Day trading

  • Jul 20 2022
  • by
  • Analyst AZA
Day trading

Day trading forex strategies

This article will be providing the reader with robust strategies that can be used to take advantage of opportunities provided by the market. A trader must place trades only when their strategy is instructing them to do so, and as time goes on, they can start refining the strategy as they realize its flaws. The trader must have the right psychological approach to the market and refrain from making trades that are influenced by greed or fear. The strategies in this article will require the user to be patient and disciplined in their execution. The first strategy to be explained is multiple time frame analysis. Trading trends is one of the most preferred trading methods and is utilized by most hedge fund managers.

Although some market participants like trading ranges, the potential for making large profits tends to lie in trades that capture large market movements and it has been found that markets typically spend Seventy percent of their time in bracketed markets and Thirty percent in a trend. That makes it crucial for traders to always have the bigger picture in mind, which can be accomplished by applying multiple time frame analyses. Traders can start analyzing the weekly and daily time frames, this should give them a clue about the trend of the market, and after that, they can turn to a shorter-term market structure for entry. A Five-minute trader that is going with the main trend is more likely to make profits than a Five-minute trader who is counter trading the main trend.

During a trend, one would look to buy or sell on a pullback. This strategy advises traders to buy when the RSI is below the Thirty percent level rather than selling above the Seventy percent level during an uptrend. Multiple time frame analysis can also be used in smaller time frames, the trader needs to be aware of critical levels in higher time frames. For example, a trader can look for directional conviction of the market on hourly charts and use the Fifteen-minute chart to enter positions. The significance of using multiple time frame analysis should not be underestimated, since it can help a trader in avoiding entering dangerous trades. The Rockies in the forex market will tend to trade bracketed markets since it's easier to grasp the concept of selling high and buying low.

The unavailability of volume data in the forex market has resulted in traders relying less on the level of demand and paying more attention to the market's microstructure. although the market is open 24/5 a week the level of market activity is not the same during different trading sessions. There is usually little activity during the Asian session and this results in major pairs such as Euro/USD trading in tight ranges. According to surveys, the most market activity is evident during the European trading session. The United Kingdom has the most volume traded, followed by the US. Since the UK is the most active trading center, it gives traders a chance to exploit the news that is released during the Asian session and this allows the trader to take part in large market movements that were lightly priced during the Asian session.

This brings us to the next strategy which will work in the first few hours after the Europeans open to gauge the direction of price for the day. This strategy works extremely well if there was a major economic release the strategy is about waiting for the market to cool off before entering trades. The first trade objective for going long or buying the cable, which is the GBP/USD, is to take the first hour of the European session as a range. The trader must wait for the price to establish a range low of about Twenty-Five pips from the open and wait for the reversal of the price action. The strategy takes the initial market direction during the first hour as fake and looks to fade the move if the price has moved Twenty-Five pips from the open.

When the price breaks out from the high of the range, the trader should wait for the price action to trade higher by Ten pips and enter long positions and the stop loss should be situated not higher than Thirty pips from the high of the range. If the price moves against the trader by Fifty pips, they should close half of the positions and move the protective stop to break even and target three times the risk, which in this case would be 105 pips. The next strategy is used by most professional traders and it is called the Break out play. The trader must first look for a daily candle that opened and closed within the trading range of the previous candle. There must be two daily candlesticks that open and close within the previous day's trading range for the strategy to be applicable.

The strategy seeks to take advantage of the volatility that usually arises after this kind of candlestick formation. The volatility play is more likely to occur with a higher conviction if the candlestick formation proceeds in the London or the US session, especially if there is an economic release. This strategy has the potential to generate large profits when combined with tools like support and resistance lines. For example, if the candle formation occurs at a top of the head and shoulder formation, a trader can anticipate a breakout downwards. A stop loss should be placed at the high of the previous day's candle, which closed within the ranges.

Trading breakouts have their challenges because even if the price breaks out of the key level, the trend is not guaranteed, as prices have a habit of retesting a key level several times before they break out occurs and this can present a risk for a trader. Therefore, a trader can instead fade breakouts, but the key is knowing when the price is most likely to consolidate and this can be accomplished by looking for moving averages that have mixed directions. The strategies outlined in this article have been back-tested, forward tested and have proven to yield nice returns when they are traded accordingly. The user needs to be disciplined and patient to wait for the objectives of the strategy to be met before entering trades. Following a strategy will help the trader not make a lot of emotional decisions. This sounds easier but is very difficult in reality. Therefore, it's advisable to work on the psychological aspects so that you can start generating returns using the strategies provided in this article.

The strategy seeks to take advantage of the volatility that usually arises after this kind of candlestick formation


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