pattern looks like:
- Notice how it is the exact opposite of the Bullish Pennant Pattern?
- Notice that Pennant Chart Patterns (bullish or bearish) are different from the Flag Chart Patterns (either bullish or bearish)
- with the bearish pennant pattern, you should have a market already in an existing downtrend.
- at some stage, this downward trend will pause & consolidate for some time until a breakout happens.
- The breakout usually happens to the downside.
- with the Bearish Pennant Forex Strategy, we will be entering short orders (sell orders) when the breakout happens to the downside.
HOW TO SPOT THE BEARISH PENNANT PATTERN FORMING
- First, there has to be an existing downtrend.
- Next, watch for price to pause and slow down and consolidate.
- You need to draw 2 converging trendlines: one connecting the decreasing peaks (the downward trendline) and the other trendline connecting the increasing bottoms(upward trendline).
- wait and watch for price to break the upward trendline which was drawn connecting the increasing bottoms (or swing lows).
There you have it.
You have to be careful though. Sometimes, the peaks and bottoms may not be so clear when this bearish pennant chart is forming. So it easy to trade BEARISH PENNANT TRADING strategy.
HE RULES OF THE BEARISH PENNANT TRADING SYSTEM
- watch and wait for the upward trendline to be intersected.
- the intersecting candlestick MUST close below the upward trendline.
- then place a sell stop order 3-5 pips below the low of the intersecting candlestick
- then place your stop loss order anywhere from 5-10 pips above the high of the intersecting candestick.
- if that intersecting candestick is a true breakout, price will fall and activate your sell stop order.
- For take profit targets, you have a couple of options:
- set your take profit level at the price level where your profit will be 3 times what you risked.
- or you can use a previous swing low point (bottom) to set your take profit target level.
Also Read About: Forex Swing Trading Strategy – Floor Trader’s Method
So there you have it, the Bearish Pennant Trading Strategy. See if you can use it and make some pips.
Trading Tip: if you trade using 4hr timeframe and above like daily, you can make hundreds of pips easily with this forex trading system