Trading on the Forex exchange is associated with great risk. Opening long-term transactions in a volatile market, and even with leverage, is not a good idea. The price of Forex is a "lady" wayward. She loves to move up and down. Holding a position for several days is unprofitable and psychologically difficult. It is safer and calmer to trade during the day (so to speak inside) by setting small stop-losses.
For more comfortable and safe work, traders use simple forex trading strategies. They allow you to enter at the very beginning of the expected movement and not outstay the transaction. The system allows you to take only the active part of the emerging trend.
Before proceeding with the description of the strategies, we will analyze the simple principles of technical analysis of the price chart.
Trading Basics
The essence of technical analysis was most accurately and succinctly expressed by Charles Dow at the end of the 19th century. He said that the market is repeating, and the price takes everything into account.
Repetitions are patterns of behavior. The market is not stocks or money, but people with their hopes and fears.
The expression of Charles Dow means that all the news has already been reflected in the current position of the price. This is precisely what allows us to evaluate the further market reaction and movement on the chart.
This is easy to understand by example: if people expect growth, then they are probably already shopping. Therefore, they are always ready to take profits or strengthen their positions. The analyst’s task is to notice and compare this with the news background in time.
But the subject of this article is not a analysis of technical analysis, but a description of strategies that are based on it.
Two trading strategies
Many traders are attracted to intraday trading at Forex. Simple strategies allow you to create effective trading systems. They are of two types: trend and corridor. Which one is more effective?
Practice shows that entering the direction of a developing trend is more reliable and secure. Figuratively speaking, a trend is a moving train, jumping into which you can ride with a breeze. The price corridor can be compared to a sorting station. In the market, this is always uncertainty and throwing.
Intraday trading
For such operations, it is important to consider the time of the beginning and end of trading sessions. As mentioned above, money in the Forex market in most cases earn (or lose) on active trend movements.
Forex is an interbank exchange that operates around the clock. The only exceptions are weekends. But trading on the Forex exchange is impossible to conduct all 24 hours, so you need to choose a specific time for transactions.
Bidding takes place alternately at the European, American and Asian sessions. Traders living in Europe and Russia choose the first and second
At 5:00 - 6:00 GMT European exchanges begin to operate, at 12:00 GMT Chicago and New York open. From 12:00 to 16:00 GMT there is a lot of market activity, as the two sessions (European and American) coincide in time. Europe leaves the market at 16:00, and after 18:00 GMT the market freezes.
Currency pair selection
When trading on European and American exchanges, you should choose the pairs: EUR / USD, GBP / USD, USD / CHF (Euro, British Pound and Swiss Franc). In the future, it is necessary to analyze the volatility of currency pairs and test the trading system. Based on the analysis, you can make the best choice.
Fundamental news
Many novice traders underestimate the role of economic news. They believe that technical analysis is quite enough, and they do not want to complicate anything by conducting intraday trading at Forex. A simple strategy does not mean that it should be primitive.
Inside the session, the trader should carefully monitor the schedule for the release of economic news. It often happens that, in anticipation of important messages on Fed rates, the price moves. It is important not to miss this moment.
It is also important to know that an hour before important news you can’t open new positions. Due to the unpredictable market reaction, this deal will most likely close in negative.
What if an hour before the news there is already an open deal? If there is profit on it, you should move the stop loss to breakeven and wait. If the deal is in the red, you need to do nothing and wait too. Of course, stop loss must be set in advance.
Also, do not open a deal at the time of news release. The market can sharply go one way, then sharply turn the other way. As a result, the deal closes in the red. Trying to do something at this moment is useless: quotes will jump, and dealers will not be able to manage to process requests.
"Conservative scalping"
This is the name of the book N.A. Shiryaeva. For a trending strategy, the choice of indicators is appropriate - a set of moving averages. But oscillators showing the boundaries of price ranges in dynamics are also needed here.
What matters is not the indicator itself, but the idea. It consists in the fact that the transaction opens in a trend and on a pullback, which is tracked using an oscillator.
When a signal arrives from stochastic, the MACD indicator should confirm the trend. For this purpose, the MACD-2line indicator is used.
The shortest moving average is placed in an envelope with an offset of up and down by 0.21%. To build an envelope, you need to download and install the Envelopes indicator.
Necessary indicators:
- Exponential Moving Averages (EMA) with parameters 34, 72 and 144.
- Envelope based on EMA34.
- Stochastics with parameters 12, 5, 3.
- MACD with parameters 21, 34, 5.
- Ichimoku for 4 hour candles.
Ichimoku indicator is needed to track the trend. In this case, only the Kijun and Tenkan lines are used. The rest are painted to the background color so as not to interfere. When Tenkan is located above Kijun and looks up or horizontally, this means that there is a bullish trend in the market.
The role of moving averages
Forex trading strategies rarely do without moving averages. Their role is difficult to overestimate. With their help, the next levels of support-resistance are visible. In addition, they confirm the presence of a trend.
There are several types of averages, but exponential moving (EMA) is used in scalping. This indicator instantly responds to the slightest change in price dynamics.
Trading intraday is conducted for a short period of time. Trends here are fleeting and small. Inside the hour you can take 30 points. That will be quite enough. There can be several such inputs during one session.
The idea of ​​conservative scalping is to find trend matches on five-minute and four-hour charts. The transaction is opened at the rebound from a significant level in the direction of the trend at h4. Price rebound is determined using Stochastics and MACD.
Trend Determination Method
Now we are close to explaining the nuances of trading in the Conservative Scalping strategy. Intraday trading on it fully paid off.
So, we found out that we need h4 and m5 graphs. To determine the global trend on a four-hour chart, Ichimoku is configured. The trend during intraday trading on Forex is determined by the location of the Kijun and Tenkan lines (the remaining lines need to be made the same color with the background so as not to interfere).
Exponential Moving Averages (EMAs) are tuned on a five-minute timeline. Their location and orientation will indicate the presence and strength of the trend on this time frame. The greater the distance between them, the steeper the slope, the stronger the trend.
The Stochastics and MACD indicators help to formalize the price rebound from levels in places where the trend slows. This serves as a signal to enter the market. Signal formalization is necessary for testing. Without this, it is impossible to determine the performance and stability of the trading system.
For clarity, we give a few more examples of receiving signals on five-minute charts.
Here you can see how the stochastic oscillator shows a price reversal along a trend, and the MACD indicator confirms the signal with its growth. Moving averages also indicate the trend.
Now let's compare the h4 and m5 graphs.
A buy signal was received on the m5 chart. Go to h4 and see what Tenkan and Kijun show:
We make sure that the entry is carried out according to the trend inside the growing white candle h4.
All these tricks help make intraday trading understandable and predictable.
"5 points for success"
This is the name of the book by V. Safin, which is publicly available. The idea of ​​the strategy is to obtain an aggregate signal for several indicators, including candlestick configurations. Each signal is evaluated using a five-point system. The highest number of points is 100. If the signal gains 65 points, then this is considered a good probability of success of the transaction.
Strategy is the basis of the trading system
We examined what intraday trading consists of, as well as why it is better than long-term positions.
Two simple intraday trading strategies at Forex are shown as examples: “Conservative scalping” N. A. Shiryaev and “5 points for success” by Veniamin Safin.
Why are they chosen? Because they have the idea of ​​accumulating a statistical advantage. All decisions are made carefully and rationally. They can be used at your discretion in any market. For example, with intraday stock trading.
These strategies are easy to test, simple and straightforward. It is important that they can be improved, adjusted to suit your own trading style.
All this confirms the well-known truth that any strategy is just the basis for creating your own profitable and stable trading system.