Day Trading 101
October 31, 2015 at 12:37 pm #56802
Hi Fellow traders, as promised, let me share a method of day trading that I use.
It is not my method, it was taught to me, and now I will teach it to you. Its a very simple method and does not require any analysis of the market, although it is helpful to see the previous days candle close for general trade direction. It is also helpful to mark off your closest daily levels of support and resistances with horizontal lines on your chart.
So, we need to place two moving averages on our charts – please colour them differently.
Settings: Simple moving average applied to “typical price” period 6, shift 0
Second one is period 6, shift 1
These two averages combined is what price “rides” upon. Henceforth, I will call these two averages “the ribbon.”
Basically we are looking for price to break the ribbon, and have our two moving averages cross each other. Then we look to see if there is separation of the two averages – If so we initiate our buy/sell.
Use any time frame you like. I prefer 15min as I can get 1-2 trades per session on a particular pair. The higher time frames will give you more reliable signals and of course bigger profit targets.
I do 1:1, or 1:2 trades. Lower time frames its better to take 1:1 unless you have reason to believe that you are about to ride a big move.
Do not trade a big candle that breaks the ribbon.
It may seem too simplistic – and it is, but this will put many many pips into your pockets.
Only use this method from London open to NYT close. You can trade in the Asian session, but sometimes its more exciting to watch paint dry on a wall 🙂
Please refer to the chart examples for how this method works, and please let me know if you have questions.
Cheers.October 31, 2015 at 12:51 pm #56807
How long candles should be treated.
Cheers.October 31, 2015 at 2:01 pm #56826
thanks very much. I’ll take a look at that now.
The typical price moving average is based on the pivot points of the given period, right?
This system is very mechanical and could be automated. Have you thought about letting somebody develop an EA for that?
I’d like to share some examples and ask you to tell me if I do it correctly:
+ / – means winner/loser for the 1:1 R:R trades
I will do more back-testing on this. Just wanna make sure if I understand your strategy correctly.
Are there pairs you like best for this strategy and are there pairs that don’t work well with it? What is your experience?October 31, 2015 at 2:29 pm #56827
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- Replies: 370
thanks Raj, as long its working for you in real account, one can try it first on his demo to get the hand of it like any system that needs mastering to benefit from.
please post more real examples from time to time and shade more light on the aspect or reasons that setups fails if you see important in your future trading.
all the best for you Raj.October 31, 2015 at 3:26 pm #56834
Thank you very much Raj. This sounds and looks very mechanical, but yet quite effective when I back tested it. It could be our bread and butter trades while waiting for the bigger setups. I really appreciate your input on this Forum.
I will certainly have a go on my demo and see how it works.October 31, 2015 at 4:44 pm #56843
Moaied – its been working like a charm, thanks.
Marek – thanks and yes you can make a lot with this truly simple system.
Sebastian – when you get separation of averages, you should get in right away at the opening of the candle, you don’t have to wait for it to close. And your last example, try to avoid getting into a trade right after a massive candle like that.
I will post more examples soon.
Cheers.October 31, 2015 at 5:42 pm #56847
Sebastian – this works on any chart, any pair….I only have been using it on the majors though. But if you use it on pairs like g/j, e/j, eur/nzd etc, it will make you rich faster.
If you want to trade Asian session stick to Aud and Nzd blends, and jpy blends.
I don’t know what typical price is based on, like I said, someone showed me this system, I back tested it for a day, then immediately started using it.
As far as automating the system, I suppose you could, my concern with robots or signals are that they don’t have common sense. Say for example the 4hr chart is falling, and you are trading the 1hr chart and a retrace starts happening – a robot could generate a signal, but as a trader you would think ten times before entering.
Also try to trade in the direction of the bigger time frames. This may save you some bad signals.
Cheers.October 31, 2015 at 6:20 pm #56849
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- Replies: 3
Thanks Raj for taking the time to show this strategy with clear and concise examples.
I may backtest this and probably do it on the H1 charts for October.
Raj or Marek: Have you backtested it enough to have any kind of statistics or results?October 31, 2015 at 6:34 pm #56851
Pete, best to demo it yourself. I’m sure you will get great results.
Cheers.October 31, 2015 at 6:38 pm #56853
Pete, I only found out about it from Raj today, so my experience is none. I will test it on monday on demo though.
Raj, I noticed that sometimes price keep following same direction and still make this average cross couple of times…do we need bullish candle breaking a ribbon in order to long and in the same manner, bearish to go short? Do you look at the actuall slope and where you are on the actual chart while making your entry or it doesn’t matter? I hope I sound clear with my question. Please give us some more different examples when you get chance. Thanks a lot!October 31, 2015 at 6:41 pm #56854
What is great about this system, that we can trade the pair on a daily chart till we notice that two average getting closer and closer to the crossing point. Then we can exit. I will certainly have a go testing it.October 31, 2015 at 7:04 pm #56855
Hi Marek, yes slope should be up for buys and down for sells.
As far as your other question, I’m assuming you mean re-entry positions? If so, please see chart for example.
Cheers.October 31, 2015 at 9:41 pm #56863
I assume that this system can’t be working everytime, otherwise everybody would be rich 🙂 But if we can score 4 out of 5 or even 3 out of 5 trades, its worthwile, isn’t it. What is your success rate by using this system?
Are you more of a day trader? Do you prefer to close open your position and close at the same day? Could we use that system on a daily time frame with TP 1:3 ratio safely? What’s your opinion? Thank you sir.November 1, 2015 at 3:32 am #56876
Hi Marek, you are right – no one or system is immune to losing trades. But this system has a very hight success rate. 80+
Yes on the daily chart you can certainly take 1:3.
And yes I think I’m progressing towards being very comfortable with trading for a few hours and taking profits the same day.
Cheers.November 1, 2015 at 3:47 am #56877
thanks very much for all your information.
I like the idea of using multiple trading strategies, so especially after you have one successful one, you work on finding the next strategy, because one day one of the strategies might stop working and we always have alternatives.
I have one question:
If we work at a daytime job and cannot check the charts so frequently, what time frame would you recommend? I’ve seen you discover several setups per currency pair per day, so it would be worthwhile to work with the 15 min chart as well, sometimes we will spot it on time, sometimes we’ll miss it. Or would you say you discover the same amount of setups on a 1h chart, so it’s better for people who work, because it is also more reliable :)?
For those people who are interesting, what this MA does, I looked it up again. The typical price in MetaTrader is the pivot point, calculated by using the Low, High and Close price:
http://forum.mql4.com/35952November 1, 2015 at 4:30 am #56879
I did some manual back-testing for four pairs and came to the following success rate:
eur/jpy: 7/10 -> wow 🙂
gbp/jpy 8/10 -> wow 🙂
I scrolled randomly through the charts and I’d be interested about your feedback. According to this test, JPY pairs performed better, but it can be a coincidence, because I only looked at around 10 examples per pair (no large sample size) and only two JPY pairs.November 1, 2015 at 10:36 am #56900
Hi Sebastian, I usually do this on 15min, occasionally 5min simply because I can.
If you have work commitments, then 30min, 1hr, and 4hr works well. On the daily, if I get a ribbon break, I don’t necessarily enter right then, but this just gives me a direction to follow on the lower time frames.
My goal is to just be able to turn on my computer and pull out pips every day, quickly, and then I don’t have to worry about holding any positions, and not be concerned if Draghi is going to ruin my trade when I’m asleep, or Janet feeding us some story, or employment numbers being revised etc, I think you get the point.
Yes I have found the strategy works really well with g/j, e/j, and some of the exotics because they have good volatility.
Thanks for looking into what “typical” price means – it’s good to know its the pivot, because this is always a great area of supp/res.
P.S. Back testing is ok, but do forward test this on a demo or micro account.November 1, 2015 at 11:52 am #56912
thanks very much.
May I ask which exotics you’ve been having good experience with in terms of this strategy?
I like usd/mxn and usd/zar, but I’m concerned about the spread if you use it with your ribbons on a 15 min timeframe and a tight ~8 pip SL.November 1, 2015 at 12:17 pm #56914
Sorry Sebastian, perhaps I didn’t mean exotics…..I was talking about ones like gbp/aud, gbp/nzd, gbp/cad, eur/nzd, eur/aud etc.
These pairs have really good moves, as long as your brokers spread is good.
Cheers.November 1, 2015 at 1:06 pm #56915
Oh ok, many thanks 🙂
Do you take a look on the calendar before taking a position, so a news item and its volatility does not knock you out?
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