Binary option robot AGO: Intraday option trading strategies

10 Options Strategies to Know.

10 Options Strategies To Know.

Too often, traders jump into the options game with little or no understanding of how many options strategies are available to limit their risk and maximize return. With a little bit of effort, however, traders can learn how to take advantage of the flexibility and full power of options as a trading vehicle. With this in mind, we've put together this slide show, which we hope will shorten the learning curve and point you in the right direction.

10 Options Strategies To Know.

1. Covered Call.

Aside from purchasing a naked call option, you can also engage in a basic covered call or buy-write strategy. In this strategy, you would purchase the assets outright, and simultaneously write (or sell) a call option on those same assets. Your volume of assets owned should be equivalent to the number of assets underlying the call option. Investors will often use this position when they have a short-term position and a neutral opinion on the assets, and are looking to generate additional profits (through receipt of the call premium), or protect against a potential decline in the underlying asset's value. (For more insight, read Covered Call Strategies For A Falling Market.)

2. Married Put.

In a married put strategy, an investor who purchases (or currently owns) a particular asset (such as shares), simultaneously purchases a put option for an equivalent number of shares. Investors will use this strategy when they are bullish on the asset's price and wish to protect themselves against potential short-term losses. This strategy essentially functions like an insurance policy, and establishes a floor should the asset's price plunge dramatically. (For more on using this strategy, see Married Puts: A Protective Relationship . )

3. Bull Call Spread.

In a bull call spread strategy, an investor will simultaneously buy call options at a specific strike price and sell the same number of calls at a higher strike price. Both call options will have the same expiration month and underlying asset. This type of vertical spread strategy is often used when an investor is bullish and expects a moderate rise in the price of the underlying asset. (To learn more, read Vertical Bull and Bear Credit Spreads.)

4. Bear Put Spread.

The bear put spread strategy is another form of vertical spread like the bull call spread. In this strategy, the investor will simultaneously purchase put options at a specific strike price and sell the same number of puts at a lower strike price. Both options would be for the same underlying asset and have the same expiration date. This method is used when the trader is bearish and expects the underlying asset's price to decline. It offers both limited gains and limited losses. (For more on this strategy, read Bear Put Spreads: A Roaring Alternative To Short Selling.)

Investopedia Academy "Options for Beginners"

Now that you've learned a few different options strategies, if you're ready to take the next step and learn to:

Improve flexibility in your portfolio by adding options Approach Calls as down-payments, and Puts as insurance Interpret expiration dates, and distinguish intrinsic value from time value Calculate breakevens and risk management Explore advanced concepts such as spreads, straddles, and strangles.

5. Protective Collar.

A protective collar strategy is performed by purchasing an out-of-the-money put option and writing an out-of-the-money call option at the same time, for the same underlying asset (such as shares). This strategy is often used by investors after a long position in a stock has experienced substantial gains. In this way, investors can lock in profits without selling their shares. (For more on these types of strategies, see Don't Forget Your Protective Collar and How a Protective Collar Works.)

6. Long Straddle.

A long straddle options strategy is when an investor purchases both a call and put option with the same strike price, underlying asset and expiration date simultaneously. An investor will often use this strategy when he or she believes the price of the underlying asset will move significantly, but is unsure of which direction the move will take. This strategy allows the investor to maintain unlimited gains, while the loss is limited to the cost of both options contracts. (For more, read Straddle Strategy A Simple Approach To Market Neutral . )

7. Long Strangle.

In a long strangle options strategy, the investor purchases a call and put option with the same maturity and underlying asset, but with different strike prices. The put strike price will typically be below the strike price of the call option, and both options will be out of the money. An investor who uses this strategy believes the underlying asset's price will experience a large movement, but is unsure of which direction the move will take. Losses are limited to the costs of both options; strangles will typically be less expensive than straddles because the options are purchased out of the money. (For more, see Get A Strong Hold On Profit With Strangles.)

8. Butterfly Spread.

All the strategies up to this point have required a combination of two different positions or contracts. In a butterfly spread options strategy, an investor will combine both a bull spread strategy and a bear spread strategy, and use three different strike prices. For example, one type of butterfly spread involves purchasing one call (put) option at the lowest (highest) strike price, while selling two call (put) options at a higher (lower) strike price, and then one last call (put) option at an even higher (lower) strike price. (For more on this strategy, read Setting Profit Traps With Butterfly Spreads . )

9. Iron Condor.

An even more interesting strategy is the iron condor. In this strategy, the investor simultaneously holds a long and short position in two different strangle strategies. The iron condor is a fairly complex strategy that definitely requires time to learn, and practice to master. (We recommend reading more about this strategy in Take Flight With An Iron Condor, Should You Flock To Iron Condors? and try the strategy for yourself (risk-free!) using the Investopedia Simulator.)

10. Iron Butterfly.

The final options strategy we will demonstrate here is the iron butterfly. In this strategy, an investor will combine either a long or short straddle with the simultaneous purchase or sale of a strangle. Although similar to a butterfly spread, this strategy differs because it uses both calls and puts, as opposed to one or the other. Profit and loss are both limited within a specific range, depending on the strike prices of the options used. Investors will often use out-of-the-money options in an effort to cut costs while limiting risk. (To learn more, read What is an Iron Butterfly Option Strategy?)

The Top Technical Indicators For Options Trading.

There are hundreds of technical indicators available which are used by traders according to their style of trading and securities to be traded. This article focuses on a few important technical indicators specific to options trading. (Confused? If you are not sure that technical trading or options is for you, check out or tutorial, Introduction to Stock Trader Types, to decide your preferred style.)

This article assumes familiarity of the reader with options terminology and calculations involved in technical indicators.

How option trading is different.

Usually, technical indicators are used for short term trading. Compared to a typical stock trader, an option trader looks for additional aspects of trading:

Range of movement (How much - volatility), Direction of the move (Which way) and Duration of the move (How long - time)

Since options are decaying assets (see time decay of options), the holding period takes significance for options trading. A stock trader has the liberty to hold the position indefinitely or even convert the short term margin leveraged position into a cash based holding. But an option trader is constrained by the limited duration due to the option expiry date where there is no choice to hold an option position indefinitely. It hence becomes important to select the correct trading strategies taking into consideration the timing factor.

Due to the above constraints, almost all of the technical indicators suitable for options trading are momentum indicators, which tend to identify overbought and oversold markets, and hence price reversals and related trends.

The following technical indicators are commonly used for options trading:

A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.

How is RSI useful for option trading?

RSI attempts to determine overbought and oversold conditions of a security. It thereby provides vital indications about the short term price moves, or rather corrections and reversals, once the overbought or oversold condition is identified.

RSI works best for options on individual stocks (instead of indexes), as stocks demonstrate the overbought and oversold condition more frequently as compared to indexes. Options on highly liquid high beta stocks make the best candidates for short term trading based on RSI. (Check out Investopedia’s detailed article on RSI with examples)

As standard parameters commonly followed, RSI values range from 0-100. A value above 70 indicates overbought levels, and that below 30 indicates oversold.

All options traders are aware of the importance of volatility on options valuation. Bollinger bands capture this aspect of an underlying security, allowing upper and lower ranges to be identified within dynamically generated bands based on recent price moves of the security.

Two important indications which are derived from Bollinger Bands:

The bands expand and contract as volatility increases or decreases based on the recent price movement of the stock (expansion indicates high volatility and contraction indicate low volatility). The trader can thus take option positions expecting a reversal. The current market price can be assessed against the current band range for any breakout patterns. Breakout above top band indicates overbought market, which is ideal indication for buying puts or shorting calls. Breakout below lower band indicates oversold market – an opportunity to buy calls or short puts at lower volatility. Care should be taken to assess volatility – shorting options at high volatility is beneficial, as it gives higher premiums to the trader, while buying options at lower volatility provides cheaper options.

Traders are free to use their own desired values while looking at Bollinger bands. Commonly followed values are 12 for simple moving average and 2 for standard deviation for top and bottom bands.

For high frequency options traders, the IMI indicator offers a good choice of technical indicator to bet on intraday option trades. It combines the concepts of intraday candlesticks and RSI, thereby providing a suitable range (similar to RSI) for intraday trading by indicating overbought and oversold markets. However, it is important to additionally be aware about the “trendiness” of the price moves, because when there is a strong visible up/down trend, the momentum indicators will frequently show overbought/oversold opportunities. Being aware of the trends, and additionally using IMI, a trader can spot potentials where he can get into a long position in an uptrending market at intermediate intraday corrections and short positions in a downtrend market at intermediate price bumps.

IMI is calculated as follows:

1. If Close > Open: Gains = Gain (n-1) + (Close - Open); Losses = 0.

2. If Close < Open: Losses = Loss (n-1) + (Open - Close); Gains = 0.

3. Add Gains and Losses for past n chosen periods.

4. IMI = 100 x (Gains / (Gains + Losses))

Taking benefits of leverage with option positions, the IMI indicator (combined with a suitable trend following indicator) offers a great technical indicator for options trading.

The formula offers flexibility to traders to use their own desired values for n. Commonly followed resultant values are 70 or higher indicating overbought markets, and 30 or below indicating oversold markets. The interpretation remains similar to RSI discussed above.

Adding further to the RSI basket, the MFI is another momentum indicator that combines the price and volume data to identify price trends for a stock. It is also known as volume-weighted RSI.

With volume considered into calculations, the MFI indicator provides vital inputs about the amount of capital flowing in and out of a stock over a recent time period (recommended 14 days).

Due to dependency on volume data, MFI indicator is suited for stock based options trading (instead of index based), and fairs better for long duration option trading instead of frequent intraday. Traders look for cases when MFI indicator moves in opposite direction to that of stock price, as this can be a leading indicator to predict a trend reversal.

Commonly followed resultant values for the Money Flow Index are 20 indicating oversold and 80 indicating Overbought.

The put call ratio indicates the ratio of trading volume of put options to call options. Instead of the absolute value of the Put Call ratio, the changes in its value indicate a change in overall market sentiment.

A high to lower value move indicates a bullish trend, indicating more calls being opted for by the traders, while a low to high value move indicates bearish trend as more puts are of interest in the market.

Open interest indicate the open or unsettled contracts in options. OI does not necessarily indicate any specific uptrend or downtrend, but it does provide indications about the end of a particular trend. Increasing open interest indicates new capital inflow and hence sustainability of the existing up or down trend, while declining open interest indicates an end to the trend.

For options trading where traders look to benefit from short term price moves and trends, OI provides important information beneficial for entering into or squaring off option positions.

OI values, in addition to the traded volume and price movements, are frequently used by option traders. Here is an indicative interpretation for OI and price moves:

Market is Strong.

Market is Weakening.

Market is Strengthening.

In addition to the above mentioned technical indicators, there are hundreds of other indicators which can be used for trading options (like Stochastic Oscillators, Average True Range, Cumulative tick, moving averages, etc). On top of those, a lot of variations exist with smoothening techniques on resultant values, averaging principals and usage of combinations of various indicators. An option trader should select the one suiting his or her own trading style and strategy, after carefully examining the mathematical dependencies and calculations.

9 profitable intraday trading strategies (that you can use right now)

9 profitable intra-day forex trading strategies you can use right now!

People who succeed at day trading do three things very well:

They identify intra-day trading strategies that are tried, tested. They are 100% disciplined in executing those strategies. They stick to a strict money management regime.

Jump right to one you like, just click on it.

Momentum Reversal Trading Strategy.

Role Reversal Trading Strategy.

Heikin-Ashi Trading Strategy.

RSI Trading Strategy, 5 Systems + Back Test Results.

The Moving average crossover strategy.

The swing day trading strategy.

Candlestick patterns.

The Bollinger band squeeze strategy.

The narrow range strategy.

The 2 period RSI strategy.

Binary options trading strategy that generates 150% return.

Your probably thinking:

“How do I find intra-day trading strategies that actually work?”

And Are there some day trading rules that will help me to trade forex, commodities, stocks?

All you need to do is: set aside a few minutes of your day to tackle one of the following forex day trading strategies which I outline for you below.

The reality is this:

Few people are actually successfully day trading forex or other markets for a living,

That’s the uncomfortable fact of life that marketers don’t like to speak of! And those few people are most probably trading with other peoples money, like traders working for a bank or a hedge fund.

That means the stakes are not as high for them, as they are for a person trading their own capital.

That being said;

There are intra-day trading strategies beginners can use to maximise their chances to stay in the game for the long haul. These can be use in most markets like forex, commodities or stocks.

Because, ‘the long haul’ is where someone can turn their initial starting capital, into a retirement nest egg!

So, in this article I will show you everything you need to know to get started including:

Awesome forex day trading strategies that are used successfully every day. The main chart patterns associated with these forex trading strategies. Instructions for implementing the strategies.

Then I will tell you,

The simple truth is.

Learning to use and implement a basic intra-day trading strategies can cut your losses by 63% immediately and will increase your profitability chances in the long run.

MUST READ: Few Things About Risk Management Forex Trader Should Know.

So lets get down to business.

1.Momentum Reversal Trading Strategy.

#1 The strategy seeks trading opportunities through the combination of fundamental and technical analysis.

#2 It requires a trader to analyse the fundamental aspects of the traded currency to establish mid to long term trend first. Then it uses the price momentum, support and a resistance zones to spot market reversals.

#3 The strategy allows to enter the market at low risk and provide a large profit potential through advanced money management.

#4 All trades are planned in advance to give a trader enough time to enter the market every time. Most trades are placed as pending limit orders often executed during London’s session.

#5 The strategy works well on all major US Dollar crosses. It generates between 1-5 signals per month. All trades are entered and held for anything up to several weeks depending on the price action and the market fundamentals.

#6 The strategy has been traded in live markets for the last 15 months and its performance is clearly documented in the performance section.

The strategy uses a few indicators only:

Stochastic Oscillator ( multi-time frame) Support and resistance Fibonacci retracements.

After establishing your bias and long term trend through Commitments of Traders report, it’s time to switch to daily charts and look for a price reversal phase.

To define the price reversal you need to analyse the price on daily charts first and answer 3 simple questions:

Has the market been clearly falling or rallying recently? Is the weekly and daily stochastic showing overbought or oversold levels on daily charts? Is the price trading around major support or resistance zones?

In the USDJPY chart above you can see four examples of the price being in a reversal phase.

Setup #1 on the chart.

Weekly and daily stochastics are above 70 zone and the market has been in a substantial rally prior to that. A trader should be marking this zone as bearish and switching to intraday charts to seek a bearish reversal price pattern.

Similar to setup #1, price, after a few days of rally, it came back up to an overbought stochastics zone ( above 70) and is now trading around a major resistance zone. A trader will be marking this area as bearish and switching to intraday charts to seek a bearish reversal price pattern.

Once again, the momentum is now overbought and the price is forming a clear resistance. A trader will be marking this area as bearish and switching to intraday charts to seek a bearish reversal pattern.

The price declined and reached a support at 117 area. The momentum is now oversold. A trader will be marking this area as bullish and switching to intraday charts to seek a bullish reversal price pattern.

The above setups will be attempted only in the direction of the trend established by the trader during a fundamental analysis. The fundamentals were pointing to the downside in USDJPY. The first 3 setups would be considered and the 4th would be either ignored or entered as a counter trend position with a lower lot size.

Fore more information CLICK HERE.

2:The Moving average crossover strategy.

Moving average indicators are standard within all trading platforms, the indicators can be set to the criteria that you prefer.

For this simple day trading strategy we need three moving average lines,

The 20 period line is our fast moving average, the 60 period is our slow moving average and the 100 period line is the trend indicator.

This day trading strategy generates a BUY signal when the fast moving average ( or MA) crosses up over the slower moving average.

And a SELL signal is generated when the fast moving average crosses below the slow MA.

So you open a position when the MA lines cross in a one direction and you close the position when they cross back the opposite way.

How do you know if the price is beginning to trend?

Well, If the price bars stay consistently above or below the 100 period line then you know a strong price trend is in force and the trade should be left to run.

The settings above can be altered to shorter periods but it will generate more false signals and may be more of a hindrance than a help.

The settings I suggested will generate signals that will allow you to follow a trend if one begins without short price fluctuations violating the signal.

On the chart above I have circled in green four separate signals that this moving average crossover system has generated on the EURUSD daily chart over the last six months.

On each of those occasions the system made 600, 200, 200 and 100 points respectively.

I have also shown in red where this trading technique has generated false signals, these periods where price is ranging rather than trending are when a signal will most likely turn out to be false.

The first false signal in the above example broke even, the next example lost 35 points.

The above chart shows the first positive signal in detail, the fast MA crossed quickly down over the slow MA and the trend MA, generating the signal.

Notice how the price moved quickly away from the trend MA and stayed below it signifying a strong trend.

The second false signal is shown above in detail, the signal was generated when the fast MA moved above the slow MA, only to reverse quickly and signal to close the position.

Although the system is not correct all the time, the above example was correct 6/12 or 50% of the time.

We can immediately see how much more controlled and decisive trading becomes when a trading technique is used. There are no wild emotional rationalisation, every trade is based on a calculated reason.

3.Heikin-Ashi Trading Strategy.

Heikin-Ashi chart looks like the candlestick chart but the method of calculation and plotting of the candles on the Heikin-Ashi chart is different from the candlestick chart. This is one of my favourite forex strategies out there.

In candlestick charts, each candlestick shows four different numbers: Open, Close, High and Low price. Heikin-Ashi candles are different and each candle is calculated and plotted using some information from the previous candle:

Close price: Heikin-Ashi candle is the average of open, close, high and low price. Open price: Heikin-Ashi candle is the average of the open and close of the previous candle. High price: the high price in a Heikin-Ashi candle is chosen from one of the high, open and close price of which has the highest value. Low price: the high price in a Heikin-Ashi candle is chosen from one of the high, open and close price of which has the lowest value.

Heikin-Ashi candles are related to each other because the close and open price of each candle should be calculated using the previous candle close and open price and also the high and low price of each candle is affected by the previous candle.

Heikin-Ashi chart is slower than a candlestick chart and its signals are delayed (like when we use moving averages on our chart and trade according to them).

This could be an advantage in many cases of volatile price action.

This forex day trading strategy is very popular among traders for that particular reason.

It’s also very easy to recognise as trader needs to wait for the daily candle to close. Once new candle is populated, the previous one doesn’t re-paint.

You can access Heikin-Ashi indicator on every charting tool these days.

Lets see how a Heikin-Ashi chart looks like:

On the chart above; bullish candles are marked in green and bearish candles are marked in red.

The very simple strategy using Heikin-Ashi proven to be very powerful in back test and live trading.

The strategy combines Heikin-Ashi reversal pattern with one of the popular momentum indicators.

My favourite would be a simple Stochastic Oscillator with settings (14,7,3). The reversal pattern is valid if two of the candles (bearish or bullish) are fully completed on daily charts as per GBPJPY screenshot below.

Once the price prints two red consecutive candles after a series of green candles, the uptrend is exhausted and the reversal is likely. SHORT positions should be considered.

If the price prints two consecutive green candles, after a series of red candles, the downtrend is exhausted and the reversal is likely. LONG positions should be considered.

The raw candle formation is not enough to make this day trading strategy valuable. Trader needs other filters to weed out false signals and improve the performance.

MOMENTUM FILTER (Stochastic Oscillator 14,7,3)

We recommend to use a simple Stochastic Oscillator with settings 14,7,3.

I strongly advise you read Stochastic Oscillator guide first.

Once applied, it will show the overbought/oversold area and improve the probability of success.

Enter long trade after two consecutive RED candles are completed and the Stochastic is above 70 mark.

Enter short trade after two consecutive GREEN candles are completed and the Stochastic is below 30 mark.

To further improve the performance of this awesome day trading strategy, other filers might be used. I would recommend to place stop orders once the setup is in place.

In the long setup showed in the chart below, the trader would place a long stop order few pips above the high o the second Heinkin-Ashi reversal candle.

The same would apply to short setups, trader would place a sell stop order few pips below the low of the second reversal candle.

Accelerator Oscillator filter.

As another tool you could use the standard Accellarator Oscillator. This is pretty good indicator for daily charts. It re-paints sometimes, but mostly it tends to stay the same once printed. Every bar is populated at midnight. How to use it? After Heikin-Ashi candles are printed, confirm the reversal with Accellarator Oscillator.

For Long trades: If two consecutive GREEN candles are printed, wait for the AC to print the green bar above the 0 line on the daily charts.

For Short trades; If two consecutive RED candles are printed, wait for the AC to print the red bar above the 0 line on the daily charts.

The reversal pattern is valid if two of the candles (bearish or bullish) are fully completed on daily charts as per GBPJPY screenshot below. Don’t enter the market straight after a volatile price swing to one direction. It important to consider fundamental news in the market. I would advise to avoid days like:

Move position to break even after 50 pips in profit. Move stop loss at the major local lows and highs or if the opposite signal is generated. Let your winners run. Stop loss 100 pips flat or use local technical levels to set stop losses. Every trader is advised to implement their own money management rules.

Strategy examples and screenshots.

Strategy doesn’t generate much setups, but when it does, they are usually important market tops or bottoms. See some sample trade setups before and after.

To get the ready MT4 templates for the setups below please CLICK HERE TO DOWNLOAD.

You can then unzip it and place them in your MT4 and have the below charts ready.

Date: 22 May 2013.

Date: 21 June 2013.

Date: 31 October 2013.

4. The swing forex day trading strategy.

Swing day trading strategy is all about vigilance!

The trader needs to be on guard to notice a correction in a trend and then be ready to catch the ‘swing’ out of the correction and back into the trend.

“And what’s a correction?” I hear you ask.

Simple. Corrections involve overlap of price bars or candles, lots and lots of overlap!

A trending price makes progress quickly, corrections don’t.

Lets look at some charts for an example.

Take the above chart, EURUSD at 240 minute candles, within the green circle we have 26 candles where the price stayed within a 100 point range.

As I have marked with the blue lines the price even contracted to a daily move of only 20 points!

A swing trader would be on HIGH ALERT here! Contracting price, lots and lots of overlap.

This presented a very high probability that the price was going to continue in the trend that had started the previous week.

The trade would involve selling when the first candle moved below the contracting range of the previous few candles, A stop could be placed at the most recent minor swing high. ( Orange Arrows )

Another example of a swing trade is shown in the chart below.

Again we are working on the EURUSD 240 minute chart.

In green we can see a correction to the downside, notice the slowing downside momentum?

Notice all the overlapping price candles?

The entry point in this trade would be a little harder to execute, although the principle is the same.

We want to wait for the price to show a sign of reversal, at the end of the correction, two separate candles moved above the upper blue line.

This showed that the price was now gearing up for reversal.

A trader would buy the open of the following candle and place a stop at the lowest point of the correction.

The risk here was about 30 points, the gain was about 600 if you managed to ride it all the way up!

Swing trading is a little more nuanced than the crossover technique, but still has plenty to offer in terms of money management and trade entry signals.

5.Candlestick patterns.

MUST READ: Candlestick patterns – 21 easy patterns ( and what they mean )

Engulfing patterns happen when the real body of a price candle covers or engulfs the real body of one or more of the preceding candles.

The more candles that the engulfing candle covers the more powerful the following move will likely be.

There are two types. Bullish and bearish.

The bullish engulfing pattern signals a bullish rise ahead and the opposite is true for the bearish engulfing candle.

In the above chart I have circled the bullish engulfing candles which led to price rises immediately after.

Well, the bullish engulfing pattern is a precursor to a large upward move.

So, when you see an the engulfing candle taking shape you should wait for the following candle and then open your position.

Your stop should be placed at the low of the engulfing candle.

The bearish engulfing pattern signals a bearish price decline ahead.

In the above chart I have circled the bearish engulfing candles which led to price declines immediately after.

Again, the more candles that the engulfing candle covers the more powerful the following move will likely be.

It is the same principle as the bullish pattern, just the flip side of the coin!

The bearish engulfing pattern is also a precursor to a large decline.

So, when you see an the engulfing candle taking shape you should wait for the following candle and then open your position.

Your stop should be placed at the high of the engulfing candle.

The ‘long shadow refers to the length of the line from the closing price on a candle to the high or low price of that particular candle.

The ‘shadow’ should be at least twice the length of the real body of the candle.

These shadows tend to occur at turning points.

And they tend to lead to large price moves!

As with the rest of the candle stick patterns, we wait for the long shadow candle to close and we place our trade at the open of the next candle.

Your stop should again be placed at the extreme high or low of the shadow candle and trailed to follow the trend.

A candle forms a ‘hammer’ when the real body of the candle sits at one end of the candle leaving a head and handle!

Again these candles tend to form at price reversals giving a strong signal for traders.

Its the same trick!

We wait for the long hammer candle to close and we place our trade at the open of the next candle.

Your stop should again be placed at the extreme high or low of the hammer candle.

and again trailed to follow the trend.

6.Support and Resistance.

Role Reversal Day Trading Strategy.

To start I needs to assume that you know what is the support and Resistance in Forex trading. If not see few simple definitions and examples below.

Support and Resistance are psychological levels which price has difficulties to break. Many reversals of trend will occur on these levels.

The harder for price to cross a certain level, the stronger it is and the profitability of our trades will increase. The most basic form of Support and Resistance is horizontal. Many traders watch those levels on every day basis and many orders are often accumulated around support or resistance areas.

It important to mention, support and resistance is NOT an exact price but rather a ZONE . Many novice traders treat the support and resistance as an exact price, which they are not. Trader must think of support and resistance as a ZONE or AREA.

These levels are probably the most important concepts in technical analysis. They are a core of most professional day trading strategies out there.

Let me introduce you to the “Role Reversal”. Let’s see how can you use it in your every day’s trading.

Role Reversal is a simple and powerful idea of support becoming a resistance (in the downtrend) and the resistance becoming a support (in the uptrend).

Let see how this plays out in the uptrend.

Once the price is making higher highs and higher lows we call it uptrend. Technical trader must assume the price is going to go up forever and only long trades should be considered. Once the uptrend is defined, the lowest strategy to trade is – buy on pullbacks.

As per definition of an uptrend, the price punching through the resistance and pullback before it makes another higher high.

“Role reversal” concept comes handy for bulls in this scenario.

Once the resistance is broken to the upside, it becomes a new support level.

Resistance changes its role to support, hence the name “Role Reversal”.

After making a new higher high, the price in uptrend must correct. It is likely to correct to the new support level. This can present an excellent buying opportunity for bulls.

We don’t know where exactly price will resume an uptrend. Risk management must be applied.

Trader must remember to treat support and resistance levels as ZONES rather than exact price.

The same principle applies to downtrends.

If the market is in downtrend, the price will punch through supports making new lower lows. The broken support becomes new resistance and offers opportunity for short positions.

Sometimes the price will pull back a bit further than just the former support or resistance. It might retrace toward other important technical levels.

I like to combine pure price action with other major, widely used leading indicators. My favourite would be: Pivot Points and Fibonacci retracements. After many years of using these tools, I can say with confidence, they are pretty accurate.

The popularity of these tools makes them so responsive.

You could also establish few levels of entries for example:

If you are looking to buy the market after the price made fresh high, you would be waiting for the price to retrace towards role reversal, Fibonacci Level or moving average. As you are pretty confident, the price is moving higher, you don’t know how far the price will pullback.

If it’s an aggressive day, the price can only come back to 20MA and shoot for new high again. Another day, the price can dip as far as 38% Fib retracement.

You can divide you position into 3 equal parts and set limit orders based on the logic above:

1/3 at 20MA, 1/3 at role reversal, 1/3 at 50% Fib retracement. This way you lower the risk and increase the odds of getting filled.

7. The Bollinger band squeeze strategy.

Bollinger bands are a measurement of the volatility of price above and below the simple moving average.

John Bollinger noted that periods of low volatility are followed by periods of high volatility, so when we notice the Bollinger bands ‘squeeze’ in towards each other, we can infer that a significant price movement may be on the cards soon.

So, the Bollinger band squeeze trading strategy aims to take advantage of price movements after periods of low volatility.

I urge you to read: Bollinger bands ( the COMPLETE how-to guide! )

The above chart is the EURUSD 240 minute chart.

The Bollinger band indicator should be set to 20 periods and 2 standard deviations and the Bollinger band width indicator should be switched on.

When trading using this strategy, we are looking for contraction in the bands along with periods when the Bollinger band width is approaching 0.0100 or about 100 points.

When all the conditions are in place, it signifies a significant price move is ahead as indicated within the green circles above.

A BUY signal is generated when a full candle completes above the simple moving average line.

A SELL signal is generated when a full candle completes below the simple moving average line.

Stops should be placed at the high or low of the preceding candle, or, to allow for a maximum loss of 3% of your trading capital, whichever is the smaller.

8. The Narrow Range Strategy.

The narrow range strategy is a very short term trading strategy. The strategy is similar to the Bollinger band strategy in that it aims to profit from a change in volatility from low to high.

It is based on identifying the candle of the narrowest range of the past 4 or 7 days.

A suitable candle would consist of a ‘ Chubby’ look with an opening and closing prices close to the days high and low as shown in the chart below.

Quite often you will find two or more narrow candles together this only serves to contract the volatility and will often lead to an even larger breakout of the range to come.

Once a narrow candle is identified we can be reasonably sure that a volatility spike will be close at hand.

Your stop is placed at the low or high of the Narrow candle and trailed to suit.

9. The 2 period RSI strategy.

This strategy is pretty simple really.

In general this is a very aggressive short term strategy as you can see by the amount of signals that are generated in the chart shown.

As such this aggressiveness will be caught out by a ranging market and may lead to several losing trades in a row.

The aggressive nature of the strategy should be matched with an equally rigorous stop loss regime.

The merits of the system shine when the market begins to trend in a particular direction. In this case Extra BUY or SELL triggers can be used to add to positions.

Those positions should be closed when an opposing signal is generated.

As in the chart above, when the RSI moved above 90 the first BUY signal was generated and the first position was opened, the RSI then triggered another BUY signal and another similar position was opened.

Both trades were then closed when the RSI moved back below 10.

In the End!

Day trading, and trading in general is not a past-time! Trading is not something that you dip your toes into now and again.

Day trading is hard work, time consuming and frustrating at the best of times! It is no wonder that over 93% of people that try it, lose money and give up!

“the excuse doesn’t matter; the cold hard number is that only about 4.5% of traders who start day trading will end up being able to make something of it.”

BUT, by recognizing the difficulty and learning some basic trading strategies you can avoid the pitfalls that most new traders fall into!

The honest truth of the matter is this, most new traders get involved because they see huge profits straight ahead by simply clicking BUY .

Believing they will wake up the next morning a newly minted millionaire! What actually happens goes more like this.

Your friend has just opened a trading account, he claims to have made a hundred dollars in ten minutes, he just sold the EURUSD because the U. S economy is so great right now, it said so on TV!

So you go home, lodge a $1000 into a trading account, SELL the EURUSD at $5/ point.

You wake up the next day and the market has moved against you by 200 points, and your account is wiped out!

Lets look at the facts. There are three main reasons behind the high failure rate of new traders, and you can avoid them easily!

As in the story I told above, trading based on hearsay or some popular narrative will lead you to almost certain doom!

The value of using a tried and tested trading technique is immense, and will save you from loosing your hard earned savings.

By using a day trading strategy, you remove the emotional element from the trading decision.

A trading strategy requires a number of elements to be in place before trading.

So, when those elements are in place, you place the trade.

It is a binary decision rather than an emotional decision. All other actions are off the table, by following a trading technique you avoid the cardinal sin of trading, that is, over trading.

So often new traders place a trade without even placing a stop loss position! An error which can lead to catastrophic losses.

Money management can be as simple as using the 3 / 1000 rule.

That is: never ever ever ever risk more than 3% of your capital on any trade.

And never risk more than 1000 th (or as close to) of your capital per point.

Now, I’ve given you the tools, so get to it, and start trading profitably!

Please let me know, which intraday trading strategy is your favourite in the comment section below. I will expand of the most popular ones.

Author: Roman Sadowski.

I truly believe the journey to profitability and freedom is a function of hard work, commitment, persistence and boring routines.

There is no magic to trading. I believe in making calm rational decisions what, when and how to trade based on a decade of intense learning.

2 Comments.

Very good and valuable information thanks for sharing.

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четверг, 14 июня 2018 г.

Intraday option trading strategies

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четверг, 14 июня 2018 г.

Intraday option trading strategies

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четверг, 14 июня 2018 г.