Daily and 4hr Price Action Strategies.
Not everyone is able to sit at the computer for hours a day and trade. In fact, many of you have full time jobs, family lives that keep you busy, yet you still want to be able to participate and trade in the market.
A lot of times, these are the s I get from people, whereby they have the lives above, and only have a couple hours to trade after work. You don’t want to actively manage positions throughout the day because of work and are looking for a simple way to trade.
If this resonates with you and your situation, I recommend trading rule based daily and 4hr price action strategies.
1) If a strategy is rule based , then all the rules are clearly explained to make a trade. A rule based strategy generally goes something like this;
Conditions A, B and C have to be in place to make a trade.
If you do, place your trade at X, your stop at Y, and your targets at Z.
Obviously i’m paraphrasing, but as you can see, rule based systems make everything very clear to find and trade setups.
If you are having to constantly look for discretionary elements, levels, etc., that takes more analysis and time – something of which is very limited for you.
By having rule based strategies, it simplifies the trading process for you so you can spend more time taking trade setups instead of analyzing and deciding if you actually have a trade or not.
2) Use Set and Forget Strategies.
Along those lines, since you cannot sit for hours, I recommend using set and forget strategies . This means you do not have to manage them as they continue, or have stops based on indicators.
Sure, if you had hours to sit per day and could actively watch the markets, then there are some strategies I would consider managing, especially if they were designed to go for runners.
But, I also have price action strategies which are completely quantitatively based over 10 years, meaning the statistical edge has been demonstrated over the last 10 years. Thus, if you trade them as is, going for a fixed target, you can and will profit based on their edge.
3) Daily and 4hr Price Action Strategies.
First off, there is nothing wrong with trading intraday time frames, using anything under 1hr charts. There are traders making money on every time frame across the board. The time frame is not so important, but more a personal and stylized preference ( also availability ).
However, with limited time to find setups, monitor charts, etc., I recommend the daily and 4hr charts.
Generally, the lower the time frame, the more detailed analysis you have to do and more variables you have to incorporate.
More details + more variables = more time needed to make trade decisions. And time is commodity you have less of.
Statistically, various patterns such as pin bars, inside bars, engulfing bars, etc. can and will test statistically strong for various pairs.
But plug the same method and system on a 30m time frame or less, and the accuracy diminishes tremendously. In fact, accuracy for these 1 and 2 bar systems tended to degenerate tremendously below 1hr time frames. Now it should be noted this is not the case for all systems, and our statistics indicate some systems actually perform better on the 1hr time frame vs. the daily chart, so its not a linear relationship.
Now getting back to the point, 1 and 2 bar patterns are pretty easy to spot and take little effort. But if you have to know the overall trend, then the 1hr trend, along with support and resistance levels for the day, then zoom in to your 5min time frame to read the price action and how its reacting to that level, that can take more time to analyze, find and trade.
However with the daily charts, these are much simpler as you have one main candle to analyze for the day and the overall trend can be easy to spot. With the 4hr chart, only 6 per day. So overall, much less work, yet still enough to keep you active on a daily basis.
Along those lines, there is one last key point I want to make.
Not all server times perform the same. Generally, there are three major server times broker platforms are set to.
Another possibility is the NY daily close .
I have actually statistically tested about 11+ price action patterns across all server times, and their performance can vary incredibly. Some people state the NY Daily Close is the best.
But statistically, this time fails for many patterns and pairs. In fact, a pairs performance can vary wildly for the same price action pattern across different server times.
Crucial information? Absolutely!
Imagine you are trading an inside bar pattern on the daily time frame for a certain pair, based on the NY Daily Close. But statistically, that pattern is < 40% accurate. Would you want to know that before trading it? Hopefully so.
Some pairs did statistically better across several server times, but completely failed on another for one price action pattern. Yet on the same server time they failed on for pattern A, they profited highly on for pattern B.
Volatility and order flow for that pair in relationship to the sessions. That plus the type of pattern all played a part.
Regardless, server time is key and it is critical you understand how your price action pattern performs, whether it’s a pin bar, inside bar, engulfing bar, or whatever. Information is key here.
For those of you who have very busy lives, with a full-time job, family, and general commitments that you are unable to sit and trade for hours, there is a way for you to trade and participate in the markets, while not having to stay up all night.
For this, I recommend trading Daily and 4hr price action strategies that are rule based, easy to manage, yet allow you to be engaged in the market and able to make money.
Generally set and forget strategies will be easiest to manage, while also making sure the server time is appropriate for your strategy. If you have all those in place, then you can trade on a weekly basis, make plenty of trades to be engaged, not have to hold positions for days on end to see a result, and only need a few hours to trade per day.
I hope this helps for all of you who fit into this category and that you found this article informative and useful.
Please make sure to leave a comment below and your thoughts on it, along with clicking the like button 🙂
Buddhist, Trader and Philanthropist.
I'm Chris Capre, Founder of 2ndSkiesForex. I help traders of all levels change the way they think, trade and perform . As a professional trader, I specialize in trading price action. As a teacher, my passion lies in showing you how to re-wire your brain for successful trading. Want to improve your edge right now? Visit my Price Action Course page.
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Another great, eye-opening article! Thanks Chris.
De nada, glad it helped and thanks for the kind words.
Yes, these are the timeframes that suited me for the moment and also what I am trading on now. You have also pointed out the server time which is very true. So which server time work best for your H4 and daily TF strategies?
It really depends upon the pair and the system because the performance varies significantly depending upon the system and pair.
For example, some pairs do really well with inside bars on the NY close, but others fail miserably. Yet those same inside bars.
and pairs that fail miserably on the NY close, do really well on the London open, so depends upon each one.
This information is available to those in my Price Action Course which you are welcome to join.
Hope this helps.
Very interesting post, enjoyed reading it. With good information for thought.
Their is however one thing what comes in my mind about the practicality of using different server times.
As you stated that patterns perform differently with different pairs on different server times. But you only have one.
of the server times with one’s broker of choice. Unless of course you have a broker for each server time, I find it a bit.
unpractical! What is your view on this and how do you of your students manage this?
Some good questions here.
First off, many of my students end up just trading one server time which is totally fine. If you have the right server time, you can be plenty active.
in terms of finding setups and pairs.
This is the most simple approach.
Some students just run two demo accounts for the best server times, yet still trade off of one account/broker. You don’t have to have multiple accounts to trade another server time, just the charts for those signals.
So both of them are viable options, but none of my students ever really have any issues with this.
Hope this helps.
could you suggest brokers with these 4 server times. it would be interesting if i could confirm a pattern successfully in majority of them. then that pattern would mean its a strong pattern.
not sure who uses NY daily close, but I don’t find it necessary at all to confirm my signals across multiple server times.
Neither do my students or traders so seems like an unnecessary process to find good signals.
When it doubt – keep things simple.
Hope this helps.
Another great article I’m just getting to. I am in the process of changing things so I have the NY close charts. Just feels better for me.
Keep up the good work and best wishes to you and yours!
Glad you liked the article and content and good luck trading.
Fantastic article – thank you for posting it up for all to read.
Being new to forex would you advise to initially start trading with these time frames?
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Daily open trading strategy
I am going to share with you one of the simplest trading strategies you could ever come across. This is based on the idea “KISS - K eep I t S imple S tupid”. It doesn’t involve any fancy or complicated indicators nor does it involve any complex methodologies. After reading this you might wonder why it didn’t occur to you or if this really works. I assure you that if you follow this strategy exactly as explained here and also adhere to few basic rules and instructions, you will never have a losing week or a month (there could be few losing days once in a while). So if you are ready for it, here it goes-
Simple moving average 200 (for direction)
Simple moving average 10 (for entry)
Time frame - Any. Works on 5 min, hourly and daily charts. Day traders could use 5 min charts, Swing traders can use hourly charts and long term investor can use daily charts.
Item - It can be used for any currency pair, commodity, Indices or stocks.
Long Entry - When the price candle closes or is already above 200 day MA, then wait for price correction until price drops to 10 day MA, then when the candle closes above 10 day MA on the upside, the enter the trade. Stop loss would be when price closes below the 10 day MA.
Short Entry - When the price candle closes or is already below 200 day MA, then wait for price correction until price rises to 10 day MA, then when the candle closes below 10 day MA on the downside, the enter the trade. Stop loss would be when price closes above the 10 day MA.
Limit - Profit target would vary with each item. For day traders, I suggest profit target of 50% of daily Average Trading Range of that item for the last month.
Eg - If EUR/JPY (my favorite at the moment) has daily Average Trading Range of 120 for the last month, I would suggest profit target of 60 pips per day trade.
Profit targets for other items can be worked out in similar fashion. It would be a mistake to use same profit target levels for all currency pairs. In my opinion ever currency has a different personality. It means that the daily trading range, volatility, reaction to any news, etc is different for all currency pairs.
1. Follow the instructions for entry and exit exactly as above. Don’t second guess, or assume/presume anything.
2. Avoid entering the trade when the price is temporarily above /below 10 day MA, but the price candle hasn’t fully formed yet. Enter the trade only after the price candle closes above/below the 10 day MA.
3. Exit the trade immediately when the price candle closes above/below 10 day MA in the direction opposite to the trade. Don’t remain in the trade wishing it to turn in your favor.
4. Never ever trade in the opposite direction of the market. i. e. don’t buy when the price is below 200 day MA and sell when the price is above 200 day MA.
5. Take profits when limit is reached. Don’t be greedy and keep on increasing the target. Remember - A bird in hand is worth two in the bush.
1. For forex day traders, this strategy works best in the London session as there is maximum volatility. Around 3am-11am NY time would be best time.
2. As this strategy is based on purely technical analysis, I suggest you switch off your inputs from fundamental analysis and news. Don’t allow fundamental analysis to influence the trades. Remember - Price is always right. Whatever effect fundamental analysis or News has on the currency will always reflected in the price.
3. Don’t jump into the trades. Allow time for the set up to be formed. There will always be opportunities available.
4. Leverage is a silent Killer. Don’t use excessive leverage for trading. Even the best strategy in the world will not prevent you from wiping out your equity.
5. Remember - Only 5% of day traders make money consistently. And trading strategy is not the number one reason for this. Failure to implement the strategy fully and not following the rules and guidelines is the number one reason for losses of majority of day traders.
I am attaching herewith screen shots of charts showing the entry and exit signals for different currencies and for different time frames.
Fig 1- Euro-USD chart for 14Feb 2013 showing profit of 50+ pips.
Fig 2- Euro-JPY 5min chart for 14Feb 2013 showing profit of 60+ pips.
Fig 3- GBP-JPY 5min chart for 14Feb 2013 showing profit of 50+ pips.
Fig 4- Euro-USD Hrly chart for from 22-31 Jan 2013 showing profit of 200+ pips.
Fig 5- Euro-JPY Hrly chart for from 04-15 Jan 2013 showing profit of 300+ pips.
Fig 6- GBP-JPY Hrly chart for from 09-15 Jan 2013 showing profit of 300+ pips.
As seen from the screenshots, this system is not a Holy Grail of trading, as a matter of fact, there isn’t any Holy Grail of trading strategy anywhere. Every system has profitable and losing trades. But as seen above, in this strategy, the profit from the profitable trades is cumulatively greater than the losses from the losing trades.
As a guide, I have observed that there are at least 2-3 profitable day trades in any given week(50-60 pips per trade using 5 min chart), 2-3 profitable swing trades available in a month(200-300 pips per trade using 1 hour chart) and 1-2 profitable long term trades in any given year(around 1000 pips per trade using daily charts). Using sound money management plan you can achieve return of 50-100% per year on your equity.
Thanks for taking time out to read this article.
Hope I have been able to add a little bit to your knowledge and wish all of you Good Luck in your trading!
I backtested against 10 years EURUSD and it was profitable. win rate was around 43% at 1:1.5, 213 trades with an average win of 118 pips. USDJPY was profitable but only just win rate of 30%
This is one of few strategies that actually backtested well over 10 years on Daily chart. 95% percent of strategies I see online dont come close so thanks. Not to say it will work in live but definalety something to look into.
It has also changed my view on moving averages at least for now.
Trading Opening Ranges: How to do it Effectively in Forex.
by Jamie Saettele.
Ask novice traders what's most important in trading and they'll probably offer an answer along the lines of "making money". Ask a seasoned trader the same question and the answer is more likely "capital preservation". If you can't preserve capital (big losing trades), then making money is impossible and you will fail. If you can preserve your capital (small losses), then you at least give yourself a chance at success. The most useful trading approach, one that allows me to maximize position size with tighter stops, is one that focuses on opening ranges. I was introduced to this concept by Mark Fisher's book, The Logical Tr a der , which I highly recommend.
Understand that a trading approach is completely different than an analysis approach. Your analysis approach may consist of technical, fundamental, psychological, astrological, or random factors (or a combination). Your analysis approach should result in a determination of bias (bullish, bearish, or neutral). My analysis approach centers on Elliott wave, sentiment, momentum (RSI) (for more on how I analyze the market I suggest my book Sentiment in the Forex Market ), and longer term opening range considerations (weekly, monthly, and even yearly) but these approaches don't allow me to objectively enter the market with tight stops (Elliott is not objective. RSI and long term opening ranges don't allow tight stops and sentiment is probably neither). Once I've analyzed markets and determined my bias, I trade the opening range in the direction of my bias.
Opening Range Times (all times New York)
Australia - 6:00 - 6:30 pm.
Tokyo - 7:00 - 7:30 pm.
Europe - 3:00 - 3:30 am.
North America - 9:30 - 10:00 am.
At it's core, an opening range strategy is a short term breakout strategy. Breakout strategies work best with higher volatility. As such, I have focused on the AUDUSD in recent months, a pair with high volatility. I pay attention to the Australian opening range (AUD side), European (risk trends) and North American (USD side). If you were trading the Yen (who would do that?), then you would focus on the Tokyo range.
AFTER the opening range, determine the breakout points for longs and shorts. A filter is needed in order to protect against false breakouts. I use 10% of the 20 day ATR. Experiment with other filters but consistency is paramount.
For example, the 11/22 opening range for AUDUS D during Australia was 9831-9844 . 20 day ATR was 168. The bull ish breakout point would be 9844 + 10% of 168 = 9844 + 17 = 9861 . The bearish point would be 9831 - 10% of 168 = 9831 - 17 = 9814 (chart below shows opening ranges in black, long points in blue and short points in red) . The AUDUSD traded 9856 at 8:10 (failing to reach the bullish level) reversed and triggered the bearish level at 8:20. A stop is placed above the post opening range high at 9860 to account for spread. The trade can be managed with the following opening ranges (Europe would have triggered a short as well and the stop would be moved to the post European opening range high of 9785) but always have a target in mind as well. In this case, 9700 was the confluence of pivots on several time frames and a level that was targeted.
Prepared by Jamie Saettele, CMT.
This is just an introduction but hopefully whets your appetite for a more thorough investigation.
--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.
To contact Jamie e-mail jsaetteledailyfx. Follow me on Twitter JamieSaettele.
To be added to Jamie’s e-mail distribution list, send an e-mail with subject line "Distribution List" to jsaetteledailyfx.
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Day Trading Strategies for Beginners.
Day trading – the act of buying and selling a financial instrument within the same day, or even multiple times over the course of a day, taking advantage of small price moves – can be a lucrative game. But it can also be a dangerous game for those who are new at it or who don't adhere to a well-thought out method. Let's take a look at some general day trading principles and common day trading strategies, moving along from basic tips you need to know to advanced strategies that can help you learn how to day trade like a pro. [If you're looking for a more in-depth option, Investopedia Academy has a three hour video course taught by a 30-year veteran of the industry.]
Day Trading Tips You Need to Know.
Not just knowledge of basic trading procedures, but of the latest stock market news and events that affect stocks – the Fed's plans for interest rates, the economic outlook, etc. Do your homework; make a wish list of stocks you'd like to trade, keep yourself informed about the selected companies and general markets, scan a business newspaper and visit reliable financial websites on a regular basis.
Assess how much capital you're willing to risk on each trade (most successful day traders risk less than 1-2% of their account per trade). Set aside a surplus amount of funds that you can trade with and are prepared to lose (which may not happen) while keeping money for your basic living, expenses, etc.
Day trading requires your time – most of your day, in fact. Don’t consider it as an option if you have limited hours to spare. The process requires a trader to track the markets and spot opportunities, which can arise any time during the trading hours. Moving fast is key.
As a beginner, it is advisable to focus on a maximum of one to two stocks during a day trading session. With just a few stocks, tracking and finding opportunities is easier.
Of course, you're looking for deals and low prices. But keep away from penny stocks. These stocks are highly illiquid and chances of hitting a jackpot are often bleak.
Many orders placed by investors and traders begin to execute as soon as the markets open in the morning, contributing to price volatility. A seasoned player may be able to recognize patterns and pick appropriately to make profits. But as a newbie, it is better to just read the market without making any moves for the first 15-20 minutes. The middle hours are usually less volatile while the movement begins to pick up towards the closing bell. Though the rush hours offer opportunities, it’s safer for beginners to avoid them at first.
7) Cut Losses with Limit Orders.
Decide what type of orders you will use to enter and exit trades. Will you use market orders or limit orders? When you place a market order, it is executed at the best price available at the time; thus, no “price guarantee.” A limit order, meanwhile, does guarantee the price, but not the execution. Limit orders help you trade with more precision wherein you set your price (not unrealistic but executable) for buying as well as selling.
8) Be Realistic About Profits.
A strategy doesn't need to win all the time to be profitable. Many traders only win 50% to 60% of their trades. The point is, they make more on their winners than they lose on their losers. Make sure that the risk on each trade is limited to a specific percentage of the account, and that entry and exit methods are clearly defined and written down.
There are times when the stock markets test your nerves. As a day trader you need to learn to keep greed, hope and fear at bay. Decisions should be governed by logic and not emotion.
Successful traders have to move fast – but they don't have to think fast. Why? Because they've developed a trading strategy in advance, along with the discipline to hold to that strategy. In fact, it is far more important to follow your formula closely than to try to chase profits. There's a mantra among day-traders: "Plan your trades, then trade your plan."
Day Trading Like a Pro: Deciding What to Buy.
Day traders seek to make money by exploiting minute price movements in individual assets (usually stocks, though currencies, futures and options are traded as well), usually leveraging large amounts of capital to do so. In deciding what to focus on – in a stock, say – a typical day trader looks for three things: liquidity, volatility and trading volume.
Liquidity allows you to enter and exit a stock at a good price (i. e. tight spreads, or the difference between the bid and ask price of a stock, and low slippage, or the difference between the expected price of a trade and the actual price). Volatility is simply a measure of the expected daily price range—the range in which a day trader operates. More volatility means greater profit or loss. Trading volume is a measure of how many times a stock is bought and sold in a given time period (most commonly, within a day of trading, known as the average daily trading volume - ADTV). A high degree of volume indicates a lot of interest in a stock. Often, an increase in the volume of a stock is a harbinger of a price jump, either up or down.
Once you know what kinds of stocks (or other asset) you are looking for, you need to learn how to identify entry points – that is, at what precise moment you're going to invest. There are three tools you can use to do this:
Real-time news services. News moves stocks; subscribing to such services tell you when potentially market-shaking news comes out. ECN/ Level 2 quotes . ECNs are computer-based systems that display the best available bid and ask quotes from multiple market participants, and then automatically match and execute orders. Level 2 is a subscription-based service that provides real-time access to the NASDAQ order book composed of price quotes from market makers registered in every NASDAQ-listed and OTC Bulletin Board securities. Together, they can give you a sense of orders being executed in real time. Intraday candlestick charts. Candles provide a raw analysis of price action. (More on these later.)
Day Trading Like a Pro: Deciding When to Sell.
Before you actually jump into the market, you have to have a plan for getting out. Identifying the point at which you want to sell an investment is called Identifying a price target. Some of the most common price target strategies are:
In most cases, you'll want to exit an asset when there is decreased interest in the stock as indicated by the Level 2/ECN and volume.
Day Trading Pro Tips: Charts and Patterns.
Previously, we mentioned three tools for determining entry points – that is, deciding the opportune moment you're going to buy a stock (or whatever asset you're trading). The most technical are intraday candlestick charts. We'll focus on these factors:
There are many candlestick setups that we can look for to find an entry point. If properly used, the doji reversal pattern (highlighted in yellow in Figure 1) is one of the most reliable ones.
Figure 1: Looking at candlesticks - the highlighted doji signals a reversal.
Typically, we will look for a pattern like this with several confirmations:
First, we look for a volume spike, which will show us whether traders are supporting the price at this level. Note that this can be either on the doji candle or on the candles immediately following it. Second, we look for prior support at this price level. For example, the prior low of day (LOD) or high of day (HOD). Finally, we look at the Level 2 situation, which will show us all the open orders and order sizes.
If we follow these three steps, we can determine whether the doji is likely to produce an actual turnaround and we can take a position if the conditions are favorable.
Day Trading Pro Tips: How to Limit Losses.
Trading on margin means that you are borrowing your investment funds from a brokerage firm. When you trade on margin (and bear in mind that margin requirements for day trading are high), you are far more vulnerable to sharp price movements. Margins help to amplify the trading results – not just of profits, but of losses as well, if a trade goes against you. Therefore, using stop-losses, which are designed to limit losses on a position in a security, is crucial when day trading.
A stop loss order controls risk. For long positions a stop loss can be placed below a recent low, or for short positions above a recent high. It can also be based on volatility: For example, if a stock price is moving about $0.05 a minute, then you may place a stop loss $0.15 away from your entry in order to gives the price some space to fluctuate before it moves (hopefully) in your anticipated direction. Define exactly how you will control the risk on the trades. In the case of a triangle pattern, for example, a stop loss can be placed $0.02 below a recent swing low if buying a breakout, or $0.02 below the pattern. (The $0.02 is arbitrary; the point is simply to be specific.)
One strategy is to set two stop losses:
A physical stop-loss order placed at a certain price level that suits your risk tolerance. Essentially, this is the most money you can stand to lose. A mental stop-loss set at the point where your entry criteria are violated. This means that if the trade makes an unexpected turn, you'll immediately exit your position.
However you decide to exit your trades, the exit criteria must be specific enough to be testable – and repeatable.
The Bottom Line.
Day trading is a difficult skill to master, requiring as it does time, skill and discipline. Many of those who try it fail. But the techniques and guidelines described above can help you create a profitable strategy, and with enough practice and consistent performance evaluation, you can greatly improve your chances of beating the odds. There is one final rule we should mention: Set a maximum loss per day that you can afford to withstand – both financially and mentally. Whenever you hit this point, take the rest of the day off. Stick to your plan and your perimeters. After all, tomorrow is another (trading) day. If you want to learn proven, profitable strategies you can start using today, from an experienced Wall Street trader, then check out Investopedia Academy's "Become a Day Trader" course.
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