TOP 7 effective strategies for traders

A trading strategy for beginners on an hour time frame

This simple trading strategy is perfect for beginners in the world of trading.

What is important to consider? Intraday traders love to use this strategy. An hourly time frame chart allows you to fully identify potential opportunities and make trades.

1. Analysis. It is very important to make a thorough analysis of the asset they are going to trade, this includes technical or fundamental factors. 

2. Entry into the trade. The point of entry should be justified by a good analysis, which will increase the chances of profit from the transaction.

3. Exit from the transaction. The exit point from a trade is equal to the entry point, so planning it is a very responsible task, because it depends on whether the trader can keep his losses to a minimum and get the most out of the trades.

The reasons for the value of this strategy

Hourly time frame is used by a large number of traders, so there are many resources to educate themselves in this area and improve their skills.

Also, this strategy allows traders to easily assess market sentiment and identify potential trading opportunities due to the fact that trade movements are captured using this strategy.

Buying 

Using an hourly time frame with Bollinger Bands to buy can be a very effective tool for detecting profitable trades. Traders can conclude that an asset is oversold or overbought when the price moves out of the Bollinger Bands.

The Hammer pattern signals that the bulls have won and a long position can be initiated.

Sell

The pattern of the falling star is formed after the price has broken through the upper Bollinger band, indicating that a bear market prevails. Usually a shooting star pattern is formed at the end of an uptrend and is a signal that the trend has reversed. 

A strong signal to sell is a combination of a shooting star candle and a breakout of the upper Bollinger band.

Exit trade 

A strategy with an hour time frame can be effectively used to exit a trade. For example, a trader opened a short position based on the Shooting Star signal, which also broke through the upper Bollinger Band.  Later, a pattern called Three White Soldiers appears, which indicates a market reversal.  In addition, the candlesticks went beyond the borders of the Bollinger Bands, which indicates the loss of the bearish positions. At this point, the right decision would be to exit the trade to save profits and minimize your potential losses.

2. The Rule of Three in Multitime Analysis

Multitime analysis involves the use of multiple timeframes to more accurately estimate and predict price movements. An important rule in multitime analysis is the so-called “rule of three”.

The rule of three in multi-time frame analysis involves using three different time intervals to get a more complete picture of the market and make more informed decisions. It helps the trader to see the big picture and take into account both short-term and long-term trends. For example, the price of an asset on a 5-minute chart has a clear upward trend, but if you look at the price of a stock on a 1-day scale, it is seen that it has hardly changed during that time.   

This rule is used by all types of traders, position traders, scalpers and swing traders. The supporters of this strategy believe that it is enough for a trader to look at three different timeframes in order to determine all details of a deal.

For example, a scalper is interested in one-hour, 30-minute and 5-minute timeframes. Or 15-minute, 5-minute and 1-minute timeframes.

The strategy is quite simple and will do well for beginners, especially for short-term traders. It will also help determine the entry and exit points.

In addition, you will need a larger time frame to determine the direction of the asset.

This strategy is used to determine the support and resistance levels.

Effective time frame combinations (examples)

For scalpers: 30 min, 15 min and 5 min.

However, if the scalper applies a 1-minute strategy, then: 15-minute,5-minute and 1-minute.

For day traders: the best time frames are in this sequence: 1-day,4-hour,30-minute.

The daily chart shows the primary trend, the 4-hour timeframe can be used to confirm it and the 30-minute chart can be used to find entry and exit points.

For swing traders: (traders who hold trades for several days). Often swing traders use a combination of 1-day, 4-hour and hourly charts.

Trades are usually made on the 30-minute or hourly chart.

It will take you a lot of time to test the various combinations in order to choose the best time frames, but this is a necessary condition for success in this strategy.

Also keep in mind that you don’t have to follow the rule of three at all, you can also use four timeframes if you need to.

3. Strategies on candlestick patterns 

Candlestick pattern is an important indicator on the chart, with its help you can predict the price movement of an asset or possible reversal of the price. 

There are many candlestick patterns, sometimes you need a few candlesticks to confirm the signal, and sometimes a single candlestick is a full-fledged signal. Let’s talk more about the individual candlesticks and how they can help the market.

A single candle is a candlestick pattern formed by a single candle. 

What are the different types of single candlesticks?

1. Doji 

A doji pattern is a single candle, formed when the price of an asset closes where it opens. The candlestick has the shape of a plus sign.

A doji tombstone is a very small body, a small lower shadow and a very long upper shadow.

Long-legged doji – where both the upper and lower shadows are long. 

Doji – dragonfly – very small upper shadow and long lower shadow

The Doji pattern signals a reversal in most cases.

2. Hammer 

The Hammer pattern has a small body and a long lower shadow. The hammer is formed during a downtrend. It opens sharply lower and closes just above the opening. 

Wait for the moment when the hammer pattern appears and you can trade by placing the buy stop just above the top of the hammer and the stop loss on the bottom of the hammer.

3. Inverted hammer

It is the opposite of the hammer pattern. It usually signals the end of a bear market.

The price of the asset has a small body and a long upper shadow when it is in a downtrend

4. Hanged

Another candlestick, the opposite of the hammer pattern, is formed during a bullish trend. The candlestick has a small body and a long shadow.

5. A marubozoo is a candlestick that has no shadows, neither upper nor lower. There are open marubozoo, closed marubozoo and full marubozoo.

They are not a sign of a bull or bear market, so it is difficult to use them in the strategy. The best option would be to wait and watch its further movement. Then you can place a buy stop and sell order above or below the candlestick.

6. Shooting Star

The shooting star pattern has a long upper shadow and a small body.The shadow is formed during an uptrend and the pattern signals a new bearish trend.

There are candlestick patterns and chart patterns.

Candlestick patterns are patterns which are formed by one or two candles. 

Examples of patterns with two or more candles: Three black crows, three white soldiers, piercing, pin bar, matching lower level, engulfing, bullish trend reversal, bearish trend reversal.

Chart patterns-formed over a period of time. 

There are patterns of continuation and reversal.

Examples of continuation patterns: ascending and descending triangles, cup and handle, bullish and bearish pennants and flags.

Examples of reversal patterns: double and triple tops, head and shoulders, wedges.

4.  Best trading strategy with double EMA (DEMA)

DEMA (double EMA) refers to the double exponential moving average, which is very sensitive to price changes.

The most popular trading strategies are of course the SMA and EMA, but the DEMA strategy will give you the opportunity to analyze the trend in a new and equally effective way.

TOP 3 effective uses of DEMA

1. Identification of a trend

The DEMA stays above the price in a down trend, and moves below it in an up trend.

! But keep in mind that during a sideways movement or consolidation, DEMA signals will not be accurate.

2. Support and resistance 

There are static and dynamic resistance/support levels.

Static support/resistance are horizontal lines limiting the price movement at certain levels. These are, for example, Fibonacci levels, pivot points and some key levels. 

Dynamic support/resistance is a line moving along the price movement, i.e. not having a fixation at a certain level.  Bollinger Bands and Moving Average are examples of dynamic support/resistance.

Indicator DEMA belongs to the moving averages, so it shows support/resistance well when used with a long-term period.

When the price reverses, its role automatically changes. 

3. Signals of entry points

When the price crosses the DEMA line from top to bottom – it is short, when from bottom to top it is long. (on the chart).

How to trade using the DEMA and ABC pattern?

Buy: 

• A downtrending ABC wave formed during an uptrend.

• DEMA 21 crosses DEMA 50 from below to above before price breaks the ABC pattern.

• The price broke through the upper range of the ABC pattern and closed above it.

• After the close of the breakout candlestick, open a buy.

• Place a stop loss below the low of the breakout candle

• The moment DEMA 21 crosses DEMA 50 from top to bottom, take a profit.

Sell:

• Forming an ABC ascending wave during a downtrend.
• The price breaks through the lower range of the ABC pattern and closes below it
• Until the ABC breakout, DEMA 21 crosses DEMA 50 from above to below.
• After the close of the breakout candle, sell.
• Place a stop loss above the high of the breakout candle
• When DEMA 21 crosses DEMA 50 from above, take a profit.

5.  Long Term Breakout Strategy Using the 89 EMA 

The EMA is the most important and effective element of technical analysis, which is used to determine the trend. This indicator is one of the most demanded by traders all over the world.

The breakout strategy is perfect for long term trades and for those traders who do not like to be in front of a computer all the time.

This means the trader should wait for the price to break through the previous high or low of the last ten candles on the chart. Then the trader will need to adjust the stop loss in the direction of his trade according to the chart.

Determine the direction of the trend.

Immediately after adding the 89 EMA to the chart, look at the most recent candle. If it is above the moving average line – open long trades, but if it is below the moving average – this is a signal for short trades.

Determine your entry point 

From the last candle count ten candles. Then find the boundary line which separates the ten candles from the others, and identify the high and low inside the range.

The high and low are extremely important, as they determine both your entry point and your pending stop loss.

On a short trade, place the pending sell order at the lowest point and the pending stop loss at the highest point.

On a long trade: place a buy pending order on the highest point, and a stop loss pending order on the lowest point.

Open a pending order  

Once you’ve determined your entry points, you can place a pending order which will bring you in when a candle has broken the high or low of the last ten candles.

The chart above shows an example of a possible short trade scenario. The red area shows the last ten candles. Place the pending order at the lowest point of the ten candles (number 2) and place the pending stop loss at the highest point (number 1).

! When a new candlestick is formed, the highest and lowest points will change. Accordingly, your overall trading set-up should also change.

That is, you should readjust the pending order and the pending stop loss, so they correspond to the new maximum and minimum points.

Strategy adjustment.

Moving the average. You can first adjust the moving average itself. The basic concept is to use the 89 EMA, which when applied to the daily timeframe means that the previous 89 periods or days are included in the calculation. However, you can change it to any number you like.

Theoretically, a moving average reacts slower to market fluctuations the longer its duration is. As a result, a moving average will react to changes in the trend direction the faster its period is. 

Number of candlesticks. As a general rule of thumb, you should use the last ten candles on the chart, though you can actually use any number. Increasing the number of candlesticks or bars is one of the most effective solutions. It can be useful to avoid false signals in a range market.

6. Heikin-Ashi candlestick strategy: quick and easy to follow the trend. 

Heikin-Ashi is a form of candlestick pattern developed by Munehisa Homma in the 1700s that reduces market noise. It is easier for traders to understand and make sense of the market using the Heikin-Ashi candlestick chart because it gives a better idea of trend directions. In this article, we will look at the Heikin-Ashi approach to trend following.

Since candlesticks always start in the center of the previous candle, the Heikin-Ashi candlestick chart has no discontinuities. In addition, the shadows of Heikin-Ashi candlesticks usually have a smaller range than the shadows of regular candlesticks. This is because the average value is calculated from the Heikin-Ashi candlesticks.

Determining the direction of the trend.

Green and red Heikin-Ashi candles mean an uptrend or downtrend, respectively. Even though the Heikin-Ashi candlesticks, which reflect actual costs, are red, some of them are still green. This indicates that an uptrend is still present.

How to assess the strength of the trend.

Heikin-Ashi shadow candlesticks indicate that the trend is getting stronger. For example, if we observe red candles without higher shadows, we can conclude that there is a significant bearish trend in the market.

How to recognize a trend change

A trend reversal is indicated by Heikin-Ashi candles with small actual bodies and huge shadows (upper and lower). For ambitious traders who are eager to detect a reversal as early as possible, this signal offers a chance. If you are a cautious trader, however, it is preferable to refrain from opening a position until you receive confirmation.

Haikin-Ashi Trading Strategy.

Heikin-Ashi candlesticks can be used for trend trading because they allow you to determine the strength, direction and reversal of a trend. As a rule, green candles indicate a bullish trend and red candles indicate a bearish trend.

Heikin-Ashi and the 100-day EMA (on the chart). 

For our initial method, we will combine the Heikin-Ashi candles and the 100-day EMA. Both the Heikin-Ashi candles and the price movement can be seen on the chart. Trends within the same day are identified by the 100-day EMA. A bullish trend is indicated by prices closing above the 100-day EMA and a bearish trend is indicated by prices closing below the 100-day EMA.

For long positions:

The Heikin-Ashi candle shows green.

The price closes with a bullish candle above the 100 EMA.

When the two aforementioned conditions are met, open a long position.

A stop loss should be placed a few pips below the 100 EMA.

When the Heikin-Ashi turns red, exit the position.

For short positions:

• A bearish trend is indicated by a Heikin-Ashi candle in red.

• Price closes with a bearish candle below the 100 EMA.

• When the two aforementioned criteria are met, open a short position.

• A stop loss should be placed a few pips above the 100 EMA.

• When the Heikin-Ashi candle turns green, exit the position.

• The Heikin-Ashi and the EMA are two concepts.
• For the second strategy, we will combine the Heikin-Ashi candlestick with the two EMAs. Although you can also use a pair of EMA 7 and 14, 10 and 19 EMA or 10 and 25 EMA, in this example we will use EMA 9 and 18. The 30-minute timeframe is ideal for this method.

For long positions:

• Expect prices to rise above the EMA as soon as EMA 9 crosses EMA 18.

• Prices will then correct (move down) and either cross the EMA, or both at once.

• Enter when the Heikin-Ashi candle turns green and the price correction is over.

• Place a stop loss order a few pips below the low of the entry candle.

• Act quickly:

• Wait for prices to fall below the EMA after passing EMA 9 below EMA 18.

• Prices will then correct (move up) and cross one or both of the EMAs.

• Once the price correction is complete and the Heikin-Ashi candle turns red, open a short position.
• Place a stop loss order a few pips above the maximum of the entry candle.

7. Strategies with 50 EMA and 200 EMA 

The 50- and 200-EMA are two of several EMA intervals that are most widely used. Many traders incorporate them both individually and together in their trading systems. 

Strategy with 50 EMAs. 

Given that it is an average or intermediate technique that can be used to predict both short-term and long-term price fluctuations, the 50 EMA strategy is very popular. To buy or sell a position using the 50 EMA strategy, follow these steps:

How to buy

• Watch the market and watch for an uptrend to form before the price crosses the 50 EMA.
• Your entry candle is the one that appears when price passes the 50 EMA.
• Place a buy order a few pips above the breakout point of that candle. This can be any value from 2 to 5 pips. Our EMA calculations show that once the price breaks the upper point of the candlestick, we expect it will continue going up.
• As a precautionary measure, we should also set our stop loss a few pips below the bottom of the entry candle. This may be anywhere from 5 to 10 pips.

How to sell 

• Watch the market and make sure the price, which is in a downtrend, crosses the 50 EMA.
• Your entry candle is the one that appears after price breaks through the 50 EMA.
• Place a sell order a few pips below the lower point of your entry candle. This can be anywhere from 2 to 5 pips.
• Place a stop loss a few pips above the peak of your entry candle. This can be anywhere from 5 to 10 pips.

Strategy with 200 EMA 

One of the most popular tactics for using the exponential moving average for long-term traders is the 200 EMA. It is used by traders who intend to keep a position open for several months before closing it.  Use the steps below to buy or sell a trade using the 200 EMA strategy:

Steps to Buy

• When the price crosses the 200 EMA from the bottom up, watch the market.
• Your entry candle is the one that appears when price passes the 200 EMA.
• Place a buy order a few pips, say 10-15 pips, above the position of the candle.
• You should also place a stop loss order 15 to 20 pips below the bottom position of the entry candle.

Steps to Sell 

• Watch the market and wait for the price to cross the 200 EMA horizontally.
• Your entry candle is the one that appears when price crosses the 200 EMA.
• Place a sell order 10 to 15 pips below the bottom point of your entry candle.
• Place a stop loss order 15 to 20 pips above the top point of your entry candle.

In conclusion, the targets for these two strategies of 50 EMA and 200 EMA are different. Traders who prefer to use one approach for short-term and long-term forecasts usually use the 50 EMA. On the other hand, the 200 EMA method is only used by those who play long term.

Bottom Line

Effective trading strategies are key to success in the financial markets. By researching and analyzing markets, strategizing, managing risk, and continually learning, traders can increase their chances of profitable trades.

Ultimately, successful traders strategies require discipline, patience and constant learning. Traders must be prepared for changing market conditions and be flexible in their approaches. Each trader can develop his or her own unique strategy by combining different tools and methods that best suit their trading style and objectives.


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