Hello dear traders! Today in the article you will be presented with another simple trading strategy – “Daily Range”. The strategy does not use indicators, you only need a calculator to implement it.
The “Daily Range” strategy is applied on any currency pair, as an example I will consider it on the EURUSD and GBPUSD pairs.
The principle of the strategy is based on the previous day’s price readings. You only need to determine the High, Low and Close (highest high, low and close price level) of the previous trading day.
I will explain in detail the essence of the strategy using the example of the GBPUSD currency pair:
I consider an example on the terminal from a broker Alpari, according to its time (in winter), trades open at 00:00 and close at 23:00.
Determine the High, Low and Close of the 24 hour period (trading day on 02/18/2016): High was – 1.4368, Low – 1.4255, the closing price (Close) of the trading day – 1.4332.
The total movement of the pair, the range in which it moved within 24 hours (High – Low) was 114 points.
Install pending orders to buy and sell at a distance of 25% of the total move (114 points), postponed from the closing price. 25% of 114 points is approximately 29 points.
Set Buy Stop at 1.4361 (Close + 29 points).
Sell Stop at the level of 1.4303 (Close – 29 points).
Take profit is 25% of the previous day’s move, that is, also 29 points. Take profit level for Buy Stop is 1.4389, Sell Stop is 1.4274.
The stop loss is placed 10 points above the closing price at Sell Stop, and 10 points below at Buy Stop.
When one of the orders is triggered, the second is deleted.
As you can see, the meaning of the strategy is simple, it is as follows: if the pair moves in one direction, at least 50% of the total move of the previous day, then you are in profit.
Consider another example, the EURUSD currency pair:
Determine High, Low and Close on the trading day 19.02.2016:
High – 1.1138;
Low – 1.1066;
Close – 1.1131;
The total price movement is 72 points, 25% of 72 is 18 points.
We place orders:
Buy Stop – 1.1149 (Close + 18 points);
Sell Stop – 1.1113 (Close – 18 points);
Stop Loss Level:
for Buy Stop – 1.1121 (Close – 10 points);
for Sell Stop – 1.1141 (Close + 10 points);
Take profit level for Buy Stop is 1.1167, Sell Stop is 1.1095.
Sell Stop order triggered, the target was reached.
If not one of the pending orders has been triggered during the day, we delete the orders at the end of the day. And vice versa, if the order is triggered, but the take profit has not been reached during the day, then we leave the open position until the next trading day. With the onset of the next day, adjust the stop and take level based on the analysis of the previous trading day.
To make it easier and faster to work with the strategy, I offer you a calculator Daily range (in Excel format) for automatic calculation of entry points, take profit and stop loss levels.
Of course, additional indicators can be used to filter signals. Let’s say a moving average with a period of 100, if the price is above it, consider only purchases, below – sales. All in your hands.
Also, as an assistant, I recommend using it as an analysis of past signals highs and lows indicator…
For a detailed analysis of the strategy on the EURUSD currency pair, read link…
In my opinion, the strategy certainly deserves attention. That’s all for today. If you have any questions – ask. Happy trades! Goodbye.
Best regards, Evgeny Bokhach
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