If there is one essential thing when trading, it is having a good strategy, that is, a plan or a set of rules that will help the trader make decisions about entry, exit and management of current positions in the financial markets.
In this article, we will look at three strategies that exchanges prefer not to talk about. After all, everything that really works and brings success is kept secret.
Successful Strategy #1: Volume
Traders (especially short-term traders) should always choose the asset that has the highest trading volumes. This makes it possible to catch large price movements and there is no widespread.
Volume and Trend
This indicator signals the stability of the trend. Under ideal circumstances, a bullish or bearish trend will be confirmed by the increased volume, while pullbacks on the contrary — by the decreased volume.
Volume and graphical analysis
Any graphical pattern gives false signals in 50% of cases on average. But thanks to volume you can increase this ratio.
When breaking through support/resistance levels, trend lines, or any patterns, you can always see increased volume. Scalpers and intraday traders need to notice it. If you see how a fat limit order is “eating up”, you can be sure of a further price spurt.
It is trading volumes that create the right momentum for the movement.
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Successful Strategy #2: 200 moving average on any timeframe
Moving averages are one of the most popular tools for profit-taking. The most famous hedge funds and banks use 200 MA in their analysis. Usually, there is a lot of liquidity accumulated at the level of 200 MA, and many algorithms are set up to trade based on this indicator.
Building positions based on the crossover of the 200 moving average
As soon as the price falls below or above the 200 MA, a position is opened with a stop behind the local top/bottom. This is usually accompanied by a large volume.
If a trader opened a position on this signal, and the price went in a favorable direction for him, then a successful solution will be to retrace the position. Here the same 200 MA comes to the rescue. When the price bounces off the MA and does not break through it, a good solution is to retrace the position with a small shift of the stop. Such levels act as resistance/support for the price and there is a high probability of the trend continuation.
Price pullback from the 200 moving average
This signal can be used as a warning of a price reversal. A price gap of more than 20% from the 200 MA warns the trader that a correction is imminent. However, it is better to wait until the price crosses the moving average for a more accurate signal. Or combine MA with oscillators and candlestick analysis. In any case, it is better to keep it in mind and be ready for a trend reversal.
One should also not forget about the combination of moving averages. Their use is not prohibited, but the clear queen among them is the 200-day MA.
Successful Strategy #3: Japanese Candlesticks on Large Timeframes
It is no secret that Japanese candlesticks are used by most traders in the world. All candlestick patterns have been known for a long time and it makes no sense to list them. In this article, we will emphasize the proper use of candlestick patterns when forming a position.
Start with the weekly chart (intraday traders too). When analyzing this timeframe, a lot of “noise” from the chart goes away. Therefore, it is much easier to see the trends and patterns.
For example, an asset is growing or falling for 4 weeks in a row or more. The last weekly candle closed with a “doji”, and the volume on such a candle is the same or greater than that of the previous long candle. In this situation, there is a high probability that the asset will continue the reversal for at least another week.
After this kind of analysis, the trader moves to small timeframes and looks for convenient entry points with good risk/reward. Stops are usually placed behind local levels.
The disadvantage of this strategy is that such a position is quite long to wait for. But that is why there is a multiplier. Thanks to it, you can increase the trading volume and multiply the potential profit by times.
Important signal: news
For any trader, news is a source of volatility and an opportunity to make good money. In most cases, sharp movements occur against the background of news. Short-term traders take advantage of it. At such moments you should not give in to FOMO but soberly evaluate the situation. Often after the news release the price accelerates, at this moment the trader’s risks increase – it is better to wait for a small pullback on the 5-minute timeframe, and then try to open a position. If the trader has already been in a position, a good solution is to fix more than 50% of the position. It is impossible to predict the news release, but it is possible and necessary to take advantage of the volatility.
Sometimes it happens that very positive news about the company of an asset is released and the asset instantly and sharply rises in price. Negative news has exactly the opposite effect on assets. Therefore, any trader needs to follow the news of the markets.
Use it and earn a lot on trading!
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