Manual forex strategies differ from automated and semi-automated trading methods in that all market analysis and other actions are performed by the trader, without the use of additional indicators. Sometimes, when trading according to manual strategies, Moving Averages are added to the chart, which will show the direction of the trend. However, they are only used to assess the general market situation and not for finding entry points. Today we will learn about the most profitable trading strategies, including grid trading.
How Does A Manual Strategy Differ From An Automated One?
The trading process when working with a manual strategy is completely under the trader's control. The trader does not face such unpleasant phenomena as lagging or redrawing of indicator signals. They are often the reason for unsuccessful market entry and loss-making trades. Manual trading helps to master all the rules of the technical, candlestick, and fundamental analysis of the chart faster. A trader who can analyze the chart independently and see different trading situations will get the necessary experience much faster than someone who relies only on the signals from instruments.
Among the disadvantages, we can mention the laboriousness of such trading. Because of the need to constantly monitor the chart, the trader cannot focus on several assets at once, especially if the work is done in a lower time frame. Therefore, this kind of trading is suitable only for those who are ready to spend time and effort analyzing the market manually.
One more disadvantage of manual trading is the high emotional load on a trader. One has to analyze everything by oneself, that is why in case of a series of losing trades a trader can fall into a state of "tilt" and make even more mistakes trying to get back.We will analyze the most simple and profitable manual trading techniques for the forex market. You will learn how to place trades based on a candlestick analysis of the market, as well as how to increase your deposit utilizing a grid of pending orders.
The Parallel Channels Forex Strategy
This strategy allows you to earn on the market independently of the trend direction, time frame, and other nuances that are usually considered very important in other strategies. You can apply it both in a flat and any trend. You can also choose your currency pair and time frame.
Trading goes as follows:
- You need only one tool in the trading terminal - "Line";
- Draw two levels of support and resistance, thereby constructing a price channel within which the price moves.
As a reminder:
- When drawing the support line, you need to connect the price minimums;
- When drawing the resistance level, you should connect the price maximums.
The key thing to remember when trading this strategy is to wait for the price to touch one of the boundaries of the built channel. After that, events can follow two scenarios:
Opening A Trade On A Pullback
The order is placed when the price pulls back from the channel boundary. In this case, the direction of the trade will be opposite to the direction of price movement before the pullback. For example, if the price pulls back from the support level, it is necessary to open an order at an increase, and if the price pulls back from the resistance level, it is necessary to open an order at a decrease.
Entering The Market At Breakout
In this case, a trade is opened upon the breakout of a channel boundary, and the price moves in the direction of the breakout. For example, if the price has broken out of the support line and continued the downward movement - we open a sell order. The same happens when the resistance line is broken out, only in this case, we open a long position.
This method of trading is one of the main ones and is often used not only by beginners but also by experienced traders. It is convenient due to its versatility and minimal set of tools used. Stop Loss and Take Profit in channel trading are set approximately to the levels.
As we have learned about the strategy itself, you might be wondering how you can determine the type of trade to open. When trading Parallel Channels strategy, it is important to correctly determine the direction of the trade - on the pullback or breakout. This is where visual charting skills come in handy. Before opening a position, pay attention to the strength of the level. If the price has already bounced from it several times, then it will most likely bounce now as well. If the minimum/maximums of the previous candlesticks have never reached the boundary of the channel, the price is likely to break out and move out of the given range.
Here are some tips to consider:
- A breakout of the resistance boundary should be expected as the candlesticks' minimums/ maximums are gradually increasing;
- The breakout of the support level should be expected with the gradual decrease of the candlesticks' extremums;
- Opening a trade in the direction of the breakout, Stop Loss should be set a few pips above/below the breakout.
Triangle Trading Strategy
The strategy is based on finding the "Triangle" pattern on the chart. Trades are placed following the type of pattern found. The Triangle pattern very often appears on the forex chart and gives pretty accurate signals. Finding such a pattern on the chart is very easy - you need to identify the 2 nearest minimums and 2 maximums, which will form the lower and upper sides of the triangle, respectively. Remember that the Triangle is a breakout pattern of the candlestick analysis. After it, the market always makes an impulse spurt in one or the other side.
We can distinguish the following types of triangles:
- Ascending. In this type of pattern, the resistance line is directed upwards, or horizontally. The price reaches it, but cannot break out. The breakout of the pattern usually happens in a bullish direction.
- Descending. The resistance line is directed downwards. In general, the pattern as a whole has a downward direction. The breakout of this pattern will be a signal to place short positions.
- Symmetrical. The pattern sides are directed to each other and are approximately at the same distance from the conventional central part of the pattern. In this case, the breakout can occur both upwards and downwards.
The strategy essence is very simple. After the pattern appears on the chart, it is necessary to wait for the price to break out one of its boundaries. The direction of the trade will correspond to the direction of the breakout itself. The trade may be opened immediately after the closure of the breakout candle. The second variant is to open a position after updating the last extremum of the pattern.
The signals received upon breakout of the first two-thirds of the pattern are considered to be the most reliable ones. The breakout at the end of the pattern may be false.
Stop Loss should be set not far from the entry point, having retreated from this place a few points in the direction opposite to the direction of the trade. Take Profit should be equal to the length of the side widest part of the triangle. If a strong trend is coming, the position can be divided into two parts - the first lot should be closed at Take Profit, and the second lot should be moved to breakeven and a Trailing Stop should be added to it.
Trend Lines Trading Strategy
The technique refers to multicurrency and is suitable for any asset. It is based on the drawing of trend lines, which will be the main trading tool. Two time frames will be used for market analysis - one hour and five minutes. With the first one, we will evaluate the general trend direction, and with the second one, market entry will be performed.
Trading goes as follows:
- Determine the trend of the hourly chart and draw a trend line. This line is drawn based on two points of extrema located near each other;
- The next step is to switch to the five-minute chart and wait for the formation of a new price maximum;
- After that, we wait for the price to pull back from that maximum to the trend line, thus correcting;
- Now we place the pending order according to the trend direction. If the trend is growing, we place the Buy Limit order, and if the trend is falling, we place the Sell Limit order.
Note that the buy order should be set several points above the trend line. The Stop Loss is placed at a distance of 20-30 points above or below the trend line, depending on the type of order. You can fix the profit by various methods. The simplest way is to set a fixed Take Profit, upon reaching it, the trade will be closed automatically. The second option is to wait for the trade to break even and then set a Trailing Stop for the order. The latter option is riskier but allows you to take more profits from the market.
Grid Trading Strategies
Grid strategies have appeared relatively recently, but have already gained the trust of traders worldwide. The logic behind grid trading is that the price on the market is always moving chaotically and it is impossible to predict its direction with 100% accuracy. Therefore it is possible to hedge yourself and set orders in both directions at once, and then simply close the unwanted ones. The orders are set according to the grid type, at equal distances from each other. There are several grid strategies. We will consider the simplest ones, without using the Fibonacci grid and other auxiliary tools.
Pay attention that only pending trades are used for trading. Instant order execution is not suitable for this strategy.
10 Pips Grid Trading Strategy
The essence of the strategy is that the price should break out the point of extremum of the previous day and move in the breakout direction for at least 10 pips. This is the minimum profit from one trade. Sometimes due to a sharp impulse, the price can catch the opposite pending order and head in the opposite direction. To compensate for losses and stably stay in the black, orders should be set according to the following rules:
- The first order is set at the breakout point of the extremum of the previous day;
- Take Profit for the second order should be 5 points below the point of opening of the second order;
- Each following lot should be 2 times more than the previous one;
- The distance between the neighboring orders should be 10 points.
This strategy brings the maximum profit at strong trend movements of the price. In this case, 7-8 pending orders can trigger at once, which will bring the trader a good income. On average, the strategy triggers 5-6 orders in one direction. Keep in mind that this strategy is a trending one and does not work in a flat market. If such a grid is set when the price moves in flat, the orders from both sides will trigger, which can lead not only to zero profitability but also to losses.
Grid 25 Trading Strategy
This one is a simplified version of the grid strategy. When opening the terminal, you need to set 10 Sell Limit and 10 Buy Limit orders on any asset of your choice. The step of a grid (distance between orders) should be equal to 25 points. The distance from a point of the price location at the present moment to the point of opening the first order should be within the range of 20 to 40 points. Take Profit can be any, or absent at all (in this case profit is fixed manually).
Trading goes as follows:
- Set a grid of orders according to the abovementioned rules;
- Wait for the price impulse in one of the directions. As soon as 4-5 orders in one direction are triggered, orders from the opposite side can be deleted;
- If the price has begun to oscillate up and down, triggering both Sell and Buy orders, then it is necessary to wait until the profit from the activated orders will not cover the losses, and then close the entire grid.
Grid strategies allow profits regardless of the type of trend on the chart. However, when the price moves in a zigzag pattern or when trading in a flat pattern, it can cause losses to the trader. Therefore, one should trade with the help of these techniques only on volatile assets.