Price Action – enter with the third bump!
Currency pairs are among the most traded markets in the world today and there are many followers for each pair. But there are also opponents, which is why each currency pair has evolved differently over time.
Of course, it is not only traders who influence the different developments, but also countries, banks and many other institutions. In addition to the fact that currency pairs develop quite differently in many cases, there are also situations in which they behave very similarly, and we will discuss one of these here today.
Price action trading has seen a huge leap forward in its existence, and so it is no wonder that traders today use price action in so many ways that it is perhaps too many to count. In the case of Price Action, the "with the third entry...!" strategy is one of the more popular ones, not only because of its relative simplicity, but also because of its high success rate.
with the third bump! – Long
As mentioned before, the strategy is one of the simplest ever. The whole idea is to wait for a third consecutive top hitting the S/R level(consecutive candles that hit the same S/R level again do not count), at which point the third hitting enters the trading position. Thus, in the case of the situation depicted in the chart below, purchases are made.
with the third bump! – Short
In the opposite situation, when the price tests the current resistance level three times in a row, the third hit leads to entries into selling. As can be seen in the chart below, tops and bottoms do not always form in a completely optimal and clear manner, and traders must therefore often consider carefully whether a particular hit can be considered a potential new top/bottom or whether it is just another test of the same bottom/top.
Our strategy today performs best in more stable markets, such as "EURUSD" or "GBPUSD", where its success rate exceeds 70% over the long term. However, due to its relatively universal applicability across different markets, this strategy can also be used in less stable markets where it has a lower success rate, but on the other hand, it is possible to achieve relatively higher valuations in these markets with this strategy.