Trading strategy

How to persuade a person who decided to try his luck in exchange trading, to treat a new type of activity not as a purchase of lottery tickets? Trader Edward Seykota, who managed to increase the capital of his client from $ 5 million to $ 15 million, said to his charges: «While you are not interested in trading books and opinions of experienced exchange players, you can consider your trading as  sales.» Without a professional approach, in which the elementary truth is the work on the trading strategy (both in the Forex and the stock market) the predictions of Seikot will surprise with its accuracy.

Classic menu of trading strategies

Trading uses trading strategies based on technical and fundamental analysis. Experienced traders use generalized analytics and an integrated trading system (strategies based on the use of several methods). A profitable trading strategies are usually created and tested on different trading instruments (currency pairs of Forex, metals, CFD-contracts) and on different timeframes. What makes a profit on five-minute TFs can be disastrous for a medium-term or long-term strategy.

Rules for building an individual trading strategy:

• Look for a trend — this is the best friend;
• Do not get carried away with high leverage — the notion of risk management should not be empty
• No one step into the open market without a prepared stop-loss;
• Selection of a suitable trading instrument (tools) and running in a demo account (or in a real micro account);
• A simple strategy is the key to success.

Types of popular trading strategies

• Trade in the trend is the best method for beginning traders. The strategy works on all TFs and tools. The task is to find ways to determine trend directions (using trend indicators and manual methods of graphical constructions).
• Countertrend tactics. There is a pass only for the professional. A conscious enter on correctional waves requires a high level of knowledge, experience and stress resistance.
• Trade in channels. The channel strategy is mainly used on flatts. A peculiar corridor of the flat has a floor (support level) and a ceiling (resistance level). Transactions sells open when the price approached to resistance, and buy approached to support.
• Trading on the waves. Elliott’s wave theory is the queen of technical analysis. Almost all of the trading strategies are based on the laws of behavior of impulse and corrective waves.
• Strategies on Fibonacci tools. Levels, a grid, a numerical series. All these Fibonacci tools are present in trading terminals MT4, MT5 and are used for various universal strategies. Good efficiency is shown by complex systems in which the Elliott and Fibonacci theories are combined.

Among the popular strategies are also «sessional trade», trade «on the news» and «on patterns». Stand alone is a scalping trading system that requires special personal qualities and is suitable not for everyone, because of excessive physical and emotional stress. A scalping trader is a sprinter for ultrashort distances and his preparation, in many respects, does not fit into the general accepted rules of trading (there are brokers who generally do not allow scalping at the forex).

Scalping strategy. How to work on intraday trading

Adherents of the «quick cream» removal are scalpers. They have a specific look at the market. They are not interested in ingenious graphic constructions and prospects for the development of the economies of the Caribbean. The scalping method is based on an instant analyzing of the situation and on the same operational actions. The scalper does not set himself the task to achieve 100 point profit, but his strategy is based on “better little by little, but often» principle. The number of transactions, during the day, can reach 100 or more. Under such a load, one must maintain a high concentration and control the course of open positions. The focus is on break-even transactions. Training in scalping is highlighted in a separate section of educational programs for stock trading.

Techniques for scalping on Forex and the stock market

Scalping on a glass. Scalping the market by the volume of applications for the acquisition or sale of a financial asset (scalping on a glass) is a favorite activity of scalp traders. The data that a glass possesses is used in many strategies related to the use of volumes. For operational intraday trading, it is extremely important to determine in advance the emerging trend and, as the scalpers say, intuitively feel the pressure in the glass. Scalping in a glass is valuable in that it saves the trader’s time (do not use additional constructions to identify the trend, follow the news, etc.). The strategy of scalping on a glass is more accurately realized in the stock market, which is not characterized by high volatility. To clarify the depth of the market on Forex (information about pending orders) use a glass of the second level.

In trading stocks there are other benchmarks that traders use on short-term time intervals. A good alternative to scalping in a glass are the guides for scalping. For example, on the US stock market, such a guide is the futures on the Sipi index, which estimates the value of securities for 500 leading corporations.

Indicators. The time limit for the analysis of the situation forces the scalper to resort to the help of indicators and oscillators. The fastest data, according to the methods of technical analysis, produce results that «see the market» in 5-10 minutes, and most transactions for scalping are performed faster than 2 minutes.

Scalper is accustomed to work in an active market, this is his element. If there is a stagnation in the open position then the order is closed — loss control at the head of the corner. If the movement continues — the trader will open the order again.

Requirements for the broker. The strategy of scalping is very sensitive to the quality of the broker’s services. Hanging the terminal, delay with the translation of quotations is an unacceptable luxury for scalping. Equally important will be the quality of the connection (Internet speed) and the ability to work with the broker in the phone mode. Scalping does not provide stop-loss, so any force majeure with technology can become fatal if there is no any backup.

In connection with the large number of transactions, the scalper should choose a broker with low commissions and a suitable service plan.

In selection of the trading platform on the Russian stock market scalpers consider two MICEX and RTS exchanges. Scalping RTS is preferable, because there is a fixed low price for the purchase of a futures contract.

Principles of building a scalping strategy forex

The most popular scalping system on Forex is the Victory strategy.

Tests showed that this system is the best in terms of profit.

• trading tools are any of them
• rading time is European and American trading sessions;
• the TFs considered are minute;
• the target profit is 5 points;
• stop loss – 15 points.;
• indicators — TMA bands, RRSC, SkyLover TMA, SkyLover Dream;
• principle of trade — channel strategy (operating range 10-25pp);

Advisor for scalping on Forex strategy Victory is installed in the terminal MT4.

Magic Stream

• The strategy is recommended for working with various Forex currency pairs on the M5.
• Effective with flat movements. The system includes a number of indicators and oscillators. The template is installed on the trading terminal MT4.
• The chart is presented in the form of candles by X.Ashi. False signals are filtered by the Momentum VT indicator.
• The disadvantage is a fixed value of stop loss and take profit, regardless of the observed levels for the current currency pair.

Lord

• Strategy for «slow» scalping (M15) for beginners. It consists of 6 indicators.
• The rules for opening positions are formalized and treated unambiguously.
• The setting of stop orders is arbitrary with an orientation to your own vision of the situation.

Sniper

A representative of the trading strategy. Scalping without indicators. Currency pairs for scalping — any (the best results are achieved on the main forex-pairs).

The strategy refers to countertrend, so it is not recommended for beginners. To enter the market, it is required to find the trend (at 5-minute TF) at certain levels on H1, wait for the turn and enter the counter-match. If the level calculation for the stop-loss exceeds 25p. on 5 min. graph, then the entrance to the transaction is not justified — the risk is too high.

Skalp inc

Scalping strategy for M1. Works equally successfully on flat and trend movements (only the rules for opening deals change).  Eurodollar. It is important not to trade:

• for 30 minutes before and after the publication of significant news;
• during the Pacific trading session;

The strategy provides for working with 3 screens: 2 — monitoring for a trend search, 1 — for trading operations. The system can work with the help of RiskPercent advisor.

The best indicators for scalping

The main drawback of most indicators is their susceptibility to redrawing, and as a result, inputs are not in place with all the ensuing consequences.

There are a number of indicators where the problem is eliminated. They do not redraw the values. Such a tool looks more reliable and will help to fully analyze historical prices.

Indicators for scalping without redrawing:

• Trend Strike
• Trend Focus
• Trend Master

All these indicators are of particular value for scalping strategies, because static values on small TF give the trader the confidence in the data on the basis of which the deal is opened.

Each style of trading has the right to life. Adherents of short-term deals are more likely to be affected by emotional and physical pressure, but they feel the results of their work much quicker. There is an opinion that the main secret of the stock exchange in scalping is a trader who can not scalp the market can not be considered a professional.

Training in scalping is carried out by brokerage companies, offering to attend full-time or correspondence courses (workshops, webinars, master classes).

Books on scalping:

• «RTS Futures Scalping»
• «Conservative scalping»
• «Intraday trading on Forex».