A trading strategy is a list of rules one should follow when looking for a quality signal to enter a trade. Compliance with these conditions contributes to making profits. If a trader steps back from them or just trades at random, the outcome of such investments can be quite unpredictable.
The Olymp Trade customers use a wide variety of market analysis techniques to find the best trading strategy. These methods help them study the price movements and determine the entry points.
Let’s take a look at this step-by-step guide on the use 3 top trading strategies on Olymp Trade and find out which of them meets your needs best.
The “Same color” legendary strategy
A basic strategy for beginners.
You can master the strategy “The same color” on a demo account within 30 minutes, because you will not need anything but some basic knowledge about the platform and understanding of the candlestick chart.
Step 1: Select the “Japanese candlesticks” chart with a time frame from 1 minute to 1 hour. The strategy is good because you can use it when trading any currency pair or other asset.
Even at this stage, you can prepare and specify the investment amount and the expiry time.
Step 2: Wait until the current candle closes. If it turns out to be a rising (green) one, you should immediately open a long trade. A falling (red) candlestick gives us a signal to go short.
As shown in the screenshot (Fig. 1), a trader is watching the current candlestick. It will close in 2 seconds. It means that it’s time he or she prepared to open a long trade.
Please note that both the investment amount and the trade duration have been specified in advance. The trade was to be closed at 11:40, as this candlestick closed at 11:35.
When choosing the trading time on Olymp Trade, you can use the expiry time (as shown in the screenshot), or you can simply set the trade duration (for example, 5 minutes).
Step 3: Waiting for the result of the deal. In our case, the trend has moved on and we have made a profit (Fig. 2). However, if trading this strategy results in a loss, you should increase the amount of your next trade by 2.5 times. This approach is called “loss compensation system”.
Here is another example (Fig. 3). There is a falling candle on the GBP/JPY chart. A 5-minute short trade was opened at the first second of a new candlestick.
The “Moving averages” strategy
Perfect for those who want to study indicators.
When traders search for the best trading strategy on Olymp Trade, many of them think about technical analysis indicators. These tools automatically analyze the asset price and give signals to enter trades.
The “Moving Averages” strategy uses two SMA lines to give you a signal of a trend reversal. To configure the strategy, follow a few simple steps:
Step 1: Select a candlestick chart with a timeframe of 1 or 5 minutes (Fig. 4). However, if you are ready to wait for the trading results for several hours, you can set a higher timeframe. For intraday trading, it is better to use a time frame of no longer than 4 hours.
Step 2: Click the Circular icon (1) and add two SMA indicators (2), then go to the settings by clicking the Pencil icon (3).
Step 3: Specify the setting period “4” for the first SMA, then set the period “60” for the second one and change its color (Fig. 5).
Step 4: Now we have to find a recent intersection of these two lines. If the SMA (4) breaks the SMA (60) from bottom to top, we should open a long trade. (See Fig. 6)
If the SMA (4) cuts through the SMA (60) from top to bottom, open a short trade, like it is shown in Fig. 7.
Not to follow a false signal, it is necessary to wait for the closure of the candlestick, at which the two SMAs intersected before opening a trade in the right direction.
Get some practice. We received a sell signal (on a 1-minute time frame), that’s why we opened a 3-minute short trade, which brought us profit (Fig. 8 and 9).
Fig. 8 and 9
The Olymp Trade experts remind you that it is necessary to take short breaks every 30 minutes when trading. Also, do not forget to keep records of all your trades in a trader’s journal in order to discipline yourself.
“Bullish engulfing” and “Bearish engulfing” candlestick patterns strategy
This strategy can be used with any time frames of a candlestick chart.
The higher the time frame of this strategy, the better the quality of the signals. Such patterns are quite reliable, so they are really popular with traders.
The strategy is based on “bullish engulfing” and “bearish engulfing” candlestick patterns. The first one provides a signal that the chart will soon go up. The second one signals when the chart is about to move down.
A candlestick pattern is a combination of candlesticks (or just one candlestick) that helps us to determine the future direction of the trend.
“Bullish engulfing” (Fig. 10) is a rising candlestick. Its body is larger than the bodies of two or more falling candlesticks. It is a signal to buy.
“Bearish engulfing” (Fig. 11) is a falling candlestick. Its body is larger than the bodies of two or more bullish candlesticks. Traders use it as a signal to sell.
If you see one of the patterns presented above, open a trade in the direction of the signal. The trade duration (expiry date) should amount to at least two following candlesticks. That is, if you follow a signal on a 1-minute time frame, the trade duration should be at least 2 minutes. The signal on 1-hour time frame means that the duration of your trade should be at least 2 hours.
Here is an example of following this strategy on a 5-minute time frame (Fig. 12). On the EUR/CAD candlestick chart we can see a Bearish Engulfing pattern. Note that the body of the red candlestick is larger than the bodies of three previous green ones. This is why we opened a 10-minute short trade.
This is what happened 8 minutes later (Fig. 13). The strategy works!
The methods of analysis presented above will help you quickly understand the work principles of basic tools used in price analysis. As you have already understood, you can use both technical analysis indicators and candlesticks.
You can combine different approaches, add advanced systems of graphical analysis or take into account fundamental factors.
In conclusion, we would like to remind you about the most important rules of strategy usage:
- Do not put at risk more than 5-10% of your deposit.
- Follow the loss compensation system.
- Keep a trading journal.
- Do not trade 15 minutes before and after the news comes out.
- And don’t forget to visit the webinars held by Olymp Trade Expert Advisors.
Despite the fact that all three strategies provide excellent results, we would like to highlight the strategy based on the use of candlestick patterns. We find this approach quite reliable. In turn, the “Same Color” strategy is perfect for beginners.