Strategies

Here you can see trading styles/strategies, from short time-frames to long.

 

Scalping:

Scalping is the shortest time frame in trading and it exploits small changes in currency prices. Scalpers attempt to act like traditional market makers or specialists.

To make the spread means to buy at the Bid price and sell at the Ask price, in order to gain the bid/ask difference.

This procedure allows for profit even when the bid and ask don’t move at all, as long as there are traders who are willing to take market prices.

It normally involves establishing and liquidating a position quickly, usually within minutes or even seconds.

The profit for each transaction is based only on a few pips, so scalping is typically conducted when there are large amounts of capital and high leverage or there are currency pairs where the bid-offer spread is narrow.

These are very short-lived trades, possibly held just for just a few minutes.

Scalpers are targeting small amount of pips as many time as they can.

Typically uses tick charts.

 

Day trading:

Day trading is speculation in securities, specifically buying and selling financial instruments within the same trading day. Strictly, day trading is trading only within a day, such that all trades that are exited before the end of the day, as the name suggests.

Traders who participate in day trading are called day traders. Traders who trade in this capacity with the motive of profit are therefore speculators.

Some of the more commonly day-traded financial instruments are stocks, options, currencies, and a host of futures contracts such as equity index futures, interest rate futures, currency futures and commodity futures.

Day trading was once an activity that was exclusive to financial firms and professional speculators. Many day traders are bank or investment firm employees working as specialists in equity investment and fund management.

However, with the advent of electronic trading and margin trading, day trading is available to private individuals.

This removes the chance of being adversely affected by large moves overnight. Also to avoid swaps.

Trades may last only a few hours and price bars on charts might typically be set to one or two minutes.

 

Swing trading:

Swing trading is a speculative activity in financial markets where a tradable asset is held for between one and several days in an effort to profit from price changes or ‘swings’. A swing Positions held for several days, looking to profit from short-term price patterns. Profits can be sought by either buying an asset or selling. Momentum signals (e.g., 52-week high/low) have been shown to be used by financial analysts in their buy and sell recommendations that can be applied in swing trading.

A swing trader might typically look at with bars showing every half hour or hour.

 

 

Carry trade

The currency carry trade is an uncovered interest arbitrage.
The term carry trade, without further modification, refers to currency carry trade: investors borrow low-yielding currencies and lend (invest in) high-yielding currencies. It is thought to correlate with global financial and exchange rate stability and retracts in use during global liquidity shortages, but the carry trade is often blamed for rapid currency value collapse and appreciation.

A risk in carry trading is that foreign exchange rates may change in such a way that the investor would have to pay back more expensive currency with less valuable currency. In theory, according to uncovered interest rate parity, carry trades should not yield a predictable profit because the difference in interest rates between two countries should equal the rate at which investors expect the low-interest-rate currency to rise against the high-interest-rate one. However, carry trades weaken the currency that is borrowed, because investors sell the borrowed money by converting it to other currencies.

By early year 2007, it was estimated that some US$1 trillion may have been staked on the yen carry trade. Since the mid-90’s, the Bank of Japan has set Japanese interest rates at very low levels making it profitable to borrow Japanese yen to fund activities in other currencies. These activities include subprime lending in the USA, and funding of emerging markets, especially BRIC countries and resource rich countries. The trade largely collapsed in 2008 particularly in regard to the yen.

The European Central Bank extended its quantitative easing programme in December 2015. Accommodative ECB monetary policy made low-yielding EUR an often used funding currency for investment in risk assets. The EUR was gaining in times of market stress (such as falls in China stocks in January 2016), although it was not a traditional safe-haven currency.

Most research on carry trade profitability was done using a large sample size of currencies. However, small retail traders have access to limited currency pairs, which are mostly composed of the major G20 currencies, and experience reductions in yields after factoring in various costs and spreads.

 

 

NR7 Strategy

Market goes through regular contraction (i.e. daily trading range getting shorter and shorter) and expansion (i.e. daily trading range getting bigger) cycle. Expanding range is followed by Contraction and vice-versa. So if we can identify the narrow range days, then it give us a step ahead of everybody to benefit from coming expansion.

NR7 is term given to a day that has the daily range smallest of last 7 days including that day.

How to Find NR7 day:

1) Get the High and Low data of last few periods

2) Calculate the range of each day i.e. high – low) for each day

3) Compare the range of a today and previous 6 days range (to get NR7. To get NR4 get last 3 days range)

4) If today’s range is smallest of all 7 days, then today is NR7 day.

It is simple as that.

This is one of my favourite setup. It gives u a chance to be ahead of trade follower / indicator followers who will jump in the trend after you.

One of the easiest way to trade this setup will be to go long above the Day’s high ofNR7 day with a stop at the Day’s Low of NR7 day.

Or Go short below the Day’s Low of NR7 day to stop at the Day’s High of NR7 day.

Observing this pattern gives day trader /swing trader a distinct edge to trade next 1 or 2 days. In many cases, NR7 break-out is found near the start of a new wave. For day traders, this setup indicates that they can anticipate wide range days, so they should be prepared to chase the trend and use trailing stops so that they can get the maximum from the coming trend.