2 Basic Strategies for Trading Forex on Olymp Trade
There are plenty of strategies on trading Forex. They are based on various forecasting systems that have been developed over decades. However, the accuracy and reliability of these systems is not always the same, and it is sometimes very difficult to figure out which strategy will be working and suitable for you.
If you are looking for a better strategy, but have not found anything good enough yet, pay attention to the basic techniques described in this article. We have chosen two strategies for working on Olymp Trade Forex especially for you. These strategies have repeatedly proved their efficiency. We hope that you will find useful at least one of them.
The SMA method of market analysis
This trading strategy is good for trading various instruments, including stock, currency, cryptocurrency and other assets. To enhance the result, use it with indicators, graphic and candlestick patterns.
In our example, the SMA indicator is a conditional benchmark for the market balance. If the asset price is much higher than the SMA line, we can expect the quotes to return to it soon.
In screenshot 1, there is a typical situation for this strategy: the chart has risen too much in relation to the SMA and we opened a short trade. We remind you that you can buy and sell currencies, commodities and crypto assets on Olymp Trade.
However, it is just one of the ways how one can use the strategy. You will find the description of other mechanics below. But first let’s prepare everything for work.
Step 1: switch to the candlestick chart with a timeframe from 1 minute to 4 hours.
Step 2: set the 200 period of a SMA indicator.
Step 3: start searching for a signal.
You have already come across the first type of the signal—a search for overbought and oversold assets. In the first case, the chart should be much higher than the indicator line. In the second case, it should be below that line.
Unfortunately, one cannot specify the entry point using the SMA. But even if you are guided by a rough estimate, the asset price will return to its balance sooner or later. Many traders use the RSI or Stochastic Oscillator indicator to confirm the signal, which clearly shows overbought and oversold zones (screenshot 2).
The second way of getting a signal is more reliable: you should wait until the SMA line is broken and the the first candle appears after the breakout. In screenshot 3 you can see the candles, which must close right before you make trades.
Stop loss (or closing a position with a negative result) should be set behind the SMA line. In this case, everything is logical: we close a losing trade when we get the opposite signal.
There is a third way to earn on the SMA: you should add one more. In this case, the strategy becomes similar to the “Moving Average” method for Fixed Time trading. We will search for the intersection of two SMAs as a signal.
To do it, add a 20-SMA (screenshot 4) to the 200-SMA you already have. The new average will act as a signal, as it is more sensitive to the asset dynamics.
The longer the timeframe of the chart you analyze, the higher the probability of getting a quality signal.
If you are using such kind of a signal, we recommend limiting the risk to 10% of the investment amount. In some cases, the Stop Loss recommendation from the SMA strategy we have previously described remains relevant.
In screenshot 5, there is an example of a trade made using the first method of trading Forex with SMA, which resulted in doubling our investment within one hour.
In this strategy, Take Profit should be set based on 1 to 3 risk/reward ratio. That is to say, for every $1 of a possible loss, your profit target should be at least $3.
Trading news on Olymp Trade Forex
Novice and professional Forex traders always study the economic calendar very carefully.
Some traders open trades right before the report is published. They hope that their “sixth sense” will not let them down. However, there is a much safer way:
Step 1: open the economic calendar — screenshot 6
There you will find the most important economic news in different countries. The release of these reports has a really strong impact on the assets’ movement.
Step 2. Find the “three bulls head” news that comes out soon.
Please note that there is a flag of a country next to each event in the second column. This means that the currency of this country is likely to react to the news.
The report on US oil reserves, which has greater impact on the dynamics of oil trading than on the USD, is the only exception.
Step 3. After the news comes out, compare the readings in the Actual and Forecast columns.
You can hover over the figure to see whether the reading is “Better than expected” or “Worse than expected.” Sometimes the result comes out in line with the forecast. Such situations are not so good for trading, as soon as the market is hardly ever enthusiastic about them.
If the indicator in the country is better than expected, it is better to open a long position on its currency.
For example, we chose the UK in screenshot 7. Its official currency is pound sterling (GBP). Since the report’s data is “Better than expected”, we make a trade with an expectation that the GBP is about to go up.
Step 4: Open the trade.
Go to the trading platform and open the list of assets. To make the search easy, enter the abbreviation of the currency you need.
Here is a list of major currency abbreviations:
- CAD—Canadian Dollar
- AUD—Australian Dollar
- NZD—New Zealand Dollar
- CHF—Swiss franc
- USD—US Dollar
To make money on the positive news, you have to buy the pair, where the currency of this country comes first. Or sell the pair where this currency takes the second place.
In screenshot 7, we indicated a positive report in the UK. The retail sales increased there (by 1% compared to the forecast of -0.3%). Against this background, we should long the British pound.
To do it, we might sell the EUR/GBP pair or buy any currency pair from the list (screenshot 8).
The reverse condition applies to opening a position after negative news or a financial report comes out.
The result of the strategy is presented in screenshot 9. The news supported the British currency.
The market does not always quickly react to the report. In our example, the chart did not show a defined trend in the first hours after the news release, but the pound strengthened significantly within one day.
This way, we have showed you some of the most famous strategies for trading on Olymp Trade Forex. If you have never used market analysis techniques before, start with the ones presented above.
As time goes by, you can improve these instructions and someday become an author of the best strategy for working on Olymp Trade.
In conclusion, I would like to remind you of the most important rules for using strategies:
1. Do not risk more than 5-10% of the deposit.
2. Each trade must be justified by the strategy signal.
3. Be sure to use Take profit and Stop loss in Forex mode.
4. Use your demo account to test new methods of price analysis.
5. Combine various methods of technical analysis.
And do not forget to watch webinars on Olymp Trade. Everyone can ask a company expert any question about trading.