Unlocking profitable trading strategies: Guide to Granville’s Rules, buy Signal 3, and sell Signal 7. Technical analysis, market trends, and proven investment strategies
Trading with Granville’s Rules: Buy Signal 3 and sell Signal 7
Granville’s Rules have four buy signals and four sell signals, which show the relationship between the position of the moving average (200-day MA) and the price. These signals are usually explained using conceptual charts, but candlestick charts like the ones used in technical analysis must be used here. In this article, we will introduce buy signal 3 and sell signal 7, which appear when the price approaches the MA but returns to the trend without falling below the MA.
Let’s look at buy signal 3. First, we will look at the price movement after the signal appears.
Buy signal 3 in a EUR/JPY chart
Above, we see the EUR/JPY daily candlestick chart, with buy signal 3 appearing twice. After signal A appears, the price returns to the uptrend and goes on increasing. In contrast, after signal B appears, the price moves upward but immediately reverses and falls below the MA. As this example shows, buy signal 3 does not necessarily guarantee a steady uptrend; this scenario requires extra attention.
Now, let’s look at sell signal 7 and the price movement after it appears.
Sell signal 7 in EUR/USD chart
Above, we have the EUR/USD daily candlestick chart, with sell signal 7 appearing periodically. Between F and G, there is a break above the MA, but the signal here is sell signal 6. When the signal appears regularly like this, it can be identified as a selling opportunity after the correction.
Buy signal 3 / sell signal 7 is similar to buy signal 2 / sell signal 6 (returning to the trend shortly after breaking down/up the MA). Still, the price does not cross the MA when buy signal 3 /sell signal 7 appear. When approaching the MA, the correction ends and the price rebounds.
Such signals appear when the trend is clear and multiple signals are triggered in a single move. In addition to appearing more frequently than other signals, it is also more likely that false signals occur, a scenario requiring extra attention.
Trading strategies
Let’s analyze the trading strategy rule with buy signal 3. The crucial factor here is to use the average candle to determine the timing of the entry point. Enter when the average candle approaches the MA and the blue line changes to the red line, and take profit at the recent high.
Buy signal 3
Let’s have a look at this rule in practice. In the chart above, buy signal 3 appears twice at A and B, both are steadily rising, and profit can be taken at the recent high (about 240 pips for A, about 320 pips for B). The advantage of this strategy is to use the average candle (from the blue line to the red line) to determine the rise from the low.
Now, let’s analyze the trading strategy of sell signal 7.
Sell signal 7
If this rule is followed, when trading at C and D where sell signal 7 appears, both prices will steadily decline, ensuring profits of about 200 pips for C and 150 pips for D. Then the price rises again near the MA, which can also be identified as a signal. In this strategy, when such a trend occurs, we find several opportunities to sell on the corrections.
