Short-term trading Technicals for Forex

time range

In our strategy we will use two charts with different time periods (10-minute and hourly), as well as two technical indicators: moving average with the period 200 and the slow stochastic with a period of 14.

Step 1. Identify the trend. Compare moving averages and the hourly and 10-minute charts. We assume that the trend is present in the market, if in both graphs, the price for a tangible period of time is above/below the moving average.

Step 2. Identify the entrance. After we have identified the trend we need to see 10-minute chart at the same time was observed under two conditions: 1) price should not be more than 20 points above (to buy) or 20 points below (to sell) the moving average; and 2) the fast stochastic line must cross the up line of the slow stochastic below 20 (to buy) or the fast stochastic line must cross the down slow line over level 80 (for sale).

These conditions indicate the following: 1) At the moment the currency pair is in short term uptrend or downtrend and 2) the pair made a break in his movement and rolled back (as indicated by the position of the stochastics at the top or bottom of the range, and the fact that the price is within 20 pips from the moving average) and intends to turn (because the fast stochastic line has crossed up or down the line of the slow stochastic).

Step 3. Saddle the trend. Set the trailing stop after the first login. When you open a long position, we set a stop-loss order 10 pips below the moving average with the period 200 at the 10-minute chart. In the case of opening a short position, we place the initial stop loss 10 pips above the moving average. If the trade moves in your direction, raise (for a long position) or lowered (for a short position) stop to protect your profit. With the aim of simplicity in the following examples we will use the stop in increments of 25 points from each new peak or bottom. The graphs in the next Chapter will help you to understand how to work on the strategy on the example of two currency pairs.
Examples of transactions.

An example of the first trades on the chart of the Euro/dollar in June 2002. First, we compare the 10-minute and hourly charts our currency pair. Note the time that the price held above the moving average with the period 200 in both graphs. On the hourly chart (shown below), the fact that the price is above the 200 MA indicates a constant ascending trend. The 10-minute chart (figure 2) the price moved (and remained above the 200 MA) in the right third of the graph. Our next step is to identify the entrance area – when a market will stay within 20 points of moving average on a 10 minute chart and the intersection of the lines of the stochastic.

Price is always above the 200 MA hour chart gives us an idea about the prevailing market trend.

In the last third of the chart the price is above 200MA, between 13:00 and midnight on 27 June, the market was within 20 pips from MA. The entry signal was given when the fast stochastic lines have crossed up slow line (a sign of the resumption of bullish momentum) when the indicator was below level 20. It happened at about 20:00.

The range of time between 13:00 and midnight. June 27 meets these requirements. The entry point appears when the fast stochastic crosses the slow stochastic line when the indicator is at level 20. A long position was opened at a price .9883 around 20:00 with a stop loss at the price of .9858 (10 points below the 200 MA, which at that time was at .9868). Then, when the formation of new peaks, we moved the stop up. EUR/USD pair formed a top at .9992, after which the stop was moved to .9967, where the position and was closed with a profit of 84 pips ($840).
an Example on the chart of the currency pair dollar/yen

Figures 3 and 4 we see a similar example on the chart of the currency pair dollar/yen. Hourly chart (figure 3) shows that the price is under the moving average, indicating downward trend. The 10-minute chart (figure 4), price fell below the moving average after 10:00 on June 27, indicating the possibility of opening short positions. Also, the price was at this time at less than 20 pips from the moving average. A short position was opened at about 17:00 price 119.57 when the fast stochastic line has crossed down the slow stochastic line when the indicator was above 80.

On a 10 minute chart of the USD/JPY crossing of the stochastic (occurring above 80) occurred around 17:00, when the price was below (but within 20 points) from the 200 MA, which gave a signal to open short positions.

To protect the transactions were set stop-loss order at the level of 199.86. In this case, the stop remained intact until the following day, when USD/JPY started to decline. After we moved the stop down amid falling profit was recorded at 188.58 on 25 points above the low of 118.33, we have earned 99 points.

Short-term trading method works well in the foreign exchange market Forex, but it can be used in other markets. Each step of the system helps to identify areas where we can make effective transactions. If at some point in time one of the criteria is not met, it is clear that one should not make a deal. This model usually gives you the freedom to experiment with different time intervals. When you have a system that helps to catch trends in their early stages, you can observe how other traders follow your example.