Medium-term trading is the execution of transactions on the horizon from several weeks. Within the framework of this strategy, we will consider the specifics of trading CFD contracts on large time intervals.
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If you are still not very good at CFD trading, I recommend my training articles:
- Trading CFD contracts on shares. Overview CFD brokers
And now we proceed directly to the strategy.
Trading System Characteristics
Trading instrument: any contract for the price difference (CFD).
Time intervals: for the analysis of the monthly and weekly (M and W1), to search for the entry point - hour (H1).
The trading session does not matter, you need to open positions in the first half of the new week (Monday or Tuesday).
Duration of the position held: 4-6 weeks.
Requirements for graphic instruments: Japanese candles or bars.
Indicators: on H1 - any oscillator (RSI, Stochastic), on M - ATR (average true range) with period 14.
The key idea
Analysis of several timeframes is one of the common methods in trading that will allow you to make deals at the most favorable prices. Fame this technique was due to Alexander Elder and his system of three screens.
Many traders do not take into account the most important details when trading on a similar strategy. For example, timing is the retention of a position for a strictly defined time. Opening the transaction at the beginning of the month, there are only two possible outcomes: the candle closes in long (up) or short (down). In the end, the probability of obtaining a profit near 50%, except for cases of low volatility and too small movements in the market.
The DAX index is a month on average about 800 points, which is evident from the ATR. In most cases, it's realistic to take profit in 400 points or 50% of the traffic.
Rules for entering and exiting a position
First of all, we estimate the trend direction and ATR on the monthly chart. If the previous candle closed in the long, then we consider the transaction to buy. Take-profit set at a rate of 50% of ATR, on DAX - 400 points. Stop-loss minimum in the ratio of 1 to 2, or 200 points.
To search for an accurate entry within a day, we use the timeframe where RSI or another oscillator should be installed. When RSI crosses the level of 30, then we enter the purchase (for sales, it is necessary to cross the 70 level).
Green circles indicate potential entry points to H1. You can enter the parts in each of the three points. The exit from the transaction before the expiration of time is carried out strictly with the help of a stop-order or order to fix profit.
Risk management
The recommended risk is 2% of capital. This approach is conservative and stable. As already mentioned, the approximate chances of profit are 50%, and the take-profit to stop-loss ratio is 1 to 2. In such a system, in order to disperse the account, it is permissible to go for a larger risk, but not more than 10% of the deposit.
To reduce the drawdown, you have to enter the trade first? From the planned volume, and then gradually increase the volume when the position goes in the right direction. At the same time, the remaining volume should be transferred to the breakeven. The most important thing is to constantly consider ATR and the potential profit margin. Profit targets are always placed at the beginning of the month, and a manual exit from the transaction is made no later than the closing of the candle on the monthly chart.
