Among the various trading systems available for free, only a few of them are effective in practice. For the successful application of such strategies, it is enough for the trader to carefully study the rules and simply follow the recommendations. One of these strategies is the The7 system. All traders will be able to use it in trading, regardless of experience.
Strategy Brief
There is an unwritten rule among traders: potential profit should exceed several times the potential loss. Thanks to trading with The7 strategy, this is really possible. This system is characterized by the following features:
- the possibility of effective use on any currency pair;
- chart time period is only D1;
- the analysis of the price chart is carried out according to 2 standard trend indicators.
Nivice traders are advised to pay attention to the mandatory recommendations:
- it is important to follow the rules of money management - the risk for each transaction is no more than 2% of the deposit (5% during acceleration);
- setting safety orders is required;
- the use of averaging and Martingale methods is inappropriate and unacceptable;
- the recommended level of leverage is up to 1:100.
Setting indicators
To make a trading decision, in accordance with the rules of The7 strategy, you will need to use 2 moving averages with different input parameters. The type of moving should be exponential, since in this case the indicator is more sensitive to tick changes in the asset value. When transferring indicators to the chart, you will need to set the following input parameters:
- period 5 for two moving;
- the first indicator should be applied to Low (minimum price values), and the second to High (maximum price elements).
After installing the indicators, the chart should look something like this:
As you can see, sliding, with this application, are a kind of support and resistance lines, forming a kind of trend corridor.
Using oscillators or custom indicators to filter out false signals is not recommended. This can significantly affect the effectiveness of trade.
Rules for opening orders
Opening a Wu order is possible under the following circumstances:
- The opening point of the signal candle is located below the moving one applied to the LOW. The price element should close inside the channel.
- It is important that the closing point of the signal candle is at least 20 points from the opposite moving one.
- Stop Loss order must be set at the level of the opening point of the signal candle. Experienced traders recommend placing this order with a margin of 7-10 points below the value recommended by the creators.
- According to the classic rules of The7 strategy, Take-Profit is optional. The transaction will need to be closed independently when forming the opposite trading signal, but in practice it is not particularly effective. For automatic profit taking, it is recommended to set the appropriate order at a distance equal to the average daily volatility of the selected financial instrument (for EUR/USD - 70 points, for GBP/USD - 120 points).
To successfully open a Sell order, you will need to observe the following rules:
- The signal candle opens above the moving one applied to High, and closes inside the price channel.
- The closing point must be at least 20 pips from the opposite movement applied to Low.
- The rules for placing safety orders are identical to those considered previously.
It is worth saying that successful trading according to The7 strategy is possible only in the medium term. This system is not suitable for intraday scalping. It should also be noted that Stop Loss on average is not more than 40 points, which is 2-3 times less than the expected profit.
Beginner traders should be aware that The7 strategy is indeed profitable, but false signals will still occur. We should be mentally prepared for this and not refuse to further use the system in trade. According to statistics, out of 10 signals for opening an order, only 2 are false.
Practical examples
To correctly understand the principle of trading, it is recommended to consider several practical examples:
The screenshot shows the price chart of the favorite currency pair of novice traders - EUR/USD. Period is D1 (each candlestick is formed during the day). The presented segment displays changes in the value of the asset for 3 months. During this period, 7 signals were issued for opening an order, of which only 1 was false:
- In the first case, the Wu order cannot be opened, since the close point of the signal candle is too close to the moving High.
- The candlestick opens below the moving Low and closes inside the price channel, while the closing point is at a sufficient distance from the opposite moving to open the Wu order. The average volatility of the EUR / USD pair is 75 pips. The order is closed with profit taking.
- A signal to open a Sell order, which fully complies with the rules of the strategy, but turns out to be false. As a result, the deal closes with Stop Loss.
- Generating a signal to open a Sell order in full accordance with the rules of the system. The order is closed with profit taking.
- The signal to open the Wu order, however, it is not recommended to enter the market due to the close distance of the closing point of the signal candle from the opposite moving.
- There is no signal to open an order. The potential signal candle closed outside the price channel; therefore, it is not recommended to consider entering the market in such cases.
- This case deserves special attention. A signal has been generated to open an order in accordance with the rules of the strategy, however, the transaction is closed with a loss fix. It is important to remember that if the safety order was touched by a pin-bar, then it is permissible to reopen the transaction in the same direction.
If we consider trading pairs EUR/USD or AUD/USD, then the potential profit will be from 10% to 20% of capital per month. To increase profitability level, it is not necessary to increase the volume of transactions. It is enough to choose a financial instrument with greater volatility for trading, but at the same time, asset pricing should be stable. The best tool for earning the The7 strategy is the GBP/USD pair:
- Opening an order is not recommended due to the close position of the closing point of the signal candle to the moving Low.
- The signal to open an order is correct. Profit amounted to 120 points.
- A situation similar to that described previously in paragraph 1.
- Entering the market for the purchase and profit taking.
- Another example of a successfully open order.
- A good signal to open a deal Wu.
- A deal to fix profits.
- A situation similar to that described previously in paragraph 1.
- Opening a Wu order with profit taking.
Thus, the following advantages of the GBP/USD currency pair in comparison with EUR/USD can be distinguished:
- More signals to enter the market for the same period of time;
- During the period under review, out of 9 generated signals there was not a single false one;
- Profitability on each open transaction is higher due to higher volatility.
Tip: when generating a signal to open an order, it is recommended to open a deal 20-30 minutes before the close of the daily candle (before spread expansion). This will make it possible to extract additional income from a positive swap, if such is provided for by the specification of the broker's contracts for the asset selected for trading.
The pros and cons of The7 strategy
Before practical implementation of The7 strategy, it is important to familiarize yourself with its main advantages and pay attention to some disadvantages. Among the advantages it is worth highlighting:
- No need to constantly monitor the trading process. For the timely opening of an order, it is enough to open the terminal once a day - from 23-00 to 23-30.
- False signals to open a transaction are formed extremely rarely.
- The potential profit for each order is 2-3 times higher than the potential loss.
- The ability to trade any currency pairs.
- There is no need to use dubious methods for optimizing losses - averaging and Martingale.
- Subject to the rules of money management, the potential profit reaches 30% of the capital monthly.
During testing of The7 strategy, there were no significant shortcomings. However, medium-term trading on timeframes from H4 or more, as practice shows, is not entirely comfortable for beginners. It is necessary to realize that although intraday trading promises more substantial profits, higher risks are also associated with it. Therefore, The7 system can be called one of the best strategies for novice traders. Following the rules presented will allow you to instill in yourself "trading patience", which is essential for a successful career.
The only disadvantage of The7 strategy can be called an insufficient number of trading signals - no more than 3 within a month. However, this problem can be solved if several financial instruments are selected for trading. If you select pairs with a zero-correlation coefficient, you will be able not only to increase profitability indicators, but also to diversify risks.
Additional recommendations
It was previously mentioned that using custom indicators or oscillators to confirm trading signals is not recommended. This is true, however, it is quite acceptable to use Price Action reversal candle patterns as a filter - a pin bar and Rails. Their complex usage with The7 system will allow almost unmistakably determine turning points on the price chart and use this to confirm the correct entry into the market.
Conclusion
The7 strategy is an effective, medium-term trading system in the foreign exchange market. The application of the trading rules for this trading strategy when working with stock assets, commodity raw materials or with cryptocurrencies is unacceptable.
Trading on the rules of The7 strategy is recommended primarily for novice traders. To achieve a stable profit, it is important to follow 2 simple rules:
- Calculate the volume of each transaction in accordance with the standards of money management.
- Always set safety orders (beginners often neglect this rule, which always leads to the loss of part of the deposit).
Experienced speculators can use this system for extra profit.
