3 Minutes to Understand the Simplest Trading Strategy (1) – Weekly High-low Breakout Method
The most important thing, for most novice traders, is to pick up some practical strategies that are easy to understand and can help them cope with changes of market in a short period of time (without sufficient trading experience).
With more than 10 years of experience in the foreign exchange market, John Benjamin, Special trader from Orbex, is good at tracking the impact of macroeconomics and geopolitics on the market. In this article, John will share a set of minimalist trading strategies with us -- high-low breakthrough of weekly chart.
Weekly high-low breakout strategy.
Weekly high and low breakthrough strategy is one of the easiest strategies to understand. When combined with other factors, such as price movements and overall market trends, traders will be able to easily trade without filling their charts with a large number of other indicators. Such a trading strategy is especially suitable for novice traders who have insufficient trading experience but desire to quickly enter the market to experience trading at the same time.
It is not new and has been widely adopted by the trading community. This method is truly profitable when traders apply their knowledge to the market. Therefore, simply buying and selling when an emergency occurs may not always be profitable, however, when combined with trading experience, the results can be improved.
The weekly high-low breakout method is unique because of its simplicity. This strategy allows traders to bring their own analytical skills that can be used as a complement to this approach.
Tips for weekly high-low breakout strategy.
As suggested by the strategy, we should stick to 4-hour chart, which can provide us with the weekly price movement.
These charts are usually prepared on Sunday, which gives traders plenty of time to analyze various markets and choose more potential trading. Since the market is closed on weekends, traders are not easily distracted. After setting up a 4-hour chart with weekly period separators, the next step is to plot the highs and lows of the previous week, which can be achieved by the horizontal line tool on the MT4 platform.
After setting high and low prices of last week, traders can look for further filtering conditions, for example, observing the weekly candlestick chart helps us understand which markets are hesitant (cross star) and should be treated with caution; or which markets are bullish (or bearish), indicating a price recovery.
With the understanding of last week's close situation, traders are able to select the most promising trades. Among these screened trades, the next step is to simply buy above or below last week's closing low based on a four-hour chart.
It is best to wait until the close of the first day (Monday) before operating the order, and then prepare to go long or short. In other words, wait for the first 4-hour candle chart before using this method to trade. Traders can postpone the transaction until the closing time of Friday based on their own judgment. Stop-loss can be set at the high and low points of the key center point.
Let us illustrate this strategy with the S & P 500 CFD tool.
The horizontal lines plotted above are the highs and lows of the previous week (4-hour charts), but a closer look at the chart reveals a pattern. In the nine weeks we see from the chart above, we can see that there were 4 profitable trades, 2 losing trades, and three weeks without a trade. This approach can be further adjusted by using the method of price movement method and understanding the market (e.g., the bull rally of the S&P 500 index).
Who can benefit from this simple transaction method?
Although simple and easy to understand, this method actually has higher requirements for the trader's experience. Novice traders can easily understand this set of trading methods, but they need to have some analytical experience in the market to use them properly. The most important thing is to be familiar with the price movement method of trading. Therefore, it is meaningful to understand the basic principles of the market, for it can help you know whether you are positioned correctly in the market.
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