The third touch (also known as the third strike) trading strategy is another strategy that we are going to introduce to our traders. Unlike complicated strategies with the usage of many indicators, the “third touch” requires only one element – a trend line.
Recommendations:
You can implement the strategy on all of the trading instruments, including stocks and commodities.
It is not recommended to use this strategy on the timeframes, which are smaller than M30. The smaller the timeframe, the lower the possibility of a good signal because of the price noise.
Let’s consider the steps that you need to follow. At first, let’s look at the scenario when you want to open a long position.
You see the upward movement and draw the trend line, which connects two lowest points. These points ideally should be the extremums. This is the most difficult part of the strategy.
We wait for the correction to the downside and enter the market after the price touches the trendline for the third time and the bullish candlestick is formed. We open a long position at the closing price of this bullish candlestick.
We place a stop loss below the previous support level.
Our take profit level is calculated as follows:
The highest level after the “A” point – the lowest level at the “A” point = the number of pips you need to add to your entry level.
We will use the EUR/USD chart with M30 timeframe as an example.
On March 11, the pair started to move up. We waited for the point “B” to draw the ascending trendline. After that, we waited for the third touch at the point “C” and opened a position on the closing price of the bullish candlestick at 1.1292. We place the stop loss level at 1.1265 (lower than the previous support). Our take profit equals the size between point A (1.1221) and the highest point after point A (1.1272). Thus, we place it at 1.1343 (the entry point + (1.1272-1.1221).
For the short position, you need to follow the following steps.
When the downward movement appears, you draw a trendline between two highest points.
After the second of the trendline, we need to wait for the correction to the upside. Next, we wait for the price to touch the trendline for the third time. The short position needs to be opened at the closing price of the bearish candlestick formed after the third touch.
We place a stop loss above the previous resistance level
Our take profit level is calculated as follows:
The highest level at the “A” point – the lowest level after the “A” point = the number of pips you need to deduct from your entry level.
On February 14, the EUR/USD pair bounced from the 1.2434 level and corrected to the downside. After the short-term correction, the price jumped to the upside but failed to move higher than the point “B”. The situation helped us to suggest about the possible downtrend’s formation. We waited for the point “C” to confirm our thoughts and entered a short position after the bearish candlestick was formed. The entry was placed at the closing price of the candlestick at 1.2405. Our stop loss was set above the previous resistance at 1.2421. Take profit was calculated as the entry point minus the distance between the “A” point and the lowest point after “A”: 1.2405- (1.2434-1.2387) = 1.2358.
In this article, we explained an easy-to-use strategy for trend traders. Its advantage is that it requires only trendline and the support and resistance levels. However, you need to be careful while trading the pairs and be sure that there are no events which may affect the movement of a trend.
Trend trading is a strategy that involves identifying and following a market trend to capitalize on its direction. It's based on the principle that securities tend to move in a particular direction over time. The strategy requires patience and discipline, as the key is to ride the trend for as long as it lasts.
Trend trading is a strategy that involves traders analysing the direction of trendlines for financial instruments. For an upward trend, traders would look to go long and buy, and when a share or an asset is seeing a downtrend, traders would look to go short and sell.
As the saying goes, “the trend is your friend”, what that means is that a trader is able to potentially make a profit from the market when he/she trades in accordance to the prevailing trend.
Many traders consider the ADX to be the ultimate trend indicator because it is so reliable. ADX quantifies trend strength. ADX calculations are based on a moving average of price range expansion over a given period of time. The default setting is 14 bars, although other time periods can be used.
Trends can be short-lived, and price movements can be volatile, making it challenging to identify the direction of the trend accurately. Lagging indicators: Trend trading often uses lagging indicators such as moving averages, which may not provide an accurate picture of the current market situation.
You can spot an uptrend when there are higher highs and lows as time passes. To apply a trend line on a chart that you believe is on a bull run, simply plot a line between three or more of the market's low points – when it has dropped to a low price and reversed.
Trendlines can be used effectively by traders to gauge potential areas of support/resistance, which can help to determine the likelihood that the trend will continue.
The first thing to do when using trendlines is to establish which timeframes you will be prioritizing for your trades. Intraday traders may use any combination of time frames from the 1-minute up to the 60-minute. Swing traders will usually utilize the 60-minute to the monthly times frames.
For an aggressive trade, place a stop at the swing low on the five-minute chart. For a conservative trade, place a stop 20 pips below the 20-period EMA. Sell half of the position at entry plus the amount risked; move the stop on the second half to breakeven.
In conclusion, while it is possible to become a millionaire through scalping trading, it requires a significant amount of skill, experience, and risk management. As with any form of trading or investment, it is important to thoroughly research and understand the risks involved before investing your time and money.
The defining feature of day trading is that traders do not hold positions overnight; instead, they seek to profit from short-term price movements occurring during the trading session.It can be considered one of the most profitable trading methods available to investors.
Day traders' earnings vary widely based on experience, skill level, trading strategy, and market conditions. Some may earn a substantial income, while others may not be as successful. It's important to note that day trading involves significant risk and is not suitable for everyone.
Trend trading is a time-tested strategy in which traders attempt to profit from the prevailing market direction by taking positions in the direction of the trend until the trend changes. This strategy relies on the current trends in the market price to create profit.
A popular method for modeling and predicting the stock market is technical analysis, which is a method based on historical data from the market, primarily price and volume.
Trend-following strategies focus on trading in the direction of the prevailing market momentum. Commonly used strategies aim to employ a combination of tools and chart patterns in order to find and confirm precise entry and exit levels.
In the markets, a trend is a series of higher highs and higher lows or lower highs and lower lows. The markets may even trend sideways in a range, which happens when highs and lows do not change much over a period.
- It can be less time-consuming as the trader does not need to monitor the market constantly and can hold positions for extended periods. - The risk-reward ratio is usually higher than one (higher average profits than losses), so a high win rate is not required to make long-term profits.
Introduction: My name is Greg Kuvalis, I am a witty, spotless, beautiful, charming, delightful, thankful, beautiful person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
