Trading Strategy for Beginners - ReturnFriday, 2 March 2018 09:50
Trading strategy Return is a technique for night work in the Forex market, which is based on opening orders in the flat period. Trading is intended to six pairs: GBP/USD, USD/JPY, USD/CAD, EUR/USD, AUD/USD, USD/CHF. The preferable timeframe - Н1.
This strategy is very popular among traders with any trading experience. This is non-indicator system, and the main goal is to monitor the price. You do not need a deeper technical analysis and clutter up the chart with indicators. But, at the same time, trading is conducted at night, so it complicates the task a little. Deals should be made not often, however, if all the conditions for setting positions are met, this will bring a good profit.
Forex vs Futures Exchanges
If to analyze the daily quotations of all traded pairs according to this strategy, it becomes clear that from 20:00 to 23:00 GTM they are in a narrow price range. Then, the volatility drops to 15-40 pips.
All of the above assets have equivalent currency futures traded on such exchanges as:
- Pit (open from 13:20 until 20:00);
- GLOBEX (the exchange is open from 23:00).
That is, during the flat currency exchange (20:00 - 23:00), futures exchanges do not work. It turns out, that Forex should be adapted to exchanges, on which futures are traded. At the same time, the quotes of both trading platforms have a certain ratio and differ only in the coefficient. Do not keep the ratio of JPY, CAD and CHF.
Trading Rules according to Return Strategy
Mainly, be guided by the closing price of the Pit futures market at 20:00 and the formation of the closing price of the currency market 20:01. We recall that you need to analyze the chart with a H1 period.
At exactly 8:00 pm GMT, the Pit market closes. The closing quotation (Sett), which is formed at this moment, becomes the reference point for the further price (in another way, this is the price target). In the Return strategy the price target is the closing point of 19:00, with which the bar opens at 20:00 - this is the next landmark.
Example of applying the strategy in practice
We will consider how to apply Return Strategy when trading the EUR/USD pair (the parameters of orders for this pair differ from the parameters of other assets).
Let’s say that at 20:00 8 limit pending orders are open: 4 - Buy Limit and 4 - Sell Limit. Between them - 25 pips taking into account the step of 5 pips. Take Profit - at the level of the "price target", namely, the level of the opening price of the candle is 20:00. You should keep the position the entire period of the flat - until 23:00.
According to the strategy, you should set another safety Stop Loss at a distance of 130 points from the last orders. When opening the GLOBEX market (23:00), all non-opened orders should be canceled. At this moment, the price of the futures market will start to tend to the closing price of Pit.
Stop trading according to Return Strategy is necessary if after 23:00 the price has already reached the Sett, and, at the same time, there is the closing on a Take Profit. Such a signal is considered as used, since the periodicity is repeated every day (in our case, the night), wait for the next session to open new positions.
It happens that the transactions are not closed by the Take. It depends on the traded pair and its features. It happens very rarely, but you need to be prepared that you it can also happen to you. Keep in mind the possibility of closing the order in the break-even state during the day trading Forex session.
Remember, that Friday is not suitable for trading on the Return strategy, because the main news that provokes a gap, come out just then. In another case, it is possible to refrain from transactions within an hour before and after the announcement.