End-of-Day Trading Strategy: Placing the Trades
It is no secret that the forex market is the largest as well as the most liquid financial market in the world. So, it isn’t surprising that many people would like to learn more about the forex market.
First of all, you may have heard that maintaining your discipline is a crucial aspect of trading. While this is true, how can you make sure you enforce that discipline when you are in a trade? One option is to have a range of forex trading strategies that you can stick to.
So, if your forex trading strategy is well-reasoned as well as back-tested, you can be confident that you are using a forex trading system that works for you. Hopefully, that internal confidence will make it easier for you to follow the rules of your forex strategy and thus, help to keep your discipline.
How to choose the best forex strategy
So, when it comes to clarifying what the best, as well as most profitable forex trading strategy is, there is no right and wrong answer. So, the best forex trading strategies will be suited to the individual.
This means you have to consider your personality and choose the best Forex trading system to suit you. Unsurprisingly, what may work very nicely for someone else may not work for you at all.
On the contrary, a strategy that has been discounted by others may turn out to be right for you. Hence, experimentation may be required to discover the forex trading strategies that work for you. Notably, one of the key aspects to consider is a time frame for your trading style.
There are a number of types of Forex trading strategy styles, from short timeframes to long timeframes. More importantly, these styles have been widely used over the years and still remain a popular choice on the list of the best forex trading strategies this year.
The most experienced traders always remain aware of the different styles and strategies in their search for how to trade Forex successfully.
In many cases, when people talk about Forex trading strategies, they are talking about a specific trading method that is typically just one part of a complete trading plan. While a Forex trading strategy provides entry signals, it is also important to consider:
- Position sizing
- Risk management
- How to exit a trade
End-of-day trading strategy
You need to remember that when it comes to trading, timing is everything. You might be able to foretell market changes; however, if you don’t know when those changes are scheduled to happen and how to time your entry and exit points accordingly, you aren’t bound to reap the reward.
It is worth mentioning that the most reliable as well as profitable forex trading strategies are those that take into account timing as it relates to the trader’s chosen market, strategy, as well as trading style.
Let’s focus on the end-of-day trading strategy. It is a deliberate forex trading strategy in which traders choose to place trade orders after the New York stock market (NYSE) has closed for the day. This allows traders to outline their strategy as well as establish pending orders for the next day while time is functionally paused (i.e., when no trades are occurring).
The main benefits of end-of-day trading
After the stock market has closed, traders are free to review changes in price action that occurred, analyze closing price candlesticks, and interpret any signals that manifested during the day with greater clarity as well as context.
The two greatest benefits of the above-mentioned strategy are the added context as well as flexibility that this trading strategy provides. It is noteworthy that without the pressure of responding to price movement in real time, you have the ability to conduct various technical analyses in order to identify trend strength and momentum, determine support as well as resistance levels, and verify the legitimacy of buy and sell signals before acting.
Importantly, doing so allows you to lay out a more accurate trading strategy as well as place orders with greater accuracy based on the information you’ve gathered. Moreover, by focusing on daily price action charts rather than on intra-daily charts, it’s also easier to recognize overarching market trends that will affect long-term trading outcomes.
In addition to the benefits mentioned earlier, an end-of-day trading strategy also has practical appeal in that it doesn’t require you to enter orders during trading hours manually.
To rephrase it, the end-of-day trading strategy makes it possible to keep a day job and, nevertheless, execute a deliberate and informed trading strategy. So, outlining your orders before the beginning of the trading day also forces you to preemptively measure risks as well as rewards and place orders and profit targets that match with your ideal risk-to-reward ratio, in spite of how the market moves.
Furthermore, this removes some of the emotion from trading and enables you to create a consistent strategy and monitor the results of your decisions.
Do you know how end-of-day trading strategies work?
Source: optimusfutures.com
First of all, this trading demands a comprehensive understanding of the market and the current trend. For instance, if you know how the market typically behaves and can identify the strength as well as the momentum of the current trend, you have a good framework in which to analyze buy and sell signals and establish ideal entry and exit points for the following day.
This trading strategy is most uncomplicated in trending markets that oscillate between long uptrends and long downtrends and reverse after reaching established overbought as well as oversold levels. Using trend-following, trend-confirming, as well as overbought and oversold indicators, you can measure if a robust trend is coming and place pending orders that match with the direction of the current trend. As a reminder, that would mean taking a bullish position in an uptrend and a bearish position in a downtrend.
If, on the contrary, your technical analysis reveals that the price is reaching overbought and oversold conditions or that separation has happened between price movement and market momentum, you may decide to impose a limit entry order that goes against the current trend at the expected market pivot point. For instance, if the price is in an uptrend and you’re expecting a reversal, you would impose a sell limit entry order above the current price at the expected pivot point, as illustrated.
Interesting details
So, in addition to trading with the current trend or anticipating reversals, it’s also possible to use a grid trading strategy in order to capitalize on trend breakouts. As a reminder, a grid trading strategy places buy and sell orders at set intervals above and below the current market price, removing the need to know what direction the breakout will take.
When using a grid trading strategy, nevertheless, it’s vital to close out pending orders that weren’t triggered and be careful about placing stop-loss orders and profit targets, as illustrated in the following chart.
Placing stop loss orders
What you need to know is that stop loss orders help reduce risks by reducing losses in the event that the trend moves against your expectations. Notably, stops can be fixed-value or can alter relative to price movement, or what’s known as trailing stops.
After you’ve made the decision on what position to choose and placed corresponding stop entry or limit entry orders, the next part of any end-of-day trading strategy includes placing stop loss orders for each position opened. Interestingly, for a bearish stop entry order placed above the current market price, you have to establish a corresponding sell stop loss order below the current market price, as shown in the graph below.
Moreover, for limit entry orders, a stop loss order should be placed in the same direction as in the case of a buy or sell limit entry order to reduce losses if the trend goes on rather than reverses, as shown in the graph below.
When deciding how far away from price to place, stop entry, limit entry, as well as stop loss orders, take support as well as resistance levels into consideration, along with the location of buy and sell signals as well as the amount of risk you’re willing to shoulder. Don’t forget that the most successful strategies are realistic and use technical analysis to confirm ideal entry and exit points.
Why it is essential to monitor the situation
So, once you’ve placed all your pending orders for the next day, your orders will automatically be triggered the next day without needing any manual action. However, it’s important to revisit your positions at the end of the next trading day in order to evaluate if they’re still valid based on the most recent price movement.
A trailing stop will change position relative to price movement; however, other entries, as well as exits, may need to be manually closed or modified to account for shifting risk as well as reward levels. Besides, if you want to achieve the best results, make sure your strategy has the appropriate checks as well as balances and frequently monitor results and review your positions in light of new insight.
To sum up, it is vital to identify what skills trades may have and tailor the forex trading strategy based on each individual’s personality, not the other way around. There are many benefits of forex trading, so it is up to you to compare forex trading strategies that may be better suited.
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