Forex day trading strategies
Day trading strategies in Forex are predominantly medium-term and long-term. At first glances, such as are unlikely to be suitable for traders who want to open several transactions per day and record the result in a trading report every day. But trading on the daily time frame is perfect for those who know how to wait and value reliability and safety of capital above all else. Let's look at several daily strategies and try to understand all their advantages and disadvantages.
The essence and features of trading strategies on the daily timeframe
The daily time frame is one of the slowest in Forex. Even more global weekly and monthly are used in trade quite rarely and, mainly, as auxiliary ones. Trades that open on D1 can remain open from several days to several months. Considering that there are not very many truly liquid assets on Forex (7 par-majors, a couple of cross-rates, and several), a trader opens deals no more than 1-2 times a week.
On the one hand, such trading, on average, brings less profit than intraday trading or scalping. On the other hand, when trading on D1, a trader does not need to constantly monitor the chart – it is enough to evaluate the changes that have occurred twice a day, in the morning and in the evening. If the strategy implies a strict set of stop losses and takes profit, you can limit yourself to just one session per day, which will take no more than 10 minutes.
Trading on daily charts is as close as possible to medium-term investing. Even when trading by technical analysis, a trader should consider global fundamental factors. If during scalping you can simply suspend trading at the time of an important news release, then a deal opened for several weeks will certainly be influenced by the results of important economic events.
Because of this, medium-term traders rarely use automated trading systems, preferring to make deals on their own and, if necessary, make changes to them. In short-term trading and scalping, when events develop quickly, it is most effective to strictly follow the TS rules and not try to make decisions on the fly. In trading on the daily timeframe, while the deal is still open, an event may occur that radically changes the situation and makes following the old rules impractical. On the other hand, the trader has enough time to calmly assess the situation and make a new decision, therefore, day strategies give a lot of freedom of choice and improvisation.
Forex day trading strategies
Let's take a look at a few specific trading strategies on the daily timeframe to get a better grasp of this trading style.
Medium-term TS “Nomad”
The Nomad strategy is quite simple, built on standard indicators, and is perfect for novice traders. To get started, you need to set up the following instruments on the chart:
- 2 exponential with periods of 5 and 12.
- An oscillator with a period of 20 and an additional level of 50.
Moving averages play the role of the main signal tool, the oscillator works as a filter. Trades are opened according to the following algorithm:
- If the fast 5-period moving average crosses the slow 12-period upward, and the RSI crosses the 50 levels up and down, then a buy trade is opened.
- If the fast MA crosses the slow one from top to bottom, and the oscillator crosses the average level in the same direction, a sell trade is opened.
This strategy is as simple as possible and does not dictate any mandatory conditions to the trader, except for entering a trade. Stop loss and take profit can be set at your own discretion, the main thing is to adhere to the rule of the prevalence of taking over stop. SL can be set to the nearest support/resistance level. It is possible that the transaction will have to be exited manually, simply because the market situation will change, and the previous data will no longer be relevant.
Trading system MA + МАCD + Stochastic
The next system is somewhat similar to the previous one – it is also based on two exponential moving averages. However, two oscillators are used as filters at once – and.
To search for signals, you need to plot the following indicators on the chart:
EMA with periods of 8 and 34.
MACD with standard settings.
Stochastic with parameters 9, 3, 3.
After installing and configuring the instruments, you can start trading. Buy deals are opened subject to the following conditions:
- The fast-moving one crosses the slow one upwards.
- The MACD histogram is above the zero marks.
- Stochastic is leaving the oversold zone but is still in the lower part of the range.
Sell deals are opened under mirror conditions.
As in the previous one, in this TS, setting stop loss and take profit is at the discretion of the trader. Considering that the candlestick size on daily charts is much larger than on H1, M15, and M5, it is better to set the stop loss at the nearest local extremum – the key level may be too far away. But take profit can be outlined further – with an excess of the stop size by 5 or more times. This will allow you to make a profit of several hundred points from one trade, compensating for possible losses from several unsuccessful decisions at once.
Bill Williams' alternative strategy Antiprofitunity
Bill Williams' Profitunity trading system is one of the most popular and controversial strategies. The author himself positions it as a completely new, original approach to trading, however, the TS is based on indicators that are very similar to the classic moving averages and oscillators that are widely used in technical analysis.
Not devoid of Profitunity and disadvantages. Despite the fact that the author insists on its universality, it cannot be said that it shows the same efficiency when trading on stock exchanges and in forex trading. Taking these factors into account, enthusiasts have developed an alternative strategy, better adapted to the realities of the Forex market, and designed for trading on a daily timeframe.
The Antiprofitunity trading strategy uses the same indicators as in the original Williams system: and AO (ACs are not required in this TS). But the rules for entering the market using this system are somewhat different.
Opening sell positions if the following conditions are met:
- A bearish divergence (divergence) is formed between the price chart and the AO oscillator.
- A bearish reversal bar is forming at the second top.
- The price is above the Alligator lines.
Buy deals are opened under mirror conditions.
Stop-loss is set at the nearest extremum (for these purposes, you can also use the Fractal indicator), you can take profit when the first reverse signal (divergence) is formed.
The main difference between Antiprofitunity and the original strategy is that deals are opened against the trend, which, although it increases the risk of a false signal, allows you to enter the market at the very beginning of the movement.
Advantages and Disadvantages of Daily Forex Strategies
The daily timeframe is softer and smoother than the hourly or even faster time frames. Every 24 hours is a set of trading sessions, including more active and quieter ones. On the hourly chart, during the day, clear bursts and flats are often noticeable (they correspond to the release of important news and periods of calm). However, each daily candle includes all the events of the trading day, so this timeframe is very balanced.
Taking into account the peculiarities of daily charts, trading on them is more suitable for those traders who know how to wait and do not chase extra profits. By studying only global timeframes, you can miss many small movements, but at the same time avoid most of the pitfalls. Daily Forex strategies will become an effective tool in the hands of patient traders and will help to make profits with a minimum of risk.
Trading in the financial markets carries a high level of capital risk. In order to reduce risks, it is recommended to strictly follow the rules of money management and always set Stop Loss. All decisions that a trader makes when working on Forex are his personal responsibility.