Day trading strategies in Forex are predominantly medium and long term. At first glance, such TSs are unlikely to suit traders who want to open several deals per day and record the result in a trading report every day. On the other hand, trading on the daily timeframe is perfect for those who know how to wait and value the reliability and safety of capital above all else. Let’s look at several daily strategies and try to understand all their advantages and disadvantages
The essence and features of trading strategies on the daily timeframe
The daily timeframe is one of the slowest in Forex. Even more global weekly and monthly are used in trade quite rarely and, mainly, as auxiliary ones. Trades that open on D1 can remain open from several days to several months. Considering that there are not very many truly liquid assets on Forex (7 par majors, a couple of cross rates, gold and several CFDs ), a trader opens deals no more than 1-2 times a week.
On the one hand, such trading, on average, brings less profit than intraday trading or scalping. On the other hand, when trading on D1, a trader does not need to constantly monitor the chart – it is enough to evaluate the changes that have occurred twice a day, in the morning and in the evening. If the strategy involves strict setting of stop loss and take profit, you can limit yourself to just one session a day, which will take no more than 10 minutes.
Trading on daily charts is as close as possible to medium-term investment in the stock market . Even when trading by technical analysis, a trader should consider global fundamental factors. If during scalping you can simply suspend trading at the time of important news releases, then a deal opened for several weeks will certainly be influenced by the results of important economic events.
Because of this, medium-term traders rarely use automated trading systems, preferring to make deals on their own and, if necessary, make changes to them. In short-term trading and scalping, when events develop quickly, it is most effective to strictly follow the TS rules and not try to make decisions on the fly. In trading on the daily timeframe, while the deal is still open, an event may occur that radically changes the situation and makes following the previous rules inappropriate. On the other hand, the trader has enough time to calmly assess the situation and make a new decision, therefore, day strategies give a lot of freedom of choice and improvisation.
Forex day trading strategies
Let’s take a look at a few specific trading strategies on the daily timeframe in order to better master this trading style.
Medium-term TS “Nomad”
The Nomad strategy is quite simple, built on standard indicators and is perfect for novice traders. To get started, you need to set up the following instruments on the chart:
- 2 exponential moving averages with periods of 5 and 12.
- Oscillator RSI with a period of 20 and an additional level of 50.
Moving averages play the role of the main signal tool, the oscillator works as a filter. Trades are opened according to the following algorithm:
- If the fast 5-period moving average crosses the slow 12-period upwards, and the RSI crosses the 50 level upwards, then a buy trade is opened.
- If the fast MA crosses the slow one downwards, and the oscillator crosses the average level in the same direction, a sell trade is opened.
This strategy is as simple as possible, and does not dictate any mandatory conditions to the trader, except for entering a trade. Stop loss and take profit can be set at your own discretion, the main thing is to adhere to the rule of take over stop. SL can be set to the nearest support / resistance level. It is possible that the transaction will have to be exited manually, simply because the market situation will change and the previous data will no longer be relevant.
Trading system MA + МАCD + Stochastic
The next system is somewhat similar to the previous one – it is also based on two exponential moving averages. However, two oscillators are used as filters at once – MACD and Stochastic Oscillator .
To search for signals, you need to plot the following indicators on the chart:
- EMA with periods of 8 and 34.
- MACD with standard settings.
- Stochastic with parameters 9, 3, 3.
After installing and configuring the instruments, you can start trading. Buy deals are opened subject to the following conditions:
- The fast moving one crosses the slow one upwards.
- The MACD histogram is above the zero mark.
- Stochastic is leaving the oversold zone, but is still in the lower part of the range.
As in the previous one, in this TS, setting stop loss and take profit is at the discretion of the trader. Considering that the candlestick size on daily charts is much larger than on H1, M15 and M5, it is better to set the stop loss at the nearest local extreme – the key level may be too far. But take profit can be outlined further – with an excess of the stop size by 5 or more times. This will allow you to take a profit of several hundred points from one trade, compensating for possible losses from several unsuccessful decisions at once.
Advantages and Disadvantages of Daily Forex Strategies
The daily timeframe is softer and smoother than the hourly or even faster time frames. Every 24 hours is a set of trading sessions, some of which are more active and quieter. On the hourly chart, during the day, clear bursts and flats are often noticeable (they correspond to the time of important news releases and periods of calm). However, each daily candle includes all the events of the trading day, so this timeframe is very balanced.
Taking into account the peculiarities of daily charts, trading on them is more suitable for those traders who know how to wait and do not pursue super profits. By studying only global timeframes, you can miss many small movements, but at the same time avoid most of the pitfalls. Daily Forex strategies will become an effective tool in the hands of patient traders, and will help to make profits with a minimum of risk.
Trading in financial markets carries a high level of capital risk. In order to reduce risks, it is recommended to strictly follow the rules of money management and always set Stop Loss. All decisions that a trader makes when working on Forex are his personal responsibility.