It is not without a reason that people compare traders with entrepreneurs. Both make decisions that will bring either profit or loss. But to be successful, both a trader and a businessman need to have a clear understanding of what goals to pursue and how to achieve them.
A strategy is the very tool traders use to become successful. One can get stable results only when following some strategy. There are plenty of market cases when a beginner multiplies their capital by tens or even hundreds of times, and all of those trades are made by chance or intuition.
However, in the future, luck leaves them in 100% of cases, and these traders keep getting negative trading results. This is why fast success without a strategy is a trap, which you’d better avoid. To keep away from such a scenario, you should choose a working trading strategy and start conquering the market.
It does not matter whether you have had experience trading in the financial market or not. If you really want to become a professional trader and make money, check out the strategies in this article.
Especially for you, we have selected the best basic systems that will teach you how to analyze the asset price, help you make your first successful trades already today, and learn about Fixed Time Trades – one of the most profitable trading instruments. We will provide you with examples of real trades made on the Olymp Trade trading platform so that you could get the most out of this article.
What Does a Trading Strategy Mean?
A trading strategy is a set of conditions that needs to be met so that a trader could have a reason to open a trade. If there are no such conditions in the market, a reasonable trader will not invest their money and will wait until some signals appear.
In general, a trading strategy can give you an answer whether the asset price is going to rise or fall. And a trader’s job is to analyze the strategy conditions and the market factors, and decide whether to open a trade or not.
Traders tend to opt for ready-made solutions that have passed the test of time. As the traders gain skills, they start upgrading those strategies, thus creating new systems, which becomes their own technique.
A unique trading strategy can be compared to a company. It works and creates goods or services, which consumers purchase. Everyone knows how it works and what should be done: how to sell the products and who the customer is, when to hit competitors and what season to choose for a presentation of a new product. The trading strategy works like this in the financial market.
It’s essential that you understand when to go long, on which asset and for how long. Your trading strategy must provide definite answers to all these questions.
You might have already guessed that a strategy is a filter of the market and your emotions. It can bring order to your actions, which is already half the battle.
Let’s find out what kind of strategies are used in the world of Fixed Time Trading.
What Do Fixed Time Trades Mean?
An FTT is a financial instrument with a limited trade duration. You can open a position expecting the price to go up or down, but your forecast should be come true by the end of the trade time. This is the only fact that affects the trading result.
For example, a trader opened a trade expecting the bitcoin to rise in 5 minutes. If the price rises by at least a fraction of a cent by the end of this period, the trader will receive profit. By the way, they know the the amount of profit in advance.
The popularity of FTT is based on the transparency of its trading conditions. Unlike classical trading on Forex, FTT brings fixed returns. The profits do not depend on how much the price has changed relative to the opening quote. The profitability of many assets on the Olymp Trade platform is never less than 80%.
At the same time, FTT requires not only to determine the direction of the trade, but also its duration. And a trading strategy must provide information on how to select it.
Types of FTT Trading Strategies
Let’s review simple strategies first. Simple strategies are not less effective than more complex ones. They can all give great results, but sometimes they can also make mistakes. Therefore, we recommend trying and testing all the options we have presented.
Basic strategies can be divided into several groups:
Traders use technical analysis indicators to analyze the price movement. The indicators are built-in programs available on the trading platform. Each of them contains a ready-made algorithm, which prompts you when to open an up or down trade.
A strategy can be based on the use of one or several indicators. In turn, indicators are divided into oscillators and trend indicators. There are several other groups, but we won’t need them now.
Oscillators show two key areas: “overbought” and “oversold” zones. These names suggest that in the first case, the price has increased too much, and the indicator signals a possible trend reversal. When the asset is oversold, it is better to open a down trade. But how does their use look in practice? Let’s consider an example.
To activate the indicator, we open a special menu indicated by a drawing compass icon. In the “Oscillators” section, we choose RSI. This is one of the most simple and effective tools.
The RSI indicator consists of a blue signal and a channel between levels 30 and 70. When the line rises above the channel, we receive an overbought signal. In such situations, one should open a down trade. If the RSI line has fallen below level 30, it is time to open up trades.
Stochastic, CCI, Aroon indicators are based on similar working principle. In addition, the signals provided by one indicator can be confirmed by another one. Alternatively, you can open trades when two indicators are giving the same signal. This is one of the easiest ways to improve the quality of your strategy.
You can also use trend indicators to analyze the asset price. They include Simple Moving Average (SMA), WMA, EMA, Bollinger Bands, and so on. We will now focus on SMA and Bollinger Bands.
SMA is an indicator that shows the arithmetic average of the price for a specified period. Why is it important? Firstly, SMA shows a smoothed trend. This tool is especially useful for novice traders using trend-following strategies.
Here is a practical example: the growth of an asset accelerated as soon as the chart rose above the SMA line. A signal of decline was given when the chart fell below the SMA. These are examples of how to use the simplest indicator as a trading strategy.
You should enter a trade when the first candlestick appeared, which both opened and closed below or above the signal line. In the picture, you can see such candlesticks in white squares.
Bollinger bands (BB) is a truly excellent indicator that constructs a dynamic channel of three lines. The easiest way to use it to open down trades when the chart touches the top line and opt for the up ones when it’s testing the bottom line.
The advantage of the indicator is that it shows high efficiency even with the smallest periods (1, 5 minutes). Other indicators show better results with longer periods.
According to this strategy, there are two moments when you can enter a trade. The first one comes when the chart touches the BB boundary. The first one comes after the price has reversed from the boundary and the first candlestick has been formed below or above the boundary (just the same way as the SMA-based strategy suggests).
Do you want to get an excellent trading strategy right now? Then enable two indicators — RSI and Bollinger Bands — on the same chart. Open an up trade when the price chart touches the lower BB line and the RSI signal line falls below 30. Open a down trade when the chart touches the upper BB line and the RSI is above level 70.
Support and Resistance Levels Strategy
The study of visual chart patterns is an integral part of technical analysis. Support and resistance levels are one of the most popular areas of this science.
The essence of this method is using certain price levels on the chart. Either an uptrend or a downtrend are likely to begin near these levels. If the trend goes up, this level is called a support one. If the trend goes down, a resistance level must be close to its beginning.
Look at the example below. There is a line running along the level, from which the price has reversed several times. Is it a coincidence? Of course not. Such moments mean that the asset was actively sold at this price range (resistance level), which caused a sharp trend reversal.
Our task is extremely simple: we need to find such a situation and open a trade in the right direction near the support or resistance level.
Following the same logic, one can also use another method. In this method, support and resistance levels are presented as inclined (trend) lines.
You can see in the example how we got a ray by connecting two lows. This ray helped us find two excellent up trade entry points. Traders often prefer this strategy, because it is safer to trade with the trend than to look for its reversals.
Trading the Economic Calendar
Another interesting trading strategy is based on the use of the economic calendar data. This calendar is a chart listing important economic reports released in different countries on a particular day. Investors from around the world closely monitor these data as no one wants to invest in the currency of a country when there is evidence of decline it its wealth
The investing.com website is one of the most popular resources for working with the economic calendar. Now let’s talk about how to trade the economic calendar on Forex.
First, open the calendar. Note that almost every news item has its publication time and importance level. You will also see the currency that this particular event will affect.
Let’s analyze the real news on the UK PMI indices. This kind of news shows the dynamics of economic activity in the country. You can see that the real data are lower than those indicated in the forecast column. It turns out that the news released at 8:30 were negative for the UK. And what happened to the British pound rate (GBP) at this moment?
After the news release, the British currency rate jumped up a little, but the common sense prevailed and the GBP/USD currency pair began to actively fall in price. Trading the economic calendar is a simple but very effective strategy, because it is based on economic patterns and simple logic.
The Simplest Candlestick Patterns-Based Strategies for FTT
Analysis of Japanese candlesticks is another effective way to better recognize future trends. Japanese candlesticks are a kind of chart. It is considered the most informative because we can immediately see the price, at which some period began, price highs and lows, and the price, at which the period was over.
As for the strategy we are going to tell you about, there is only the color of the candlesticks that matters. This strategy can be applied to any interval of a candlestick chart. In addition, this is a trend following strategy, which already signals its reliability. However, you should not forget about risks. Especially when the market is flat and there is a high probability of no trend.
The strategy rules are simple:
- Select the “Japanese Candlesticks” chart.
- Set the timeframe of 1 or 5 minutes (other options are also available).
- Wait until the candle expires.
- If the candlestick is green, open an up trade. If it is red, open a down one.
- The trade duration should be always the same as the time frame. If it is 1 minute, then open a 1-minute trade.
- If the result of your trade is negative, apply the loss compensation system from the final part of this article.
This strategy is most effective when there is a large number of the same color candlesticks as shown in the screenshot above.
Candlestick analysis is also based on set models, which are called patterns. These are specific types of candlesticks that provide hints. Japanese candlesticks were studied many centuries ago. This is probably the oldest trading strategy. A “pin bar” pattern is its special case. This is what it looks like:
In this case, the “pin bar” indicates a downtrend. This candlestick pattern can be distinguished by a long “tail” coming out of the candle’s “body”. The reverse “pin bar” has a tail pointing down. This pattern indicates a likely growth of an asset.
The trade duration is chosen in the same way as in the previous strategy. However, you should not look for “pin bars” on a timeframe lower than 15 minutes. Such candlestick patterns are unreliable and can lead to losses.
How Do I Know Whether the Strategy Is Effective?
The good news is that you can make sure that your trading strategy works for free. There is no need to fund your trading account if you are using the Olymp Trade platform.
The first way to test a strategy is to trade with a demo account. Everyone who signs up to the platform receives a free demo account with virtual money to practice. Once you open an account, you will get 10,000 currency units at your disposal. Please note that all trades are made at the current market prices. In other words, the demo trading process is exactly the same as the real one.
The only disadvantage of this method is that you have to spend a lot of time. You must open at least 100 trades to get some statistical results. A working trading strategy must meet the following criteria:
- No more than 5 losing trades in a row.
- The total number of profitable trades must be at least 30%, provided that requirement 1 is met.
It does not matter whether you have earned from these 100 trades or not. At the end of this article, we will tell you about the loss-compensation method, which will help you earn on FTT even if 30% of trades are profitable!
The second way to check the strategy is to view the historical data of the chart. This method is less accurate, but can save a lot of time.
To evaluate a strategy in this way, you need to set it up on the chart and start gradually moving deep into the historical data. As soon as you see the strategy signal, you will need to fix and test it. Was it profitable or unprofitable? Write the answer to this question either on paper or in google sheets.
Since this method is less accurate, we recommend to review no less than 200 examples.
How Do I Choose the Trade Duration?
The most popular way to find the best trade duration is to work with the history of the chart. Calculate the approximate ranges and select an average value. Is it too difficult and long?
Then focus on the selected time frame. The trade duration is most often two or three times longer than the selected chart period. If you are dealing with a 1-minute chart, the trade time is 2-3 minutes. If your strategy implies analyzing a 4-hour time frame, the trade duration can be 8-12 hours.
How Do I Earn with Loss Compensation System?
The main secret of making Fixed Time Trades successfully is the use of loss compensation system (LCS). This approach will allow you to earn even if 30% of your trades are profitable.
According to the LCS method, a trader should double the investment amount if the result of their previous trade was negative. For example, you invested $10 in a losing trade. The next trade amount should be equal to at least $20. If the second trade closes with a profit, you will compensate for the loss of the first trade and earn money.
If the second trade closes against your forecast, the amount of the third trade must be twice as much as your total loss, which is $60. It is not recommended to increase the amount after 4 or 5 losses, but your strategy should not allow such negative scenarios.
Practice shows that a good strategy rarely implies more than 3-4 negative trades in a row. Keep striving for such a result.
There are a lot of strategies for FTT trading. We told you about the basic but effective approaches you can use to start building a trader’s career and check the effectiveness of any method.
Trading is a business. Just like any business, it is never without a risk. But with a consistent approach and discipline, you can quickly make your business profitable.