This trading strategy should be classified as a simple strategy for beginners, but at the same time dynamic. She constantly keeps the trader in suspense. And the point is not so much that deals and signals need to be constantly monitored, but that it gives relatively many false signals. But a few profitable trades are enough to cover the loss and make money.
Probability theory plays into the hands of high-frequency trading: you can open one deal a day and get 100% loss, or you can open two and get only 50% unprofitable transactions. The more signals, the greater the likelihood of success.
The Dynamic Trend indicator, on which the strategy is based, draws dynamic levels – levels that constantly change along with the direction of the price. Transactions open almost all the time with a coup. The currency pair is EUR / USD, the timeframe is H1, but you can try to change it to M30. Indicator settings – Percent = 15 (percentage deviation of the indicator), MaxPeriod = 50 (calculation period).
Conditions for opening a long position:
- The price line was below the Dynamic Trend for some time.
- There was a growing signal candle, which closes above the indicator (the breakdown of the dynamic level).
We open a deal on the candle after the signal, but they stop at the level of 50-100 points. After the position has brought 50 points, close its third, upon reaching 100 points of profit we close another third and insure the trailing. If the candle goes below the indicator, close the deal ahead of schedule.
Conditions for opening a short position:
- The price line for some time was located above the Dynamic Trend.
- A falling signal candle appeared, which closes below the indicator (the breakdown of the dynamic level).
We open a deal in the same way. The trader is required to respond quickly to a reversal of the transaction in case of an error. True, it is worth considering that the price can change directions due to correction, long stops, in this case, are a risk for the trader. You can change the closing policy of the transaction, the currency pair. You can also drag the trailing manually, although this will distract from control over open trades and signals. To curious traders, I suggest comparing this level indicator with other channel counterparts by applying, for example, Bollinger Bands. I don’t see much point in adding oscillators.
Conclusion on channel trading strategies
Channel strategies are interesting in that they have a clear application principle. The task of the trader is to choose an indicator, a pair, a timeframe and a good moment. A few recommendations in this regard:
- Strategies of this kind require constant monitoring. Therefore, be prepared for the fact that testing takes a lot of time.
- Do not trade at the time of publication of statistics, in the first 2 hours of Monday and the last 2 hours of Friday. Close deals before the weekend.
- Do not try to open as many deals as possible, it is better to adhere to the principle of “rarely, but accurately”.
- Learn to “feel” the market. The perfect match of all conditions, price lines, and indicators is rare, therefore it is important to be able to correctly take risks.
There are no ideal strategies; there is a successful combination of market conditions, news, and indicators. And, of course, nowhere without professional experience. The more a person becomes acquainted with various kinds of tools and the more he experiments, the more his intuition develops. Therefore, I recommend as much as possible to be interested in new indicators, train on demo accounts and not be afraid to take risks. Good luck with trading and do not forget to share the review with your friends! Waiting for your comments, thoughts, comments, and advice in the comments! Write what forex strategies for beginner traders do you know!