Traders that simply try to trade randomly, or have strategies but don’t follow them to the letter, tend to find that the outcome of such trades are very unpredictable. Trading strategies basically consists of lists of rules a trader should implement when they’re looking for quality signals to enter trades. When a trader follows their strategy, it goes a long way towards contributing to making a profit.
Traders that use the Olymp Trade platform have access to numerous market analysis tools they can use to create a trading strategy that works best for them. These techniques help them in studying price movements of a wide range of assets and determining entry points that will result in a profitable trade.
In this guide we’ll discuss using 3 of the most popular trading strategies available on the Olymp Trade platform to help you determine which of these meet your requirements best.
Same colors
The same colors strategy is a very basic strategy often used as a starting point by beginners.
The same color strategy can easily be mastered within about 30 minutes on your demo account, as you won’t need anything except some rudimentary knowledge of how to navigate around the platform and how a candlestick chart works.
- Choose a Japanese candlesticks chart and set the time frame to anything from a minute to an hour. This strategy can be used to trade any one of the many currency pairs available on the platform, or other assets.
Decide which expiry time and investment amount you want to use for the trade, and get ready to specify these.
- Wait for the existing candle to close. If the current candle is green (rising), you should be opening a long trade. If the current candle is red (falling) you should be opening a short trade.
Watching the current candlestick is presented in the image below. As the existing candlestick will end in 2 seconds, the trader watching it should be ready to open a long trade.
You should specify both the trade duration and the investment amount in advance, as this candlestick would be closing at 11:35, the trade should be closed at 11:40.
When selecting the trading time, you can set either the trade duration (e.g. 10 minutes), or you can use the time the candle will expire as shown in the image.
- Wait for the deal’s result. In the case shown, the trend moved on as shown in the image below, and a profit was made. If using this strategy however leads to a loss, the next trade’s amount should be increased by 2.5 times. This method is known as the loss compensation system.
Another example is shown in the image below. In this example GBP/JPY chart, the candle is falling. At the first moment of the new candlestick a short trade was opened for 5 minutes.
Moving averages for Fixed Time
The strategy uses moving averages and is perfectly suited for traders that want to learn more about indicators.
Many traders want to know more about technical analysis indicators when they try to determine which of the many trading strategies available on Olymp Trade will work for them. Moving average tools analyze asset prices automatically and then provide signals where trades can be entered.
This strategy uses 2 SMA lines to provide traders with a signal when a trend is about to reverse. The strategy can be configured by following these simple steps:
- Choose a candlestick chart that has a time frame of 5 or even 1 minute as shown in the image below. If you however don’t mind waiting for trading results for a few hours, a higher time frame can be selected. It is however best to use time frames of shorter than four hours if you are doing intraday trading.
- On the image, (1) indicates selecting the Circular icon, (2) shows 2 SMA indicators being added and (3) selects the settings by the Pencil icon being clicked.
- Setting a period of 4 for the SMA number 1, and a period of 60 for the next SMA. Also change the second SMA’s color to make it easier to differentiate between the two SMAs.
- The next step is to find the latest place where these 2 lines intersected. If the 4 SMA breaks the 60 SMA from the bottom to the top as shown in the image below, a long trade should be opened.
- If the 4 SMA however breaks the 60 SMA from the top to the bottom as shown in the image below, a short trade should be opened.
To prevent following false signals, it is important to wait for the candlestick where the 2 SMAs intersect to close before a trade in the appropriate direction is opened. Make sure you first practice this technique in your demo account to ensure you get it right.
In the images shown below, a sell signal was received on a one minute timeframe. This resulted in a three minute short trade being opened, and this ultimately led to a profit being made.
It is a good idea to get into the habit of taking regular breaks every half an hour while you’re trading. You should also make sure you are keeping record of all each and every trades in your trading journal to keep track of what works and what doesn’t.
Bearish & Bullish engulfing candlestick strategy
This strategy is suitable for use with all time frames on candlestick charts.
The quality of the signals in this strategy will improve the longer the time frames are. These types are patterns are popular in the trading community as they are very reliable.
The bearish engulfing candlestick pattern strategy signals when a chart is about to start moving down, while the bullish engulfing candlestick pattern strategy provides signals that indicated a chart will soon start moving up.
Candlestick patterns are combinations of candlesticks, although it could also be a single candlestick, and these helps us to figure out in which direction the trend will go. Bearish engulfing (shown below) is a candlestick that is falling with its height being bigger than the combined heights of two or more bullish candlesticks. This is a signal that we should sell.
Bullish engulfing (shown below) is a candlestick that is rising with its height being bigger than the combined heights of two or more falling candlesticks. This is a signal used by traders to buy.
Once one of the arrangements shown above has been identified, a trade should be opened in the signal’s direction. The trade’s duration, i.e. the expiry date, must be at least as long as two successive candlesticks. If you are for example following signals in a 1-minute timeframe, the duration of the trade must at a minimum be 2 minutes. For signals in a 1-hour timeframe, the trade’s duration should be at 2 hours or longer.
The example shown in the image below uses this strategy by following the candlestick chart on EUR/CAD exchange pair on a time frame of 5 minutes. Note the Bearish Engulfing pattern that has formed with the height of the red candlestick being bigger than the combined heights of three successive green ones before it. This was the signal to open a short trade of 10 minutes.
The image below shows the situation 8 minutes later, proving that the strategy worked
The analysis methods explained above should go a long way to helping you to understand the working principles of some of the basic tools that are often used in analyzing prices. Both candlesticks and technical analysis indicators can be used in these strategies.
You can also take fundamental factors into account, add advanced graphical analysis systems, or combine various approaches.
In summary, we want to reiterate the crucially important rules you should be applying when you use any strategy:
- Use the loss compensation system.
- Don’t risk more than between 5% and 10% of your available funds.
- Log all your trades in a journal.
- Regularly visit webinars presented by Expert Advisors from Olymp Trade.
- Don’t open trades 15 minutes after and before any news is released.
Although all 3 the strategies discussed can be used to achieve excellent results, we’d like to emphasize the candlestick pattern strategy, as we feel it’s the most effective and reliable. If you are however a beginner, using the “Same Color” strategy is a perfect place for you to start.