According to the authors, this strategy is suitable with any instrument, but we however have only tested two currency pairs with it: EUR/USD and GBP/USD. During the last 4 months we have obtained with it 74.5% profitable trades. Accordingly, every 7 trades out of 10 (roughly speaking) were in line with our forecast (ITM), and 3 trades were closed against us (OTM). Continuing with this same example, you can obtain: 7 * 84 = 588 profit, and 3 * 100 = 300 losses, so the net profit will be 588 – 300 = 288 dollars, for every 10 transactions in case you put 100 dollars per trade. In total, we received over 50 signals. The maximum number of consecutive losses was 2.
The Expiry Time of the option should be set at 1 hour (closing of the hourly candlestick, so the strategy is largely determined by the next hourly candlestick)
There are no required indicators to be used in this strategy.
You should use the candlestick chart type.
The conditions to buy CALL option.
1) On the candlestick chart type a bullish engulfing pattern is formed. At the peak of the movement, the last candlestick has a white body, which completely engulfed the previous black candlestick.
2) The pattern should fix minimum values for at least the last 2-3 candlesticks.
3) Next, we are waiting for the first candlestick with a black body.
4) Once the first black candlestick is formed, we buy the CALL option. So, we are assuming that the next candlestick will close with a white body.
5) The first black candlestick after the engulfing pattern must be formed in the next 4 hours (4 candlesticks), otherwise the signal is ignored.
6) If until the moment of market entry the price is rolling back down to half of the total recent increase, this signal is also not taken into account.
7) The body of the absorbing candlestick should not be bigger than 1.5 times in comparison with the absorbed candlesticks.
8) The candlesticks with small bodies, and those formed inside the sideways movements are not taken into account.
The conditions for buying the PUT option.
1) On the candlestick chart type there is formed a bearish engulfing pattern. At the peak of the movement, the last candlestick has a black body, which completely engulfed the previous white candlestick.
2) The pattern should fix maximum values at least during the last 2-3 candlesticks.
3) Next, we are waiting for the closing of the first candlestick with a white body.
4) Once the first white candlestick is formed, we buy the PUT option. So, we are expecting that the next candlestick will close with a black body.
5) The first white candlestick after the engulfing pattern must be formed in the next 4 hours (4 candlesticks); otherwise the signal is simply ignored.
6) If, before the entering the market the price has rolled back up by half of the total recent drop, then the signal is also not taken into account.
7) The engulfing candlestick body should not be more than 1.5 times bigger in comparison with the engulfed candlesticks.
8) The candlesticks with small bodies and those formed inside the sideways movements are not taken into account.
As you can see, the strategy does not use any indicators and is quite simple to use as long as you carefully read and follow the above steps.