There are many different trading patterns on the platform. Some have weird-sounding names. You may have heard of butterflies or bats. But what about pigs? Are you familiar with the Pig’s Hoof pattern? Well, it is not a very common one. I found it while reading one of the trading forums online. It picked my interest, so I read a little more and I decided to try it in the game. And you know what? It seems like a good trading pattern for different kinds of traders.
Let me bring you closer to the Pig’s Hoof pattern and show you how to trade with it on the Olymp Trade platform.
The Pig’s Hoof pattern overview
As you probably guessed, the name of the pattern comes from the way it looks on the chart. Check out the picture below. The pattern looks like the pig’s hoof. When can you encounter such a pattern? When the asset’s price reaches the support or resistance level, then reverses for a short time and strikes the support or resistance again. Only then bounces back and begins to form a new trend in the opposite direction.
Furthermore, the Pig’s Hoof pattern will come to existence only when the Relative Strength Index shows divergence. This means when the price is rising and the RSI is falling, or the price is dropping while the RSI is rising.
Take a look at the picture above. In both marked situations, the price reaches the level, reverses, hits the level the second time, and then bounces back and forms a new trend.
You may also notice, that when the price touched the support/resistance level for the second time, the RSI was not on the same course. This is what we call divergence. It was moving up in the first situation, and down in the second, indicating a possible trend reversal.
Trading with the Pig’s Hoof pattern on the Olymp Trade platform
Setting up the chart
After you have logged in to the Olymp Trade account, select the Japanese candlesticks chart. Set the candle interval for 1 minute.
Now, click the graphical tool feature and find the RSI among oscillators. Hit the button and it will be added to your chart.
Using the Pig’s Hoof pattern and the RSI in trading
Your task is to observe the chart meticulously. There are three things you will have to be attentive to. First, price behavior. You will have to define the support/resistance levels and notice when the price reaches them. Secondly, the special candles may develop on the support/resistance level. Lastly, the RSI divergences. Look out for the moments when the price is going in one direction and the RSI does not follow it. The line of the oscillator will also remind a pig’s hoof.
The moment to open a long position is when the RSI divergence can be observed during the downtrend. It should last a maximum of 5 minutes if you trade on 1-minute interval candles.
A short position can be entered when the RSI divergence happens at the uptrend top.
A simple capital management strategy to couple with this trading tactic
You cannot forget about money management strategy while trading any kind of patterns and indicators. The following method is a simple way to earn. It is called a compounding strategy.
Now, remember not to invest more than 3% of the entire account balance in one trade. When your initial capital is $100, invest $3 in the first trade.
The compounding strategy says, that in place of trading $3 each time you open a position, you should invest all earned money. This means if you invested $3 with a payout of 82% and you won, you should put $5.46 in the subsequent trade. Check out the table beneath.
Psychological aspects of trading
It might be sometimes overwhelming to trade financial derivatives. You should prepare yourself for some portion of pressure and decide what are your limits.
Let’s focus on the exemplary table above. Imagine you lost all three trades. It will be a $9 loss. What do you do? Do you keep trading in the hope of recovering the loss?
Imagine the opposite. What do you do after three winning trades in a row? Are you able to stop and take a break or will you continue in anticipation of earning bigger?
To say “enough” is not always an easy thing to do. No matter win or loss you may still feel like going on. But it is more important to keep the mind relaxed and this is why you should decide on what is the maximum amount of trades per day beforehand. Put it in your trading plan and stick to it.
The benefits of using the Pig’s Hoof pattern at Olymp Trade
The Pig’s Hoof pattern is a very nice and effective way of trading on the Olymp Trade platform. It probably works so well because it depends on three conditions. The price has to reach the support/resistance level, the special candles have to appear and the RSI divergence has to take place.
The Pig’s Hoof pattern is perfect for the trending markets when many reversals happen during a specific timeframe.
Use the pattern in combination with the compounding capital management strategy and you will achieve a daily profit target just in a couple of trades.
Pros and Cons of the Pig’s Hoof Pattern 📈📉
|Pros 😃||Cons 😞|
|Effective in trending markets||Not suitable for all market conditions|
|Works well with the RSI oscillator||Requires constant chart observation|
|Can be combined with a simple capital management strategy||Recommended for short period candles, which may be overwhelming for beginners|
Interesting Facts about the Pig’s Hoof Pattern 🐖📊
|Origin||Discovered in a trading forum online|
|Visual Appearance||Resembles a pig’s hoof on the chart|
|Key Components||Price reaching support/resistance levels, special candles, and RSI divergence|
|Best Timeframes||Recommended for 1-minute interval candles|
The drawbacks of using the Pig’s Hoof pattern
The Pig’s Hoof pattern is recommended for short period candles. And for many traders, especially at the beginning, observing 1-minute interval candles can be a bit too demanding. Well, the pattern can be used also on longer intervals, but it will require a great deal of patience to wait for a Pig’s Hoof to appear on such a chart.
Are you curious how the Pig’s Hoof pattern works in reality? Go to the Olymp Trade demo account and use it in your trading. However, keep in mind that this strategy is not a sure-win technique. You still have to deal with risks and losses, so always be diligent and prepared. There’s no magic formula for success.
I would love to hear about your experiences. Use the comments section down below.
I wish you high profits!
Short Q&A about the Pig’s Hoof Pattern 🔍
- Q: What are the ideal market conditions for the Pig’s Hoof pattern?
A: The Pig’s Hoof pattern works best in trending markets where reversals occur frequently.
- Q: How does the RSI oscillator complement the Pig’s Hoof pattern?
A: The RSI oscillator helps identify divergences, which indicate a possible trend reversal, making it a crucial component of the Pig’s Hoof pattern.
- Q: What is the recommended timeframe for using the Pig’s Hoof pattern?
A: It is recommended to use 1-minute interval candles when trading with the Pig’s Hoof pattern.
- Q: Why is it important to set daily trading limits when using the Pig’s Hoof pattern?
A: Setting daily trading limits helps manage risk and maintain a disciplined approach, preventing emotional decision-making during trading.
- Q: Can the Pig’s Hoof pattern be combined with other trading strategies?
A: Yes, the Pig’s Hoof pattern can be combined with other trading strategies, such as capital management strategies like the compounding method, to enhance trading effectiveness.
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