There are a million ways to trade markets, and of course it’s very likely that the toolbox that you have can use a few more strategies. That is the point of this article, to give you a couple of ideas how to trade from a day trading point of view, which tend to be rather reliable. Remember, nothing is 100% reliable but there are few things that tend to be more reliable than others.
You are a retail trader, so you have the ability to get in and out of the market rather quickly. Ultimately, you don’t have the same problems that an institution would have, for example trying to move 25 million shares of a stock. You’re knocking to move the market against yourself, so you have the ability to be extraordinarily flexible and agile.
Round number strategy
This is an incredibly simple trading strategy: take advantage of large round numbers as they tend to attract large order flow. This isn’t necessarily going to be the be-all and end-all of trading strategies, but it is a way to pad your trading account over time. It comes down to how patient you can be, because you won’t have this set up all of the time.
Trade at big figures such as 1.10, 1.12, 0.98, and so on. If you are even more patient, you can wait until you get whole figures such as 110.00, 115.00, and the like. The currency markets tend to react quite positively to the idea of support resistance every 500 pips. So at this point it comes down to whether or not you are willing to wait, but every 100 or 500 pips gives you an opportunity.
Take a look at the USD/CAD pair as it approaches the 1.35 level on the 15 minute chart. A simple short at that level could be a nice selling opportunity. A 10 pips stop with a 20 pips target worked out quite nicely. Notice how this is a 500 PIP number. On the other hand, if it were something like the 1.33 level, you may wish to have a stop loss of 10 pips and a target of 10 pips. This is why it works out better every 500 pips because those are much more important.
Three in a row
This is an incredibly simple strategy as well, as waiting for three similar candlesticks in a row is all you have to do. Obviously, you need some type of trend to start trading. As you can see, I have a 20 period moving average on a five minute chart in the AUD/NZD pair. In the pink circle, you can see that we had three white candles in a row, showing that the market was starting to pick up momentum. At that point in time you would put a stop loss below the bottom of the third candlestick and aim for at least the same distance as the distance of the three candlesticks.
Another twist on this is that if you get the same distance as you did of the three candlesticks, then you could put the stop loss at breakeven and see if you can let the trade run longer.
Hammer time!
While this seems incredibly rudimentary, I know professional traders that do nothing but trade hammers or shooting stars whenever they appear. They then will place a certain amount of credence to these hammers and shooting stars. For example, if you get the hammer or the shooting star at a 500 level, then it becomes much more important. Ultimately, if it is at the 100 level, then although important, you may not use as large of a position as you would in the initial scenario.
You simply put your stop on the other side of the candle stick and let it rip. This is one of those things where you can get a high probability when, if you are only trying to use the same distance as the height of the candle stick.
Something I want you to think about
Something I want you to think about is the fact that a high probability rate does not necessarily mean that you will be profitable. The need to win every trade is understandable, but at this point in time it’s very likely that you need to focus on risk and reward, because you need to make the most out of your trade. Most “sure things” are simply just scalping methods that have skewed a risk to reward ratio is. Any system that has a high success rate typically will have one loss wipe out several traits. Make sure you are not going down that road.