Intraday Forex trading: simple strategies and top secrets

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Forex trading involves a lot of risk. Opening deals for a long time in a volatile market, and even with leverage, is not a good idea. The price of "Forex" - "lady" wayward. She likes to move up and down. Holding a position for several days is unprofitable and psychologically difficult. It is safer and calmer to trade during the day (so to speak inside), placing small stop losses.

For a more comfortable and safe work, traders use simple strategies for intraday trading on Forex. They allow you to enter at the very beginning of the expected movement and not to sit out transactions. The system allows you to take only the active part of the emerging trend.

Before describing the strategies, let's analyze the simple principles of technical analysis of the price chart.

Basics of trading

The essence of technical analysis was most accurately and succinctly expressed by Charles Dow at the end of the 19th century. He said the market repeats and the price takes into accountall.

Repetitions are patterns of behavior. The market is not stocks or money, but people with their hopes and fears.

Charles Dow's expression means that all the news has already been reflected in the current price position. This is what allows us to evaluate the further reaction of the market and the movement on the chart.

This is easy to understand with an example: if people expect growth, then they are probably already in purchases. Therefore, they are ready to take profits or strengthen their positions at any time. The task of the analyst is to notice this in time and compare it with the news background.

But the subject of this article is not an analysis of technical analysis, but a description of the strategies that are based on it.

Two trading strategies

Many traders are attracted to intraday trading on Forex. Simple strategies allow you to create effective trading systems. They are of two types: trend and corridor. Which one is more effective?

Practice shows that the entry in the direction of a developing trend is more reliable and safe. Figuratively speaking, a trend is a moving train, jumping into which, you can ride with the breeze. The price corridor can be compared to a marshalling yard. In the market, it is always uncertainty and tossing.

Intraday trading

For such operations, it is important to take into account the start and end times of trading sessions. As mentioned above, money in the Forex market in most cases is earned (or lost) on active trend movements.

"Forex" is an interbank exchange that operates around the clock. The only exception is weekends. But trading on the Forex exchange is impossible to conduct all 24 hours, so you need to choose a specific time to conclude transactions.

Trading takes place alternately at the European, American and Asian sessions. Traders living in Europe and Russia choose the first and second

European stock exchanges open at 5:00 - 6:00 GMT, Chicago and New York open at 12:00 GMT. From 12:00 to 16:00 GMT, there is a lot of market activity, as two sessions (European and American) coincide in time. At 16:00 Europe leaves the market, and after 18:00 GMT the market freezes.

Choosing a currency pair

When trading on European and American exchanges, you should choose pairs: EUR/USD, GBP/USD, USD/CHF (Euro, British Pound and Swiss Franc). In the future, it is necessary to analyze the volatility of currency pairs and test the trading system. Based on the analysis, you can make the best choice.

Fundamental news

Many novice traders underestimate the role of economic news. They believe that technical analysis is enough, and do not want to complicate anything by doing intraday trading on Forex. A simple strategy does not mean it has to be primitive.

Inside the session, a trader should closely follow the schedule of economic news releases. It often happens that in anticipation of important announcements on Fed rates, the price moves. It is important not to miss this moment.

It is also important to know that an hour before importantnews, new positions cannot be opened. Due to the unpredictable market reaction, this trade is likely to close in the red.

What should I do if there is already an open deal an hour before the news? If there is a profit on it, you should move the stop loss to the breakeven position and wait. If the deal is in the red, you need to do nothing and also wait. Of course, the stop loss must be set in advance.

Also, do not open a deal at the time of the news release. The market can go sharply in one direction, then turn sharply in the other. As a result, the transaction will close in the red. Trying to do something at this moment is useless: quotes will jump, and dealers will not be able to keep up with requests.

Conservative scalping

This is the name of N. A. Shiryaev. For a trend strategy, the choice of indicators is appropriate - a set of moving averages. But oscillators that show the boundaries of price ranges in dynamics are also needed here.

It's not the indicator itself that matters, but the idea. It lies in the fact that the deal is opened according to the trend and on a rollback, which is tracked using an oscillator.

When a signal comes from the stochastic, the MACD indicator should confirm the trend. For this purpose, the MACD-2line indicator is used.

The shortest moving average is placed in an envelope with an up and down offset of 0.21%. To build an envelope, you need to download and install the Envelopes indicator.

Required indicators:

• Exponential moving averages (EMA) withparameters 34, 72 and 144.
• Envelope based on EMA34.
• Stochastics with parameters 12, 5, 3.
• MACD with parameters 21, 34, 5.
• Ichimoku for 4-hour candles.

The Ichimoku indicator is needed to track the trend. In this case, only the Kijun and Tenkan lines are used. The rest are painted over to match the background color so as not to interfere. When the Tenkan is above Kijun and looks up or horizontal, it means that the market is in a bullish trend.

The role of moving averages

Strategies for intraday trading on Forex rarely do without moving averages. Their role is difficult to overestimate. With their help, the nearest support-resistance levels are visible. In addition, they confirm the presence of a trend.

There are several types of moving averages, but exponential moving averages (EMA) are used in scalping. This indicator instantly reacts to the slightest change in price dynamics.

Intraday trading is carried out for a short period of time. Trends here are fleeting and small. Within an hour, you can take 30 points. This will be enough. There may be several such entries during one session.

The idea of conservative scalping is to look for trend matches on five-minute and four-hour charts. The opening of the transaction occurs on the rebound from a significant level in the direction of the trend on h4. Price bounce is determined using Stochastics and MACD.

Trend detection method

Now we are very close to explaining the nuances of trading using the "Conservative Scalping" strategy. Intraday trading on it fully justified itself.

So, we found out that we need h4 and m5 charts. To determine the global trend on the four-hour chart, Ichimoku is adjusted. The trend in intraday trading on Forex is determined by the location of the Kijun and Tenkan lines (the rest of the lines must be made the same color as the background so as not to interfere).

Exponential moving averages (EMA) are set up on the five-minute chart. Their location and direction will indicate the presence and strength of a trend on a given time frame. The greater the distance between them, the steeper the slope, the stronger the trend.

Stochastics and MACD indicators help to formalize the price rebound from the levels in the places where the trend slows down. This serves as a signal to enter the market. Formalization of signals is necessary for testing. Without this, it is impossible to determine the efficiency and stability of the trading system.

For clarity, here are a few more examples of receiving signals on five-minute charts.

Here you can see how the stochastic oscillator shows a price reversal along the trend, and the MACD indicator confirms the signal with its growth. Moving averages also indicate the trend.

Now let's compare the h4 and m5 charts.

Received a buy signal on the m5 chart. Let's move to h4 and see what Tenkan and Kijun show:

Make sure that the entry follows the trend inside the growing white candle h4.

All these tricks help make intraday trading understandable and predictable.

5 points for success

This is the title of V. Safin's book, which is available in the public domain. The idea of the strategy is to get a cumulative signal for several indicators, including candlestick configurations. The signal of each is evaluated on a five-point system. The highest number of points is 100. If the signal scores 65 points, then this is considered a good probability of a successful trade.

Strategy is the basis of a trading system

We covered what intraday trading consists of and why it is better than long-term positions.

As examples, two simple strategies for intraday trading on Forex are shown: “Conservative scalping” by N. A. Shiryaev and "5 points for success" by Veniamin Safin.

Why were they chosen? Because they have the idea of accumulating a statistical advantage. All decisions are made carefully and rationally. They can be used at your discretion in any market. For example, when trading stocks intraday.

These strategies are easy to test, simple and straightforward. It is important that they can be improved, adjusted to suit yourself and your trading style.

All this confirms the well-known truth that any strategy is just the basis for creatingits profitable and stable trading system.