Simple Forex Trading Strategy Using a Kangaroo Tail Pattern

What is a “Kangaroo Tail” pattern?

Over the years different price bar patterns have been given their own names. I first read about this “Kangaroo Tail” pattern in one of Dr. Alexander Elder’s trading books.

I have taken the basic pattern and put my spin on it to create a pretty nice trading strategy for USD/JPY Forex pair.

It’s a simple trading strategy which anyone can use. Trade setups are identified on the daily timeframe and trades last less than 24 hours. It takes just a couple of minutes to spot the setups and place stop orders for the next day.

First I am going to explain how to identify the Kangaroo Tail setup and then where to place orders to trade.

I have also filmed a detailed video below in which I show you on the board the exact setups. I’ve included back test reports showing almost 13 years of trades to prove it works too.

Read to the end of the post where you can get some enhancements to the basic rules which double the profitability of this strategy.

Identifying the Kangaroo Tail Setup

Finding a BUY setup and placing the order:

• BUY setup as marked with the blue arrows above is when a bar has a low which is lower than the bars both to the right and left of it.
• Once identified the BUY kangaroo tail bar (bar number 2) place a BUY stop order at the high of bar 3 which is the bar to the right of the tail.
• Place your stop loss at the low of bar 3.
• Once in the trade, exit at the end of the day (around 16:55 EST)

Finding a SHORT SELL setup and placing the order:

• SHORT SELL setup as marked with the red arrows above is when a bar has a high which is higher than the bars both to the right and left of it.
• Once identified the SHORT SELL kangaroo tail bar (bar number 2) place a SELL stop order at the low of bar 3 which is the bar to the right of the tail.
• Place your stop loss at the high of bar 3.
• Once in the trade, exit at the end of the day (around 16:55 EST)

Example of a Long / Buy Setup

The setups occur on average about 60 times a year. Below shows the equity curve of how the strategy has performed from 2008 through to 2020.

Watch the video below to see exactly how to trade this strategy on USD / JPY and then full back test reports