Double Down Strategy – Basic PrinciplesWednesday, 27 December 2017 11:29
Double Down Strategy is a trading method in the Forex market, which is profitable and quite risky. It doesn’t involve using indicators and requires an objective assessment of market environment for effective enter. The efficiency of the method allowed it to become popular among traders.
Trading by Double Down Strategy
A distinguishing feature of this type of trading is a total lack of indicators. You use only the chart of the asset value without secondary tools. Most of all, this approach is useful for the traders who want quickly increasing their deposit, since Take Profits of the strategy work in most of the cases. Double Down Strategy can be used on any of the assets, provided that the rules are strictly followed.
We recommend giving preference to the high volatile pairs, such as EUR/USD, EUR/JPY, EUR/GBP, AUD/JPY, AUD/CAD, GBP/USD, AUD/USD, NZD/CHF, CHF/JPY, EUR/AUD, CAD/CHF, GBP/CHF, EUR/CAD. To correctly estimate a level of the asset’s volatility, use ATR. When you make a list of suitable currencies, open their weekly charts and compare the last bars, paying attention to the absolute amount of fluctuations. Choose the pair, which changed the price value most.
By Double Down Strategy, trades are opened according to the simple principle:
- If the last candle on a W1 is black, open a Buy order;
- If it is white, open a Sell order.
For orders use the H1 timeframe. A Stop Loss is set 100 pips from the deal, a Take Profit – 50 pips from the deal. The developers of the strategy claim that it provides a very high profit, and rarely leads to losses.
Also, it is worth noting that the rule of the manual closing of positions: if your trade didn’t reach the goal for Monday and Tuesday, it is necessary to exit the market. Double Down Strategy rests on a certain theoretical basis. The method is based on the following observation: after strong impulses, the market makers close positions at the beginning of the week. Therefore, on Wednesday the price dynamics can change a lot, and it is better not to leave the orders open.
Trading by this Forex strategy is carried out once a week. It means that under favorable conditions it can bring 200 pips per month. You don’t have to spend much time on it and monitor the chart fluctuation, that is why you can easily combine it with other techniques.
Development of Strategy Using Indicators
You can increase chances of getting a profit using additional tools. The key disadvantage of the method is volatility estimation; it is more effective to measure it in a percentage, not in pips. To do this, use the ROC:
In the picture above you can see the indicator window on the EUR/USD pair. If the curve of indications moves around zero, it means that the price didn’t change significantly regarding the last week. For this reason, currently, these currencies are not suitable for trading.
To simplify this, you can define a minimum value of deviation. Considering the using of a W1, we recommend setting this parameter equal to 0.5%.
Also, it is worth noting that the profitability of Double Down Strategy will significantly increase if your transactions open only in the direction of the trend. You can easily define the main trend using the moving average with a period value, equal to 52.