I’ve always been very interested in trading but am of yet to develop a winning strategy. I think (from my back tests) that I have found one with potential so thought i’d ask the trading wizards of babypips for their opinions/guidance.
For some context I am trading on the 1m screen and will usually open up my computer just before 8am GMT to draw out resistance levels.
Below I will write the strategy:
- Identify and Mark out Asia High and Low (I trade London Session - so to my understanding these are the areas with all the liquidity?)
2.Wait for a move to grab the liquidity and reject it (or if asia high was established just before london session e.g: 10-15 min before london starts)
3.Wait for the move which grabbed liquidity to close below the start of said move (move which grabbed liquidity)
4.Draw fibonacci from top of the move to the bottom (swing high to swing low/swing low to swing high)
5.Set an order in the “golden zone” (79%-81%) and target the bottom of the move.
Here is an example of NZD/JPY from today (13/02/24):
Example from GBPJPY (08/02/24) where strategy did not work:
Furthermore, an addition of the strategy could be if liquidity is grabbed but not rejected (powers thru asia high/low to establish new high/low - as it does it the example above) then we wait for a move to close below the move which created the new high/low. For example this is the continuation of the GBPJPY chart above:
Can anyone offer any guidance as to how i could perhaps hone this strategy and/or find some way to add confluence to it?
Any help is greatly appreciated,
Thank you very much!
Trading the London Opening Range Breakout is a classic approach.
Are you sure adding Fibonacci into the mix improves it?
Most traders use no indicators for this strategy.
I find it’s helpful as it shows a key area where i can add orders. However as i’ve said im pretty new so I tried using it (to find a likely area that price will bounce back from), as from what i was told you should use it to find retracements. Would you suggest i not use it? and if so what would you recommend i do instead? Furthermore, could you elaborate on the london opening range breakout please? Or recommend anywhere i could find some additional reading/information on it. Thanks mate!
Doesn’t come back to fibonnacci in this example:
But l’m not sure where the zone of resistance of that example is
The basic strategy is all over Youtube. Most traders just use eithe a breach of the Asian range limits or a close on their preferred time-frame above or below it to trigger entry long or short. No indicaors. There are many varations on time-frame and timing, and some use the opening range rather than the Asian range. GBP/USD is the usual preferred market.
It’s popular because it’s objective but it also easily sits alongside whatever other strategies you might be running, without being a distraction.
Okay sounds good. From what i’ve seen the main drawback from that is if price retests the range and takes out the SL. Ill see if i can develop some further conditions to minimize that risk.
Yes, it’s easy to be triggered into first long, then short. But if you get the range (time-frame) right and are not too ambitious for a big winner it will be quite rare that both would be stopped out on the same day. Demo it. you might also find it’s best to be out before the New York open.
Ill definitely test it out. Did a bit of some research now and saw that some people use a moving average as confirmation. As in wait for price to break out then re-test the moving average. I know you said most traders use no indicators, do you know a safe way in which to do this?
Sorry to keep pestering you but do you also know anyways i can test for a potential rejection? As one of the strategies I use is for it to reject the Asia high/low. Only way i know is to wait for a close below the move which set the high/low (as in a break of structure), but as i’m sure you are aware sometimes price disobeys this and even though it breaks structure it will continue in the direction it was going ahaha
Far as I can tell there isn’t a reliable way you tell whether a breach of the Asian range high will continue or whether it’s weak and will price will fall. Likewise, if it falls there’s no way to know whether it will end the day in small profit or small loss or hit the other side of the range and be stopped out, and price triggers a short trade. And when the secondary trade opens the puzzle begins again - it could go up a bit, down a bit, sideways all day, up a lot or down a lot - but nothing can tell you which.
But do you need to know? Or can you rely on net gains after a long run of trades? Demo trading will help you understand how your tactics affect the outcomes.
Thank you for the advice I will definetly test it out. Can i ask you’re opinion on something though? In my mind it makes more sense to trade a rejection rather than a continuation as I can clearly see a rejection on the charts (as in the low gets broken - indicating a new downtrend or the high gets taken out in which case ill look for longs) but with a continuation I have no idea where to enter if i’m being honest. Obviously i’ll have to look more into it. What’s your thoughts on the matter?
There is no single precise entry point for a continuation trade. That might suggest you can enter anywhere along the course of the price move. Some traders look for a minor pull-back and enter when that corrects and price resumes its continuaiton. Others are not afraid to go long at a new high or short at a new low: that is aggressive, so maybe only worth the risk when adding to a position you already have open and which is in the money.
A entry pattern which clearly suggests a price level for your stop-loss order is useful.
Anything more than a 1R trade and you’ll lose more than you win. I’d suggest starting with a TP level closer than the SL level.
Please can you elaborate? All the trades posted above are more that 1R. This set up usually has at least 3:1 RR. From my understanding as long as the set up is profitable 51% of the time and has at least 2:1 risk it should be good.
A 2:1 will never win more than 50% of the time. All R:R are relative to the outcome. the 3:1 will go on losing streaks of 6+ often. A 1:1 will win about 50% of the time.
Start with a lower R-multiple and see when it becomes unprofitable when it’s increased. You should have all of these scenarios marked with optimal SL and TPs
Risk:reward ratios are usually wildly ambitious (or maybe just optimistic). I would be very happy to be getting a r:r of 1:1.5 as long as it was every day.
So many times, especially intra-day, you wait for another few pips as price moves towards a very ambitious target level but it never gets there and goes all the way back to where you first entered. It’s soul-destroying.
ah okay thank you for clearing it up. The set up i’ve got at the moment has a decent R;R but i suppose a lower R;R is better if it’s more consistent. Do you recommend I try and find a new set up then?
The setup won’t be the issue. If it wins more than 50% of the time at 1:1 then you’re on the right path.