Rise of the Phoenix – Strategy

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work with you as well as against you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be familiar with all of the risks associated with foreign exchange, and seek advice from an independent financial advisor if you have any doubts.

Rise of the Phoenix

There is one trading system that has made me more money than any other trading system. It is not even close. This is my favorite. The first year that I traded only this trading setup, I made money on well over 80% of my trades. I made money more consistently with this trading system than any other trading setup. I know a couple of traders who trade only this trading setup for a living. You too can do it. There is no reason why you cannot trade only this trading system for a living. It works beautifully.

It will take practice to get good at the Rise of the Phoenix trade, and not all the Rise of the Phoenix trades will make money, but it is a very simple way to make money in the markets, in any market, currency pair and time frames.

Here’s why I like the Rise of the Phoenix Trade:

1. There is a high probability of success.
2. There is a fair chance of catching a long term move with this trade.
3. There is no need to watch the markets with the Rise of the Phoenix Trade.

The Rise of the Phoenix Trade is a simple trading setup. All the Rise of the Phoenix Trades start with a simple candlestick formation. The characteristics of the Rise of the Phoenix Trade are as follows:

1. The candlestick formation occurs on a support/resistance zone.

Rise of the Phoenix 1

The Rise of the Phoenix pierces the Support/Resistance zone for a buy setup.

Rise of the Phoenix 2

 

The Rise of the Phoenix pierces the Support/Resistance zone for a sell setup.

 

2. The open and close occur in the bottom 1/3 or top 1/3 of the candlestick.

Rise of the Phoenix 3

 

The open and close are in the top 1/3 for the buy setup.

Rise of the Phoenix 4

 

The open and close are in the bottom 1/3 for the sell setup.

 

3. The candlestick is usually longer than most of the surrounding candlesticks.

Rise of the Phoenix 5

The Rise of the Phoenix is often longer than surrounding candlesticks

4. The best Rise of the Phoenix candlesticks are at extreme highs and lows.

Rise of the Phoenix 6

This is a nice looking Rise of the Phoenix because it is at an extreme low

 

Avoid Rise of the Phoenix trades that are in traffic – amongst other price candlesticks. These candlesticks do not provide high probability trades.

Rise of the Phoenix 7

Avoid Rise of the Phoenix trades in traffic

All of these Rise of the Phoenix candlesticks are in traffic, and not at extreme levels, therefore they would not be considered candidates for the Rise of the Phoenix trading setup.

5. We look for Rise of the Phoenix trading setups that have “space”.

This can be a tricky concept to understand. But the main point is that the Rise of the Phoenix candlestick “sticks out” from the recent candlesticks and that the Rise of the Phoenix is printing on an area of the chart that has not seen price action in some time.

In this example we see that price has not printed in this area for quite some time. So this Rise of the Phoenix candlestick has a lot of space, and this is a good trading setup.

Rise of the Phoenix 8

 

In this chart we see that price has recently printed at this level, so this Rise of the Phoenix candlestick does not have a lot of space, and this is a bad thing.

Rise of the Phoenix 9

Not a lot of space for this Rise of the Phoenix candlestick

Price has recently printed at this price, so this Rise of the Phoenix candlestick does not have a lot of “space”.

 

However, this Rise of the Phoenix candlestick is well placed, as there is a lot of space. On the chart we do not see where price has last printed here.

Rise of the Phoenix 10

6. The open and close of the Rise of the Phoenix candlestick are contained by the previous candlestick’s range.

This is an important rule. All Rise of the Phoenix’s are only valid if the open and close are contained by the range of the previous candlestick. If the open or close of the bullish Rise of the Phoenix is located below the low of the previous candlestick, then it is not a valid buy signal.

Rise of the Phoenix 11

 

This is not a Rise of the Phoenix candlestick because the open and close are not inside of the range of the previous candlestick.

Likewise, if the open or close of the bearish Rise of the Phoenix candlestick is located above the high of the previous candlestick, then it is not a valid sell signal.

Rise of the Phoenix 12

This is not a valid Rise of the Phoenix candlestick because the open and close are not inside of the range of the previous candlestick.

 

If the range of the candlestick before the Rise of the Phoenix candlestick contains the open and the close of the Rise of the Phoenix candlestick, then the Rise of the Phoenix candlestick is a valid signal.

Rise of the Phoenix 14

This Rise of the Phoenix candlestick is a valid buy signal because the open and close of the candlestick are both contained by the range of the previous candlestick.

Rise of the Phoenix 15

 

This Rise of the Phoenix candlestick is a valid sell signal because the open and close of the candlestick are both contained by the range of the previous candlestick.

In summary, the Rise of the Phoenix trading setup has the following characteristics:

1. The candlestick formation occurs on a support/resistance zone.

2. The open and the close occur in the bottom 1/3 or top 1/3 of the candlestick.

3. The candlestick is usually longer than most of the surrounding candlesticks.

4. The best Rise of the Phoenix formations are at extreme highs and lows. 5. The best Rise of the Phoenix formations have a lot of space.

6. The open and close of Rise of the Phoenix are contained in the previous candlestick’s range.

Rise of the Phoenix 16

This is a great Rise of the Phoenix formation, it is at an extreme low and it is on a support/resistance zone.

This chart shows the ideal Rise of the Phoenix Trading setup.

 

So we know what the Rise of the Phoenix Trade setup looks like, but when do we enter the trade?

The simplest entry rule for a Buy Trade is to enter the trade when the market goes higher than the high of the Rise of the Phoenix candlestick.

Rise of the Phoenix 17

Buy order is placed above the high of the Rise of the Phoenix candlestick.

 

Likewise, for a Sell Trade you may enter the trade when the market goes lower than the low of the Rise of the Phoenix candlestick.

Rise of the Phoenix 18

Sell order is placed below the low of the Rise of the Phoenix candlestick.

 

Stop losses can be placed just beyond the Rise of the Phoenix candlestick.

Rise of the Phoenix 19

The great advantage of placing stop losses outside of the Rise of the Phoenix is that the stop loss is also placed on the other side of the support/resistance zone.

 

Exiting the Rise of the Phoenix Trade

Profit targets and trade exits are very personal, and most traders will have their own favorite way to manage a trade. For the Rise of the Phoenix Trade you may consider the following possibilities for your exits:

1. Previous High/Low

Some traders, like me, have a difficult time holding on to a winning trade. If you find yourself wanting to get out of a trade, and you find it difficult to hold on to a developing trend, then you may want to shoot for short, quick profit targets.

One way to do this is to exit near a previous high/low. These previous highs (or lows) will nearly always be at a support/resistance zone. So you can simply put a take profit order near this support/resistance zone and let the trade go.

The drawback of this exit strategy is that you will miss out if the market continues trending. This can be very difficult to stomach for some traders.

2. Two Profit Targets

This is my favorite exit technique. It may not be the most profitable, but it certainly is psychologically easy to handle. This strategy is easy for many traders to put into practice because it allows for a quick profit AND it allows for you to cash in on a trend.

Using two profit targets means that you can target a close, easy-to- achieve target and allow the market to run further in the direction of the trend. This means that you can profit if the market hits your close profit target and then reverses and you can profit if the market continues on in the direction of the trend.

 

This is how I use this exit strategy. I enter a trade with two positions. For the first position I will set the profit target at the nearest support/resistance zone. If the trade goes in the expected direction then this support/resistance zone is the most likely place that the market will reverse. If this first target is hit I will move the stop loss on the second position to break even (or plus 5 or 10 pips). This way I will not lose money on the trade. Sometimes the market will reverse and stop out the second position, and this is fine. But sometimes the market will continue on trending and I will have a rather large profit. I will generally watch how the market reacts to each of the support/resistance zones and if it looks like the market is going to reverse at one of the support/resistance zones, I will exit this second position.

I never know if price will halt and continue once it hit’s a support/resistance zone, but if the pair has trended a long way and then retreats a bit at a support/resistance zone I am often happy to take profits on the second lot.

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work with you as well as against you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be familiar with all of the risks associated with foreign exchange, and seek advice from an independent financial advisor if you have any doubts.