Before I Start, special thanks to "Sadly" for this method
The idea behind the 3-in-a-box method is to catch high probability trade setups with the emphasis solely on price. The method uses one indicator, CustomCandle and a M1 chart. Given the resolution of the chart it's perhaps best suited for scalp trades.
Setting up the chart to trade from is simple and straightforward. The method requires an M1 chart and the CustomCandle.mq4 indicator. Place the indicator on the chart and set the 'TimeFrame' property to 15. Then place the same indicator on the chart and set it's 'TimeFrame' property to 5.
By using CustomCandle and creating an outline of a 15 minute candlestick and by adding outlines of 5 minute candlesticks it's possible to observe the price action over multiple timeframes at higher resolutions and that of the closing state of each timeframe's candlesticks.
The 3-in-a-box trade setup
The trade setup is clear when all CustomCandle candlesticks indicate identical direction which is represented by a similar colour. A trade is then made in the same direction. Such a trade setup would be shown on the chart as four candlesticks: A 15 minute candlestick outline and three 5 minute candlestick outlines. This is shown as three 5 minute candlesticks which consecutively close at higher prices within a 15 minute period in the same direction; 3-in-a-box.
The 2 ends trade setup
This trade is shown as having a predominant number of candlesticks in one direction but more importantly the second and third 5 minute candlesticks must indicate the same direction as the 15 minute candlestick.
3-in-a-box + 2 ends template
The 3-in-a-box plus 2 ends template indicates long trades in green and short trades in red.
Exiting the trade
Should another trade setup present itself which indicates a change in direction then stop and reverse.
Site your stop loss at a point above or below the 15 minute candlestick depending on whether you are long or short. All said, it is a scalping tool so grab what you can.
As an alternative way of adjusting the stop loss, I am looking at the i-HighLow.mq4 indicator to offer possible stop loss settings. This indicator will plot the high and low of a timeframe set in the properties which I have currently set as 15-0. This indicator may offer other possibilities when it comes to deciding on whether to enter or exit a trade.
In addition to both trade setups, I am looking at other ways of increasing the probability of a successful trade by use of the i-HighLow.mq4 indicator which at the moment is primarily being used to set stop loss levels. It's use involves monitoring breaks either above or below the levels it has drawn on the chart in order to gauge momentum and possible price level breaks. Should either a 3-in-a-box or 2-ends trade setups occur along with a break of either a high or a low as indicated by the i-HighLow indicator levels then this ought to signal a stronger move in the direction of the trade setup. It may also help prevent initiating trades when volatility levels have dropped and so avoid weak moves.
- Added mankurt's newer version of CustomCandle called CC_Shift
- Added Rick D's i-HighLow.mq4 indicator - with preset properties.
NB: A special thanks to:
mankurt for the CustomCandle indicators.
Rick D for the i_highLow.mq4 indicator
My custom template on a m5 chart
Good luck everyone and wish you a lot of pips. I suggest using small lots like 0.01-0.05 to scalp on this, great for time past while your higher TF trades.