There is one caveat in strategy # 1: the take-profit value is equal to the distance between the minimum and maximum price. This means that the stop loss in this strategy is equal to take profit. Hence the need for more than 50% of profitable transactions. Specifically, such a need puts pressure on me, I directly feel discomfort, as if the market owes me something. Plus, I’m not a breaker based on my internal sensations, which I experienced during the breakdown trade 🙂 But these are just my subjective sensations – maybe it’s different with you.
There is still such a thing that super-directional movements at the European session do not occur every day. Plus, the distance between the maximum price and the minimum can be significant, and then the probability of a take-off may be lower, which casts doubt on the advisability of entering the market.
Here we will trade as if AGAINST those who trade the London Explosion.
Perhaps you feel at this moment the feeling of how cleverly we are going to beat the “crowd” placing orders in predictable places, but in fact, I gave this explanation, as in the previous strategy, because we all like the explanations for what is happening =) Actually in fact, I don’t know against whom exactly we will trade there. The logic is about the same – we are looking for places where there can be a “big move”, ignoring places where the move is likely to be less. But the proposed approach has a number of big advantages compared to the “explosion” – about them, too, a little later.
Imagine that you are a major player. And you need to go into a large volume, for example, in sales, but at a good price. And you realize that OVER at any price there are a lot of people who want to buy from you. Those. not only the volume you need but also at a great, high price. What are you going to do? It would be there that I set my limits for sale:
Thus, at these prices, you and I just expect the activity of that very big player who, such a reptile, intends to take advantage of the situation and, for his personal benefit, go in large numbers “against everyone”.
How do we understand that he probably went there? Very simple. We will see that the price after breaking through is not going to go further, but returns to this level.
And here we go to the advantage over strategy number 1: we get with you a shortstop + thoughts warming your soul that once “did not go” in this direction, then it can go in the opposite 🙂
I repeat that in fact, all these explanations of price movements are nothing more than an entertaining artistic component: we are physically unable to know who is doing what. From the point of view of common sense, the law of supply and demand, as well as the principles of order execution, the above explanation is quite logical. I give it because by myself I know that at a certain stage it is much easier to apply the rules of the trading system when you can explain to them their expediency. Why is the entrance, stop and take right there, and not in another place. At the same stage, simply studying price movements, finding patterns, and testing them is rather unpleasant. What is needed is a practice that, at just a certain time, will give the feeling that explanations are not particularly needed. In general, I hope
Let’s figure out the login rules. We will be interested not just in a false breakdown. Why?
Because again there will be many questions – but is there already a false breakdown or not? But do you need to wait for the candle to close after the level or not? Etc. Therefore, we simplify it as much as possible, leaving the essence the same: we need to see the FORCE from the side that did not allow the price to fly into the sky after the breakdown (or breakthrough the floor). Following simple logic, we can conclude that strength will be shown when the opposite side shows weakness. Where will we have the opposite side? This, in the case of purchases, will be the last maximum that the price made immediately before the breakdown:
So, if we ignore the explanations now, in this strategy we trade in a false breakdown of the maximum price or minimum price formed in the period from 00:00 to 09:00 according to the time of the trading terminal.
We will be interested in just such an entry into the transaction, which will allow us to get a shortstop loss with the same potential. This means that when shopping you need to wait for the price to roll back down and ALREADY enter it (yes, yes, I know this is not very comfortable).
When this maximum is broken, we understand that no one else wants to sell there (namely, sales from this place moved the price down), which means sellers “show weakness.” Now we’re in … And here it is! Now we are waiting! This is probably the most difficult thing in trading, which a very small percentage of those who read this article will learn. We need to pull ourselves together and, in spite of the probability of “leaving the price without us,” in spite of the probability of “not getting a bit” to our entry point and, in the end, despite the likelihood that even if we wait for the point entry (such good fellows), a deal can be knocked out by stop-loss – we need to WAIT for a good price to enter.
Why is this needed? Then, that the trader should have a “click” in the brain, marking the transition from “just to catch the train” to “I will only sit on the one I need.” In other words, the focus should shift to the quality of transactions and, as a result, to the selectivity of inputs.
Sooner or later, the trader should have a “click” in the brain, which marks the transition from “just to catch the train” to “I will only sit on the one I need.”
What is inherently breaking through a level (in our case, the lower one)? This is a kind of weakness on the part of buyers. Previously, these prices were attractive to them, but now for some reason, they are not buying at such intense prices. In turn, the opposite level (in our case, the upper one) is, so to speak, the source of the opposite force. It was formed due to the fact that they began to sell intensively at those prices, after which the price was “pushed down” and the lower level could not resist. Will there be intense sales at the top level if the price approaches again? We do not know. However, evaluating the current situation, it was from the upper level that strength was shown. Thus, if you buy from the lower level, it makes sense to go BEFORE the upper such zone of uncertainty.
Second point: To enter, it is not necessary to wait for the price to roll back directly to the level. You can place an order a little earlier (in our case, higher). Just make sure that the stop loss is less than the maximum take profit by at least 2 times.
To enter the sales conditions, respectively, are mirrored.
With the above approach, we sacrifice:
- 100% entry into the transaction;
- the time spent on analyzing the schedule, which type can be wasted (we may not get money for this).
However, we acquire:
- the probability of a super-entry;
- potential improvement in the profit/risk ratio;
- pride in the fact that we trade as a cold-blooded professional (you can boast a screenshot in front of others).
A little about the desire not to wait for a pullback, but to enter right away, spit on improving the profit/risk ratio. If it doesn’t reach a couple of times, yes, it’s a shame. However, imagine that you are analyzing 100 transactions using this system WITHOUT waiting for a rollback and 100 transactions using this system WITHOUT a rollback. In fact, with the same potential, in the second case you get rarer deals, but with a much better profit/risk ratio. Yes, they will be less frequent, but the effect of them is potentially much better. However, you decide.
Now about the parameters: the strategy is suitable for all currency pairs where there is at least one European currency because the basis of the strategy is in the influx of activity during the European session. EUR / USD, GBP / USD, USD / CHF are quite suitable. They have a narrow spread and good volatility. The rest, if you want, test yourself.
On the timeframe, I recommend using at least M5, in order to again reduce the influence of the spread on the deal, but be able to enter early.
Stop loss is always set for a false breakdown. Take profit – either the opposite level or just 2 to 1. I do not recommend “keep it longer.” I know that you will do it anyway. However, a tactically more competent and much more comfortable tactic in trading is “took a piece and moved away”. Right very far the price does not go as often as we would like. Therefore, what started as a good deal, while keeping it “longer”, can be frustrating. Again, when the “click” occurs, the trader will understand that it is better to regularly, but 2 to 1, than irregularly then 5 to 1, then 0.5 to 1.
An important remark: if the levels are not worked out right away at the opening of Europe – it’s okay. You just need to wait until they work out and enter according to the rules of the strategy.
The nuances here are a bit like strategy number 1, but not quite:
- If there is only 1 level, and there is no second, then we are waiting for the price where everything is already formed.
- If you got a stop loss in one direction, then it is no longer recommended to go to the SAME side from the SAME level. But you can go from the opposite level in the opposite direction. Therefore, it is recommended to do no more than 2 transactions per day in total:
- You do not need to trade large false breakouts when the price flies after the breakdown, and then it kind of comes back.
- The distance between the levels can be almost any because it does not affect the value of stop loss and take profit. But it is undesirable for it to be very tiny when the spread has a significant effect. For example, if the stop is 5 p and the spread of 3 p is not a good deal 🙂 See that the stop loss is at least 3 times the spread.
In conclusion, I would like to recall that the strategies presented here are ideal for the trader as a “starting point” for further research, and are not a “magic technique” and “that secret.” However, instead of spending time on deliberately dead-end options that do not adjust to changing volatility (for example, indicators do not adjust because they have clear parameters), it will be more effective to work on testing and refining what will have plus-minus previous properties. Again, I understand that I want to find the “same strategy” or peep it from someone because it’s scary to create and test my own (it may not work out). And one of the first goals of the trader is that this fear recedes a little. The more trades a trader makes, the less will remain of this fear. And to build experience, these strategies are just a great option.
Try it, wish you success!