So, the easiest and most comfortable way to apply the above knowledge is to try to “ride” on triggered automatically pending orders (this also includes stop loss). Those. knowing approximately where they are placed, we place our order in the same direction where the orders we are supposed to stand are.
The algorithm of our work on the strategy is as follows:
- At approximately 08:00, according to the terminal’s time, it is already possible to more or less see the minimum and maximum prices formed per night.
- We find them, mark the levels and place orders:
- buy stop OVER the top level;
- sell stop UNDER the lower level.
- We set stop loss for orders:
- Stop-loss for a buy order (buy stop) – UNDER the lower level;
- Stop loss for a sell order (sell stop) – OVER the top level.
It turns out that above the upper level we have a buy order + stop loss for a sell order. Below the lower level is a sell order + stop loss for a buy order.
- Optionally, you can set take profits. To do this, measure the distance between our levels (let it be 20 points) and set it aside first from the upper level up, and then from the lower level down.
- At the top we will have to take profit for the purchase;
- below we will have to make a profit for sale.
Those who like to tickle their nerves may not put a take but simply “accompany” the price, pulling up the stop loss in the direction of the price movement. This is called a trailing stop, there are several types of them – you can familiarize yourself on the Internet, it’s not difficult there.
- We are waiting
As a result, we expect that if the price comes to the points we have selected, then cascaded triggering of pending orders may occur, in which we will participate.
In Strategy No. 1, we expect that if the price comes to the points we have selected, then cascaded triggering of pending orders may occur, in which we will participate.
The screenshot above shows a good example of a price movement when a profit could be made, but do not forget that there will be (necessarily, 100%, absolutely accurate) unprofitable transactions.
Those who have heard about the “cascading operation” of orders can smirk at the moment and ask: “Dear, are you aware that this can cause slippage, and our order can be executed at a much worse price, which breaks all the joy of what’s going on? ” And this is a fair remark. However, in this case, slippage is a rather rare thing. The opening of the European session is not at all the same as the release of important news for a number of reasons:
- We simply note the levels that have been identified as the highest and lowest prices for the current day. Consequently, above the highest, and also below the lowest, participants may well want to “sell out more expensive” and “buy cheaper”, which will prevent the breakthrough of the levels we marked. In this case, we are betting the “breakers” to win, no more, no less. We do not expect that there will be no sellers above the upper level and the price will fly unhindered, as on the news, due to a liquidity shortage of one of the parties (the same for the lower level, only for buyers).
Roughly speaking, unlike the situation with the news, the level will be a confrontation between 2 parties (those who are waiting for the breakdown, and those who are hunting for the best price), and not the obvious dominance of one.
- There are certain reasons for the specifics of price behavior on the news: everyone knows when the news will be released. In our case, neither we nor anyone else can know when the price will reach our levels. Maybe right after the opening of Europe, or maybe a little earlier, later. Therefore, this specificity, characteristic of news fluctuations, disappears.
Now about the nuances of this trading strategy:
- It is recommended to do one deal per day.
No need to jump in the same direction or go in the opposite after stop loss. Because you have to draw levels, and the stop loss in the second transaction will be very large.
If you add here the probability that the second transaction will close at a loss – you will have as many as 2 of them in a day: one small and the other large. I know that you are now thinking that you are intimidating you and, like that, “care” about you as if you were “thoughtless”. But I just look at it exclusively from the perspective of “what I risk and what I plan to earn”:
- In the first case, when the distance between min. and max. at the cost of a little. Accordingly, for our take to work, the price must also go a short distance. Considering that during Europe volatility usually increases significantly, the PROBABILITY of this small price hike to take profit is quite high. How likely it is to find shoes when you are 36 in size, as opposed to 45+.
- In the second deal (when it didn’t “go one way”), the stop loss increases. To take profit, it is now necessary that the price goes a greater distance than in the first case. Consequently, the PROBABILITY of its operation is reduced.
2. For comfortable trading, we are interested in a small distance between the minimum and maximum prices formed from 00:00 to 09:00. At night, directional movements are not common, but nevertheless, I give options when it is better to consider the entrance, and when it is better to refrain from it.
There are no clear rules for the distance – just look at how it has been the last 10-20 days. Volatility can change, so there are no clear criteria for the number of points. After 100 transactions on one instrument, you yourself will see when it is “normal” and when “large”. Experiment.
3. What to do if there is one level, but the second price has not formed? For example, there is already something below, but the price continues to go up. In this case, we either skip the deal or trade a breakdown of a level that is already 100% visible. But only if the stop loss is small.
Below is an example of such a situation.
There is no entry into the purchase due to the long distance. If it were smaller, the entrance to the purchase could be considered. At the same time, in both cases, there can be no sale entry – the lower level is only being formed.
4. No need to grind and yet lookout for “corridors” in the hope of reducing stop loss. As mentioned earlier, the trick of these strategies is that they are based on trading a certain phenomenon. Roughly speaking, a night determines which price is “high” and which is “low.” If at “Europe” there was a breakdown of the minimum price (down), we assume that Europeans consider the asset “overvalued”. And we can only be convinced by leaving above the maximum price of the day, and not above any corridor, etc., because it breaks the whole logic of the system.
That’s basically it. Again, as a recommendation: if you do not want to test anything yet and you plan to develop trading experience in real-time, try to find the situations that are most understandable to you. If it’s a little incomprehensible whether it is necessary to enter, where to mark the level, whether it is at all, etc., then I recommend just considering another currency pair.
If you have any questions, welcome to comment! 🙂