Forex Trading Strategies For Beginners – This trading strategy doesn’t just work for Forex. It can also be applied to the stock or futures markets.
Before explaining about it, I want to share with you the requirements that I had in mind before deciding to share the technique with you.
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I made sure this pattern was relatively easy to spot so that new traders could notice this pattern.
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Of course, there must be logic behind all strategies. Otherwise, you won’t have a criminal to negotiate with.
This means it takes time to model. If it happens too quickly, those who start first won’t be able to notice it in time. They are very slow to respond.
So I’m sure it will take some time to establish this marketing strategy, even to capture new traders.
You don’t need to be analytical about it. If you can get 77 or 75 candles, great.
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But I usually only have about 80 candles, because the more candles there are, the longer the length, the better.
I will share with you several hand-picked graphs and examples because it is very easy to explain these examples to understand their meaning.
To give you a rough idea, I’ll make a sketch to show how it would look.
Therefore, the market is in the range, ideally about 80 candles wide. Then it reaches a high level of resistance and creates a tight reinforcement, which I call construction.
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Then you want to let the 20x moving average reach the lowest level of the building. This suggests that the market is now preparing for a crash.
When this happens, you place a buy order above high resistance.
And if the market breaks, you go long with a 3 ATR stop loss as your stop loss.
When the market strengthens at a high resistance level, it is a sign of strength. This indicates that buyers are willing to buy at a higher price.
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It always goes from high volatility to low volatility and then back to high volatility.
With this in mind, during construction, the market is an area of low volatility. But as volatility and price volatility increase, it means your risk reward in trading is very favorable.
As you are entering a period of low flexibility, I want to say that the exchange cycle is suitable for you.
Compare that to what a dealer buys without construction. Where is the logical place to set a stop loss?
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If you ask me, the logic is that the position is below the support position and very far away.
Click Shift + Drag in TradingView and you will see that there are about 83 bars or candles.
You can see that the 20 MA appears to be supporting these higher prices by reaching the low of this formation.
And finally you will have 3 ATR trailing stop loss. Here you can use an indicator called butch stop.
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So, after entering a buy trade, you can use this blue line for your stop loss. When the price closes below this blue line, you exit the trade.
The key here is the ATR multiplier. I shared the 3 ATRs because they help plot medium-term trends.
If you want to capture a long-term trend, you can increase the ATR multiple to 4 or 5, depending on your preference.
If you calculate the ATR indicator, which represents the average true range, it measures the historical volatility of the market.
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Suppose we have the current value of Y with the ATR value of X and we have a multiple of 3.
As for Y, the higher the current market price, the higher your blue line will be, which you can take as your pivot stop.
And they exit the trade only when the price closes below the break stop that happened here.
Yes, it is a business where everyone wins and, yes, I chose this example because it is very easy to explain the concept.
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“No, Rainer, it’s not 80 bar yet. Can we still use this setting at just 77 bar?” You may be thinking.
Come on, don’t do anal. If it’s just a difference of one, two, or five bars, go for it.
At first glance, of course, the construction is easy to distinguish. But this is where things get complicated in real time.
You may feel that potential construction is already underway and you may simply want to buy skyscrapers.
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But remember, you only want to enter a trade when the market is ready for a rally. And how do we know the market is ready?
This is where 20 MA – 20 MA comes into play when the price falls.
For this to happen, the market will need to strengthen for some time. This means the construction should last a while.
Therefore, if you take out the 20 MM, you can see that this minimum retracement is still far from the 20 MM.
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So this indicates that it is not yet time to enter your business. You want to target the 20 MA low build.
And if you go further back in time, here the 20 MA reached the lowest construction level.
Now we can conclude that this market is preparing for breakout and so place your buy order at the highest level with 3 ATR trailing stop loss.
Yes, the market briefly cut the 20 MA before the breakout, but that’s okay.
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The main thing you want is good, solid construction. The tighter the better.
As the price increases, this blue line increases. And they exit the trade only when the price falls and closes below it.
The whole thing will stop looking distorted and you’ll know it’s time to get out of your business.
This example is a little different because you’ll notice that the construct is actually created out of resistance.
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But to hit the resistance, it seems like getting out of the resistance, and then creating a construction. And that’s good.
The next thing you want to do is wait for the 20 MA building to reach the minimum level.
At this point, the 20 MA has not yet reached the lowest level, so it is not yet ready to break.
Finally, you can hit the construction low here and place a buy order above the high.
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But that doesn’t mean you have to follow the exact rules I shared. No, that’s not how it works.
And I don’t want to repeat your marketing strategy exactly as I teach. I want you to think for yourself.
If you are following a long-term trend, you can use 4 or 5 ATR as your stop loss.
But if you still want to maintain 1% risk in this trade, keep in mind that with a wide stop loss, you will have to reduce your position size in the trade.
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Let’s say your buy stop order is above the previous high (on the blue dotted line) and your stop loss is below the build (on the red dotted line).
At this point, you may not have reached your trailing stop yet, but you can exit this trade early to minimize your losses.
So instead of letting the market completely hit your stop loss, you can exit early and reduce your stop loss to 0.5 or 0.6 R loss or closer to 0.6.
But the disadvantage of this strategy is that you exit the trade prematurely if the market reverses. The downside.
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My advice is that if you want to use this early exit strategy, you might be ready to re-enter the trade. Because it can only be a tremor to hold weak grips.
Therefore, if the market breaks out from a new swing high (blue dotted line), you re-enter the trade and reset your stop loss (red dotted line).
It’s like insurance, if the trend is complete, at least you can enter the business.
For me personally, I only do it once at most. I don’t like going out often.
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If there is an early exit, I will try to re-enter the trade if the market rises above this swing.
What you want is a false breakout setup on the lower time frame, a false breakout setup on the lower support.
We have this price drop.
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