RoboForex - Forex Broker: overview and news

[Vlad RF]

Main Order Types on MetaTrader

Author : Victor Gryazin

Dear Clients and Partners,​

This overview is devoted to the main types of orders used on MetaTrader platforms. Orders serve to open and close positions, limit losses and take the profit.

Main order types in trading

For trading in financial markets, there are two main types of orders used:

Market order is the simplest and most understandable of all. This is an order to sell or buy the asset at the current market price immediately. The priority of the order is obligatory execution, if only there is enough liquidity in the market. Positions open (or close) at once. When volatility is high, so-called "slips" occur, which means the actual execution price differs from the Bid or Ask price at the ordering moment.

Limit order is an order to sell or buy the asset at the specified price. Limit orders will not allow making trades at a worse price than said in the order, yet it is not guaranteed that the order will be executed. In other words, the order will be executed only if there is the limit (or best) price in the market. If otherwise, the order will not be executed.

Based on these two orders, there have been creates several order types on MetaTrader platforms. On other platforms, things might work differently.

Opening orders

Buy Limit

This is a limit order to buy the asset at a price no worse than the specified one. Also, this order can be used when you need to limit the price of a not most liquid asset you are buying.

For example, when Brent oil price is $80, while the trader wants it cheaper — at $70 — they can place a pending Buy Limit order at the desirable price level. The position will open as soon as the Ask price reaches the specified level.

Sell Limit

This is a limit order to sell the asset at a price no lower than the one set in the order. This type can be used when you need to limit the selling price of a non-liquid asset.

For example, if gold now costs $1,800, and the trader wants to sell it when the price reaches $2,000, they can place a Sell Limit order at this level. As soon as the Bid price reaches the desired level, a selling position will open.

Closing orders

After a position is open, the trader needs to specify its closing conditions. As a rule, there are two options: Take Profit for a price going as forecast and Stop Loss for a price going against the trader.

Take Profit

Take Profit is a pending order that closes the position without trader's participation. A placed order automatically closes a gaining position as soon as the price reaches the specified level.

For example, the trader buys Brent oil at $70 and expects it to grow to $100 in the nearest future, where they will close the position with a profit. Hence, they can place a Take Profit at $100, and the position will close automatically, as soon as the quotations reach the level.

Margin Call and Stop Out

There are also such important phenomena as Margin Call and Stop Out.

Margin Call

This is a notification by which the broker informs the trader that due to the current losses in all open positions the money on the account is not enough to sustain those positions. The trader then needs either to deposit their account or close some of the positions, otherwise a Stop Out might follow.

Stop Out

Stop Out means forced closing of losing positions by the broker at the current market price when the ratio of the trader's capital to margin reaches a critical level (set by the broker). After the positions close, the trader's deposit will get corrected according to the losses they suffered. Losing positions will keep closing until the said ratio exceeds the Stop Out level.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

How to trade the Right Moment strategy

Author : Victor Gryazin

Dear Clients and Partners,​

In this review we will look at the "Right Moment" indicator strategy. It is based on identifying and using overbought and oversold zones in trading. How to set up the indicators, and buy and sell using the strategy – find the answers to these questions and examples in our article.

Description of the “Right Moment” strategy

The "Right Moment" strategy is mainly designed to be used in a flat, sideways market movement. It requires the price to be in a limited sideways range for at least a week.

The strategy is based on signals from the Bollinger Bands trend indicator and two oscillators - Williams' Percent Range and Relative Strength Index (RSI). It can be used for trading different financial instruments. The recommended time frames are M15 and H1.

The "Right Moment" uses overbought and oversold zones to search for trading signals. They describe short-term extreme deviations of market instrument prices from average values: overbought - too high, oversold - too low. These zones are identified by the Williams' Percent Range and RSI oscillators.

Complementing the strategy is the use of the rebound of quotations from the outer limits of the Bollinger Bands indicator channel, which act as dynamic support or resistance levels. These boundaries serve as a reference point for opening and closing positions according to the strategy. The combined use of the signals of the three indicators is designed to help find promising trades in the market.

How to set up indicators for trading the “Right Moment” strategy

To search for trading signals using the "Right Moment" strategy, you need to install three indicators - Williams' Percent Range, Relative Strength Index and Bollinger Bands - on the chart of a financial instrument. In popular MT4 and MT5 trading platforms, you can install indicators on the chart through the main menu: Insert / Indicators.

In their settings window, select the following options

• Bollinger Bands: period 20, deviation 2.
• Williams' Percent Range: period 25. The overbought and oversold zones are set at -20 and -80, respectively.
• Relative Strength Index (RSI): period 5. The overbought and oversold zones are set at 70 and 30, respectively.

How to buy with the “Right Moment” strategy

The conditions for opening a buy position:

1. The Williams' Percent Range and RSI indicators should fall into oversold territory, below -80 and 30 levels respectively.
2. When the RSI crosses the 30 line upwards, there should be a confirmation from Williams: the indicator line crosses the -80 line upwards. At this point the price should be near the bottom of the Bollinger Bands channel.
3. A buy position is opened and the Stop Loss is set at the local low on the price chart. Loss is somewhat disappointing, as it turns out to be larger than Take Profit, which is not always right from the risk management point of view.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

How to Create an Investment Portfolio on Forex?

Author : Anna Rostova

Dear Clients and Partners,​

How to become an investor? Where to start and what is an investment portfolio? Let’s try to see into the matter and find out what exactly a person, who decided to start investing, should do.

An investment portfolio is a set of financial instruments. The purpose of acquiring such instruments is of course making profit in the future. Options, stocks, futures, metals, real estate, currencies, and many other assets – all of them can be considered as financial instruments.

The purpose of any investor is getting maximum profit while incurring minimum risks. Unfortunately, it doesn’t always happen this way. In order to balance possible profit and losses, investors diversify their assets, which means that they don’t invest all their money in one particular instrument, and allocate their funds into several different items.

Investment portfolio on Forex

For example, we’ve decided to create an investment portfolio using the instruments traded on the forex market (it’s possible and happens quite often). What we do in this case is the following: decide on the invested sum and the profit we’d like to receive, and then explore, explore, and once again explore all available options.

Let’s get into more details. First of all, we must decide on the amount of funds we’d like to invest in this project and the amount of profit we’d like to receive. It makes sense to set minimum thresholds and not try to get all at once. There are several types of investment portfolios, with the most popular being conservative and aggressive. The first one implies getting a small positive result with minimum (if possible) risks. One shouldn’t expect this investment portfolio type to yield extra high profit – your profit will increase slowly. The second type is an aggressive investing, which may earn you a lot of money, but risks and possible losses in this case are much higher as well.

When investing in instruments of the currency market, investors supposedly create an aggressive type of portfolio. It happens because most of currencies and metals are highly volatile, in other words, their prices are very mobile and this fact can be successfully used to get investment revenue.

Creating a portfolio

Now let’s try to figuratively group several instruments for our portfolio. Of course, it will be approximate, because all investors have their own preferences. First off, we should start with those currency pairs, which are trading at lows: they are more likely to grow than those trading close to highs. When it comes to investments, it might be better to buy than sell.

After that, one should take the correlation into account, which is the way how currency pair movements depend on each other. From this point of view, it might be dangerous and unwise to buy two instruments that are trading in almost the same direction, because if they start falling, your losses may be doubled. On the other hand, buying two instruments that are moving in different directions might be rather dangerous and risky as well. For instance, in most cases EUR/USD and GBP/USD are moving in the same direction, so if we buy them in the same volume, both pairs will simultaneously be either profitable or loss-making. In this light, opening positions in these instruments in different directions is not a good idea, as the profit received from one of the pairs will only compensate losses incurred from the other one.

Long-term investments

So, what should we do then? The most viable option will be creating a long-term investment portfolio with currency pairs or metals, which are not correlated to each other. For this purpose, one may use cross rates as well, despite their spreads being quite wide. However, it won’t matter much for long-term or mid-term investments.

After your investment portfolio is created, it’s necessary to decide how to allocate your invested money, in percentage terms. For instance, you may equally divide your money into all instruments or invest more funds in some particular ones. In each case, investors make their own decisions, because there is no any universal schemes for this.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

How to Trade the Crab Pattern

Author : Victor Gryazin

Dear Clients and Partners,​

In this review we will get acquainted with the harmonic Crab pattern. We will consider the stages of its formation on the price chart, and the strategy for its use in trading. We will compare it with the Deep Sea Crab pattern.

What is the Crab pattern?

This harmonic pattern was introduced to the trading community by Scott Carney in 2000. Its structure is very similar to many popular harmonic patterns, including the famous "Gartley’s Butterfly". The difference is in the different Fibonacci ratios: in the hero of our material, the final segment has a longer extension.

The harmonic Crab pattern consists of five points (X, A, B, C and D) and four price swings (XA, AB, BC and CD). The last one is formed by the point D, which is a potential reversal area. Its appearance is considered as a signal to open the positions for buying or selling. The appearance of the pattern on the chart signals the end of the current price impulse and the forthcoming reversal.

Stages of formation

• XA is the first impulse of the price movement on the chart.
• AB is the correction from the first XA movement, ranging from 38.2% to 61.8%.
• BC - can range from 38.2% to 88.6% of the length of AB.
• CD, the longest wave, ends around the 161.8% retracement level of XA and is an extension of 224-361.8% of VS.
• Point D is the final stage of formation.

A pattern can form on different timeframes. It can often represent a correction area, after the end of which the preceding trend is likely to continue. Relevant for trading in forex, stock, commodities and other financial markets.

How a bullish Crab pattern is formed

• The first impulse of the XA price movement is upward.
• On the AB section, the price reverses and declines by 38.2-61.8% from XA.
• On the BC section, the price reverses again and rises to 38.2-88.6% of AB.
• On the CD, the price is actively declining and reaches about 161.8% of the XA. This is the longest wave.
• After the formation of the D-point, an upwards reversal and a further rise is expected.

How to trade the bullish Crab pattern

• A buy position can be opened once the D-point has been formed and quotes have shown an upward reversal.
• The Stop Loss is placed just below the pattern low at point D.
• The points X, B, C and the maximum of the model at point A can be used for Take Profit.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

Trading on Forex – A Primary Source of Income

Author: Dmitriy Gurkovskiy

Dear Clients and Partners,​

There are a lot of discussions about trading within the boundlessness of the Internet, both in conventional businesses and state-financed organizations. People say and write a lot of different things. More often than not, they are sure that trading can’t be regarded as a primary source of income. Arguments in these judgment call are as follows: “No matter how professional, cold-blooded, or wise you are, all these personal qualities won’t help you if markets don’t give you a chance to earn money, because markets offer such chances only at some particular periods of time. And if you trade every day, you are doomed to failure.”

Forex stereotypes

Many people have similar views on the matter and say that trading may be considered only as some kind of a part-time activity in addition to one’s main day job, occupation or business, because like we’ve said before, markets offer chances to earn money only at some particular short periods of time, while the rest of the time is simply wasted. According to these discussions, to avoid wasting time one should think of trading as a secondary activity (income, earnings) or get a job at brokers, investments/asset management, etc. Independent, so called home-made, traders and investors are foretold only falling into a decline or losing all their money and going broke.

Of course, you can agree or disagree with this opinion, it’s your private stance. However, no one prohibits you to think of about a possibility of turning your personal trading activities on global financial market into something more than just a leisure, an opportunity to earn 100 extra bucks into a real business or a job that earns you considerable money. That’s why, I suggest you to decide on your approach to trading, its daily schedule, and the level of income you want to get from it to cover all your subsistence needs, because these are the criteria that you usually follow when starting your own business or applying for a job.

And of course, you have to make up your mind about an average weekly/monthly income. Probably, the income level issue may be the most essential for many of people, but it shouldn’t become a “stumbling block”, because trading is a complex matter, not a complexing one. Also, this issue may bring down to earth some beginners, who want to start trading with 100 USD and expecting to see 1,000 USD on their account balance at the end of the month. Yes, the reality is that stability and longevity on the market are controlled by modesty and common sense.

Trading system

Well, first things come first. If you plan a steady monthly income of 1,000-2,000 USD, you must have 10,000-20,000 USD on your account balance on the first day of trading. Of course, this level of income is possible if you trade very carefully and in a risk averse way. If you’re more advanced in risk management, you can start trading with 5,000 USD and hope for 1,000-1,500 USD a month. In other words, this is a basis for “home/couch” trading. Still, you must always remember that your entire work should be based directly on your trading system! It means that your trading system should adapt to all periods of market activity and earn 40-50 pips every day. Given this, we can assume that a daytrader’s standard trading volume is 0.2-0.4 lots.

Yes, it can! Your task reduces to find and track a trading instrument that can match this speed and distance and then just copy successful trades/deals. At the same time, you should realize that not all deals will be profitable, that’s why think of increasing profitable periods to cover losses suffered during drawdowns. If you survive this rhythm/schedule for at least 6 months, you can count on a glittering future and start your career as an asset management company in CopyFX and RAMM. You can create trader communities to attract investors and manage big money. This scaling, if not to say socializing, method, will help you to avoid risks of asocial burnout due to lack of social communication, which is a very common thing for retail traders and investors.

Conclusion

To put it shortly, one can draw the following conclusion: it is possible to turn trading into a primary source of income if you create your own strategy and abide by its rules. However, if you don’t have what it takes yet, I mean strategy, knowledge, skills, money, don’t rush to quit your job. Just continue practicing, accumulate experience and money.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

RoboForex: changes to the trading schedule in view of the Christmas and New Year holidays

Dear Clients and Partners,​

We are informing you that there will be some changes to the trading schedule during the Christmas and New Year holidays.

This schedule is for informational purposes only and may be subject to further change.

MetaTrader 4 / MetaTrader 5 platforms

Schedule for trading on DE40Cash

• 26 December 2022 – no trading
• 27 December 2022 – trading as usual

Schedule for trading CFDs on US stocks

• 26 December 2022 – no trading
• 27 December 2022 – trading as usual
• 2 January 2023 – no trading
• 3 January 2023 – trading as usual

Schedule for trading on other instruments

• 26 December 2022 – trading starts at 10:00 AM, server time
• 27 December 2022 – trading as usual
• 1 January 2023 – no trading
• 2 January 2023 – trading as usual (cryptocurrencies)
• 3 January 2023 – trading as usual (all instruments)

R StocksTrader platform

Schedule for trading on GER40

• 26 December 2022 – no trading
• 27 December 2022 – trading as usual

Schedule for trading on CFDs on UK stocks and UK100 index

• 24 December 2022 – trading stops at 2:30 PM, server time
• 26 December 2022 – no trading
• 27 December 2022 – no trading
• 28 December 2022 – trading as usual
• 30 December 2022 – trading stops at 2:30 PM, server time
• 2 January 2023 – no trading
• 3 January 2023 – trading as usual

Schedule for trading on CFDs on German stocks

• 26 December 2022 – no trading
• 27 December 2022 – trading as usual
• 30 December 2022 – trading stops at 3:00 PM, server time
• 31 December 2022 – trading as usual
• 2 January 2023 – no trading
• 3 January 2023 – trading as usual

Schedule for trading on CFDs on Austrian stocks

• 26 December 2022 – no trading
• 27 December 2022 – trading stops at 3:15 PM, server time
• 28 December 2022 – trading as usual
• 2 January 2023 – no trading
• 3 January 2023 – trading as usual

Schedule for trading on CFDs on EU stocks

• 26 December 2022 – no trading
• 27 December 2022 – trading as usual
• 2 January 2023 – no trading
• 3 January 2023 – trading as usual

Schedule for trading on other instruments (including CFDs on cryptocurrencies)

• 26 December 2022 – trading starts at 10:00 AM, server time
• 27 December 2022 – trading as usual
• 1 January 2023 – no trading
• 2 January 2023 – trading as usual (cryptocurrencies)
• 3 January 2023 – trading as usual (all instruments)

cTrader platform

Schedule for trading on all instruments

• 26 December 2022 – trading starts at 10:00 AM, server time
• 27 December 2022 – trading as usual
• 1 January 2023 – no trading
• 2 January 2023 – no trading
• 3 January 2023 – trading as usual

Please take note of the above trading schedule changes when planning your trading activity.

Sincerely,
RoboForex team

 

[Vlad RF]

What is the Cost-of-Living Index?

Author : Victor Gryazin

Dear Clients and Partners,​

In this article, we will look at the Cost-of-living index (COLI), and find out what it is useful for. We will look at what items of expenditure it takes into account, how it is calculated, and how it differs from the Consumer price index (CPI).

What is the cost-of-living index?

The Cost-of-living index (COLI) is a price index that captures changes in the relative cost of living over time and across regions. It characterises changes in the prices of consumer goods and services in relation to a fixed set of goods and services that make up the basket of goods and services for certain categories of the population.

COLI is an estimate of how much money a person needs to live in a certain place. It is therefore a widely used indicator to compare living standards in different regions.

The index is not an official government statistic but is calculated by various private companies around the world. This indicator can help a person determine whether the income or wages they receive are sufficient to cover basic expenses where they want to live and work.

How the cost-of-living index is calculated

There are many different methodologies that have been developed to calculate the cost of living index. The general formula compares the costs to the consumer of one year's prices with the equivalent costs of another year's prices. In a simplified format, it looks like this:

P = C(u,p1) / C(u,p0)

• P is the cost-of-living index
• C(u,p1) is the cost to the consumer for a given set of prices p1
• C(u,p0) is the cost to the consumer for a given set of prices p0

Many COLI calculations use a "base" cost of living, which is usually taken as 100. This base can be the cost of living in Chicago, for example, or an average of several regions. Other regions are measured in relation to the baseline. If it is 20% more expensive on average to live in New York than in the "base" city, the COLI for New York would be 120.

It is also important to consider the average income for the chosen region. For example, a city in the south of the US may have a lower cost of living than most cities on the east or west coasts. However, the average income in that southern city may be lower than the cost of living there.

The difference between COLI and CPI

The government and the Central Bank of a country are usually guided by changes in the official, regularly published Consumer Price Index (CPI) when estimating the rate of inflation. This is essentially the change in the value of a basket of basic goods and services chosen to measure price growth in the economy.

The COLI is a cost-of-living measure that more fully accounts for changes in consumption expenditure associated with current economic conditions. It estimates the entire set of goods and services consumed by households, also taking into account those received free of charge from government or non-profit institutions.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[xidose]

if my orders stay opened during the holidays season will be price gap in between and over night comission will be deducted as well?

 

[Vlad RF]

Intraday Trading – What is It?

Author : Anna Rostova

Dear Clients and Partners,​

Day trading or intraday is short-term transaction on stock exchanges performed during the same trading session without roll-overs. This way of trading is quite peculiar, because this approach requires traders to consider all incoming information, such as news, statistics, external factors, and a lot of other events. Market responses can be very quick, but short-term at the same time. This is exactly what is interesting for intraday investors. When trading within the same trading session, they have an opportunity to save their time and get profit in much shorter periods.

Nowadays it’s safe to say that intraday trading is a major driving force on financial markets. The current statistics shows that In the USA, where intraday trading is allowed since 1996, about 70% of intraday investors were losing their profit on NASDAQ stock exchange during the period from 1996 to 2000. Why? Because traders, who wanted to increase their margin, increased their risks as well. This is a subtle aspect of intraday trading.

Capital and risk management

Below you will find a lot of theoretics about this, but the only thing that should be remembered for sure – no positions are rolled over. The position opened today must be closed today. In order to minimize risks, trades must have a good knowledge of daily volatility (it can be figured out in advance by monitoring the market to know what to expect). Of course, there are life hacks, for example, the time, when the Asian session is ending and the European is starting, is pretty good for opposite positions.

When managing risks, it’s very important to remember that daily limitations for profit and losses is a necessary and essential aspect for intraday traders.

Day trading strategies

As a matter of fact, there is only one strategy: close all open transactions before the current trading session is over. To scratch beneath the surface, intraday strategies may be of two types, scalping and news trading. Let’s discuss both of them in more details.

Scalping is very simple and efficient. To use this method of trading, you have to set a clear threshold to close an order. If your plan implies “5x5” approach, then in case the current trend changes by 5 points in any direction, your order must be closed (with profit or loss, it doesn’t matter). In one case a scalper will get profit of 5 points, in the other one – lose the same amount. To minimize risks when the current trend starts moving in the wrong direction, traders use technical analysis of an asset behavior and place Stop Loss orders quite close to the price. Taken together, these things may really prevent traders from running many risks. One doesn’t have to follow “5 points rule” – as time passes and experience comes, traders find their own best way to close orders. The key thing is to close them no matter what.

Another thing that should be mentioned here is that liquidity of an asset is very essential for intraday trading. One is recommended to work with the assets that are highly liquid or the assets with strong trends and higher volatility. These factors are required to expand trading opportunities to earn more during the day.

Advantages and disadvantages of intraday trading

Intraday trading is a very energy-consuming process, which may be very challenging and exhausting, especially at first. Psychoemotional state is very important. When they talk about being a “cool head” and “getting rid of all emotions”, they mean intraday trading. When an intraday order is open, there won’t be time to calm down. One should remember this from the very beginning.

In order to handle emotions, one should limit risks and decide on the part of deposit one is going to use on a particular day. By opening an order worth 5-6% of the entire portfolio, a trader skates on really thin ice. For starters, 1-2% of the deposit will be enough. As experience comes, this number can be safely increased.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

What is Scalping on Forex?

Author : Dmitriy Gurkovskiy

Dear Clients and Partners,​

Who in the world of trading hasn’t heard of scalping? Probably, you may know it as pipsing, but all traders surely heard a lot of different things about it, some of them tried it in practice, others are just going to, that’s why I guess it would be interesting to go into details of such thing as scalping.

Scalping definition

Let’s start with the definition. Scalping is a type of a trading strategy for trading on currency, stock and commodity markets. The distinctive feature of scalping is closing an order when the profit reaches several pips. This definition is offered by a lot of public trading-related web resources. In addition to that, some of they say that a scalping position is held from several second to several minutes. Under this approach to scalping, it may be regarded as an element of a high frequency trading.

We can go deep in the theme and “lift the curtain” over scalping, which is considered by many traders as almost perfect and advanced method of trading.

The question above helps expand the concept of scalping as it is, because the period of holding an order is too small, the profit may be almost equal to spread expenses, and the risk level for a position may by far exceed the potential benefit. In today’s technology intensive world, computers are vastly superior to enthusiasts of manual trading, but this competition allowed traders to expand the border of scalping as a trading instrument.

One should realize that there is a difference between scalping on the Forex and stock markets. In case of the former, traders use additional tools, such as Time & Sales and Depth of Market. Some Forex brokers make concessions and reduce commissions for scalpers. However, efficiency of scalping on stock markets even with additional helpers is rather questionable. The key thing in trading is the market liquidity, while scalping can be used even during periods of low volatility and liquidity.

Scalping strategies

Most scalping strategies are based on breakouts of support and resistance areas, for selling and buying respectively. Additional tools that are used by traders for determining support/resistance levels are line charts embedded in trading platforms (MT4, MT5, R WebTrader, etc), as well as fractal indicators, Parabolic SAR, and almost full range of Envelope-type indicators, which form mobile support/resistance levels taking into account volatility and averaged price movements per specified numbers of candlesticks.

The figure shows an example of scalping strategy using the VoltyChannel_Stop indicator. The logic of this system is based on a breakout of the indicator’s endpoint as a signal to open an order. The price movement range after the control level had been broken was from 4 to 34 pips, which is quite enough for a scalper. The only thing that may raise questions is where exactly every scalper intends to close their order.

In other words, possible profitability can be calculated in some specific range. We should also note that scalpers use quite large parts of their deposits in trading, from 10% to 50%. Depending on the opening/closing strategy, a scalper opens from 5 to 50 orders in case of constantly being in front of a computer and trading very actively. Consequently, we can calculate that scalper’s daily profitability may vary from 2% to 100%, but it requires a lot of work without any breaks.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

Harmonic Patterns in Trading

Author : Victor Gryazin

Dear Clients and Partners,​

In this article, we will consider the use of harmonic patterns in trading. We will get acquainted with the history of their emergence, and the principles of their formation, and tell you about the most popular patterns.

What are harmonic patterns?

Harmonic patterns are graphical price patterns based on a combination of Fibonacci ratios and Elliott wave elements. The basis for such patterns was laid down in the works of Harold Gartley, a renowned analyst, and technical analysis specialist. His book "Profits in the Stock Market" describes his trading methodology in detail.

The harmonic patterns became widely known and popular at the end of the last century when Gartley's works were further developed by his followers – Scott Carney, Larry Pesavento, and Bryce Gilmore. They have refined the description of already known models, and also identified and described new ones.

Harmonic patterns are versatile: they can be used to trade on different timeframes and financial markets. The most popular are Gartley, Butterfly, 5-0, Crab, ABCD, Bat, and Shark.

Gartley pattern

The Gartley pattern is one of the first harmonic patterns described. It is also called "Gartley's butterfly" because of the similarity in the outlines of price movements, and the Fibonacci lines on the chart resembling the wings of a butterfly.

Stages in the formation of the Gartley pattern:

• XA is the first impulse of the price movement on the chart
• AB is the correction from the first XA movement at approximately 61.8%
• BC can be 38.2%, 50%, 61.8%, 78.6%, 88.6% of the AB wavelength
• CD can be 127.2%, 146%, 150%, and 161.8% of the BC wavelength and ends around the correction level of 78.6% of the XA wavelength
• The D-point is the final point in the pattern, where a reversal of quotes is expected

Butterfly pattern

The Butterfly pattern, created by Bruce Gilmore, is very similar to the one mentioned above. Therefore, understandably, many traders confuse the two.

Stages in the formation of the Butterfly pattern

• XA is the first impulse of the price movement on the chart
• AB is the correction from the first XA movement at approximately 78.6%
• BC can range from 38.2% to 88.6% of the AB wavelength
• CD can range from 161.8% to 224% of the BC wavelength and ends at about 127.2% of the XA wavelength
• The D-point is the final point in the pattern, where a reversal of quotes is expected

5-0 Pattern

The 5-0 pattern was first described in detail in Scott Carney's book "Harmonic Trading: Volume Two", which was published in 2007. Visually, it resembles the Head & Shoulders and Wolf Waves patterns.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

11 Rules of Effective Capital Management On Forex

Author Timofey Zuev

Dear Clients and Partners,​

There is no successful Forex player that has achieved a good and stable result without an efficient money management system. Wise and weighted up capital management allows for playing on the high-risk market thanks to marginal trading. In this article we are going to have a look a the main rules and principles of money management on Forex.

Rule № 1

The size of the margin must not exceed 10-15% of the deposit.

This rule helps calculate the margin for the orders to open. The remaining sum is necessary for normal work of the trader and for avoiding force majeure on the market: Forex may behave unexpectedly.

As for the suggested margin, its maximum size is not always the same. For example, Murphy suggested that it should not exceed 50%; however, other sources advise to stick to the margin amounting to 5 to 30% of the deposit. Anyway, the approach should go in line with the initial size of the deposit, as long as the smaller it is, the harder it is to go along the conservative way.

Rule № 2

The investment into one instrument or a group of assets with high correlation coefficient must not exceed 15% of the deposit.

This helps diversify risks and avoid strong dependence on the result of the trade.

On Forex there are groups of instruments as yen pairs, groups of allied currencies like EUR/USD и GBP/USD, AUD/USD и NZD/USD, metals like XAU and XAG and so on. Currency pairs of one group normally move in the same direction, slightly lagging behind one another. Thus, large investments into one instrument or the assets of one group go against the rules of risk control. The principles of efficient funds use are also to be kept in mind. Money should be allocated in such a way that a trade resulting in a large loss does not rid the trader of the whole deposit.

Rule № 3

Each instrument must imply a risk no bigger than 5% of the deposit.

This rule seems rather arguable, and its feasibility to a big part depends on the size of the trading capital. The risk of the trade may vary from several tenths of a percent to 10-20%. It does not relate to traders who do not regulate risks at all, the only limit being the size of their deposit.

If we turn to classics, Elder suggested 1.2-2.0% risk for one trade, Murphy – 5.0%.

Rule № 4

Define the level of diversification of instruments.

Regardless of diversification being one of the most efficient ways of protecting money, one should not overuse it. There should be a certain balance between concentration and diversification of assets. Excess diversity of the instruments used in trading makes the trader lose their concentration which may lead to untimely reaction to the market movements and a decrease of productivity.

Allocation of assets to 5-6 different instruments of various groups is considered most efficient. The bigger the coefficient of inverse correlation is, the higher is the diversification level.

Rule № 5

Put Stop Loss orders.

The main purpose of Stop Loss order is to limit the trader’s losses. Some put them every time opening a trade, others do so only for the time of their absence from their workplace. However, it is always worth remembering that Forex is an unpredictable market, and the movements of currency pairs can be sharp and quick. As a consequence, traders may suffer excessive losses, because they may not react in time, even sitting in front of the computer screen.

The size of a Stop Loss depends on two factors: the size of the loss that the trader is ready to suffer and the situation on the market.

Let me give you an example. The trader’s deposit is 1,000 USD. The risk of a trade is 5%. The volume of the trade is 0.02 lot. In such circumstances they can afford a loss of 50 USD, and in case the price is 0.1 USD per 0.01 lot for a pair, as, say, with GBPUSD, the Stop Loss should be no farther than 250 points from the entrance to the position.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

Gann Concept in Trading: Fundamentals, Algorithm

Author : Timofey Zuev

Dear Clients and Partners,​

In this article we shall discuss the trading method of William Delbert Gann. While alive, Gann managed to become a legend thanks to his exact market forecasts. First, a bit of his biography. He was born in the family of a poor farmer that cultivated cotton. In early childhood William got to know that the family’s income depended on the prices on “some market”. So, he was eager to know, how and why the prices for cotton change. Later this desire led him to the New York stock exchange, where he opened his broker company 5 years later. However, real success found him when he forecast the capitulation of Germany in the World War I.

Gann became known for his “sniper” forecasts based on his unique trading method, which later transformed into a whole concept.

As a great sportsman of present time said, the main thing that is left after a person is their legacy. Well, Gann left a great intellectual baggage after himself. Perhaps, not every trader knows his name, but each and every has at least come across the phrase “Gann’s theory”, not to speak about William Gann’s many followers.

Gann’s theory: main theses

The main thesis of Gann’s theory is based on the postulate about the necessity of the balance between the price (quotation) and time.

Financial markets are very dynamic in essence, which, naturally, makes them attractive for speculators. The level of volatility (variability) of markets can be different. Rate fluctuations on Forex can differ in frequency and amplitude. Meanwhile, Gann’s theory states that in any price change one may see certain patterns. In other words, though chaotic at he first sight, fluctuations of quotations presuppose a certain degree of order in their structure. The ability of a speculator to identify this data timely guarantees that their forecasts will have a real basement and come true in the end. As the author of the theory said: “Future is a repetition of the past”. Which means that all actions on the market are cyclic and can be forecast.

An argumentative forecast of the market dynamics is an indisputably important factor of success of any speculative trade.

Gann’s theory states that a very important moment of the market analysis is to define the so-called balance points correctly. These points of balance between the price and time let the player forecast future rates and detect the priority vector of further market dynamics.

Gann developed a lot of instruments meant to help the analyst (trader) define the aforementioned points:

• using patterns, formed by market fluctuation patterns;
• using “angles” and “squares” of time and price (quotations);
• studying the factors of time.

Apart from this, on the basis of William Gann’s drafts, several indicators have been developed; they lay the foundation of the market analysis according to Gann’s method. By the way, Gann Grid is integrated into each MT4 and MT5 terminal, which proves the genius of Gann and his theory (Insert-Gann):

According to the basic theses of Gann’s theory, financial market can be interesting for speculations in two typical cases only:

• when time goes ahead of the price on the chart;
• when the price goes ahead of time on the chart.

If the market remains in perfect balance for a long time, it is of no particular interest for trading as no significant movements are to be expected.

The essence of Gann’s theory

On the whole, Gann’s theory is based on drafting certain geometrical patterns and angles. When analyzing the market according to Gann, the main attention is paid to the interrelation of time, price and the patterns. Thus, for successful market forecasts one should know how to use squares, circles, angles, lines etc. What is more, each figure is to be used at the right moment and in the right order.

All the aforementioned reveal the main drawback of the theory – it does not suit inexperienced traders. Some traders use the main principles of the theory and certain indicators separately, which is wrong in the essence. For successful use of Gann’s theory all its components should be applied in complex, because they supplement each other, and the trader should perform the whole series of actions when analyzing market movements.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

RoboForex: upcoming changes to the trading schedule in view of Martin Luther King Jr. Day in the US

Dear Clients and Partners,​

We are informing you that changes will be made to the trading schedule due to the Martin Luther King Jr. Day in the US.

This schedule is for informational purposes only and may be subject to further change.

MetaTrader 4 / MetaTrader 5 platforms

Schedule for trading on CFDs on US indices (US30Cash, US500Cash, and USTECHCash) and CFD on the Japanese index JP225Cash

• 16 January 2023 – trading stops at 7:45 PM server time.
• 17 January 2023 – trading as usual.

Schedule for trading on CFDs on Metals (XAUUSD and XAGUSD) and CFDs on oil (Brent and WTI)

• 16 January 2023 – trading stops at 7:45 PM server time.
• 17 January 2023 – trading as usual.

Schedule for trading on CFDs on US stocks

• 16 January 2023 – no trading.
• 17 January 2023 – trading as usual.

R StocksTrader platform

Schedule for trading on US stocks and ETFs

• 16 January 2023 – no trading.
• 17 January 2023 – trading as usual.

Schedule for trading on CFDs on US stocks and ETFs

• 16 January 2023 – no trading.
• 17 January 2023 – trading as usual.

Schedule for trading on CFDs on US indices (US500, US30, and NAS100)

• 16 January 2023 – no trading.
• 17 January 2023 – trading as usual.

Schedule for trading on CFDs on Metals (XAUUSD and XAGUSD) and CFDs on oil (WTI.oil, BRENT.oil)

• 16 January 2023 – no trading.
• 17 January 2023 – trading as usual.

cTrader platform

Schedule for trading on CFDs on Metals (XAUUSD and XAGUSD)

• 16 January 2023 – trading stops at 7:45 PM server time.
• 17 January 2023 – trading as usual.

Please take note of the above trading schedule changes when planning your trading activity.

Sincerely,
RoboForex team

 

[Vlad RF]

How to Start Trading on a Demo Account?

Author : Andrey Goilov

Dear Clients and Partners,​

Trading is a way of conquering financial markets to make a good profit by applying your skills and knowledge. We can trade from any place on the globe, having neither a boss nor subordinates, which is characteristic of very few jobs. Many beginners rush at trading, having no real experience and thus compromising their money, which, of course, might lead to poor results.

All beginners are attracted by high percents and wide perspectives often described by experienced traders in their books and blogs. Financial markets do provide such opportunities but you have to take into account your experience and get prepared for systematic trading to make a profit in the long run.

To gain experience and enhance your future results, you should start with a demo account, where you can test your trading system without risking your real money.

What is a demo account?

A demo account is an almost-normal trading account, with real quotations and financial instruments; the trader can open and close their positions following the market. It is identical to a real account in the quotations and the size of positions. The only difference is that the capital is virtual, i.e. the trader does not deposit such an account, only chooses a sum when opening a position, which is later shown in trading.

Naturally, you cannot spend the profit you make, however, you can feel like you are a real trader, practice your trading methods, and make sure you are psychologically prepared to various market situations.

How to start trading on a demo?

After you receive your access data, which are the trader's login and password, you type them in the terminal. For example, if you are using MetaTrader 4 click "File" — "Access account" and introduce your data. After you accessed the account successfully, in the "Trade" section you will see your balance. Now you can start trading.

To open your first trade, click "New order", choose your financial instrument, choose your direction depending on what is expected (a decline or growth), and click "Sell by Market" if we are forecasting a decline or "Buy by Market" if we are waiting for growth.

How long do you trade on a demo?

There are a few opinions on this issue, most of them depending on the timeframe you prefer.

1. If you trade minutes, it is advised to stick to your demo account for about a month. If you use H4s, you should spend some three to four months on trading. The difference is explained by the fact that on minute charts you receive lots of signals in a small period, such as a week; conversely, trading H4s, you can receive few to no signals at all during the same week.

2. In most cases, you can have good signals in a flat, but as soon as a trend begins, you lose your funds. However, it may happen vice versa: in a downtrend, the signals are good but in a range or a bullish trend, they are executed poorly. That is why it is so important to sample trading at different stages of the market.

However, it should be remembered that a demo account will not get you emotionally prepared to trading large real sums. The psychological pressure will be quite strong at the moment of transition to a real account; what is more, to stick to the rules of your system on a real account, you will definitely need some experience with real money.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

What is a Gap? Main Types and Gaps Trading

Author : Igor Sayadov

Dear Clients and Partners,​

What is a Gap?

In order to get a full idea of a Gap, let us have a look at the stock market as it features the full range of the peculiarities of this phenomenon. Our example will be the stock index DAX, describing the state of the German economy. It is comprised of the indices of 29 biggest German companies; in a terminal, it is market as DE 30.

The Gap is shown in the chart above as yellow rectangles. This is a practical gap in the flow of quotations reflecting a serious difference between the opening and closing prices in trading sessions. A quick look at the chart captures a large number of such phenomena. This means that if we classify them we may find a lot of opportunities to use them in trading. But first, let us talk about the reasons which a Gap emerges for.

Reasons for the Gap emergence

As a rule, all markets close Friday evening and open Monday morning. During this time, major events may occur in the world: natural and industrial disasters, terrorist acts, as well as elections and speeches of political leaders. All this may make investors reprice the assets abruptly. Thus, pending orders accumulate; upon market opening, they trigger at the opening price without due coverage because of the lack of demand/supply. A weekly Gap, which we can see in the chart, emerges. Of course, such Gaps are featured on daily as well as hourly timeframes, too. Gaps inside a daily session also exist; however, it has no connection to the news, and we shall discuss this phenomenon in subsequent posts about gaps and strategies. And now let us try to classify weekly Gaps.

Types of the Gap

Depending on the direction, there are the following types of the Gap:

• Downward Gap appears when the opening price of a candlestick is much lower than the closing price of the previous candlestick.
• Upward Gap appears when the opening price of a candlestick is much higher than the closing price of the previous candlestick.

How to trade Gaps?

There is a classic, conventional way of trading Gaps. Seven out of ten Gaps are traded on closing. The remaining three are traded on the continuation of the trend. How should a trader tell one type from the other? This is what indicators are used for.

Firstly, as has been said before, volumes can give a hint, but not an exhaustive one. Secondly, even a simple Moving Average (MA), following the trend, may be of much help.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

What is OPEC, and How It Influences Crude Oil Prices

Author : Victor Gryazin

Dear Clients and Partners,​

In this article, we will find out more about OPEC and its activities. We will look at the history of OPEC, and how it was established. We will also try to analyse how the organisation influences world crude oil prices and demand.

What is OPEC?

The term OPEC (Organization of the Petroleum Exporting Countries) refers to a group of thirteen of the world's largest oil-exporting countries. The organisation was founded in 1960 to coordinate the petroleum policies of its member countries and the technical and economic cooperation among them. OPEC is headquartered in Vienna, where the executive body, the OPEC Secretariat, manages the day-to-day operations of the organisation.

OPEC was formed in response to the Seven Sisters alliance, which included major international crude oil corporations such as British Petroleum, Exxon, Mobil, Royal Dutch Shell, Gulf Oil, Texaco, and Chevron. They adversely affected the development of oil-producing countries whose natural resources were actively used.

According to OPEC's charter, the organisation's mission is to coordinate and unify the oil policies of its member countries and stabilise the crude oil market to ensure an efficient and uninterrupted supply of black gold. The basic principles guiding its work are oil for consumers, stable income for producers, and a fair return on capital for those who invest in the crude oil industry.

How OPEC affects the price of crude oil

Cartel members produce about 40% of the world's oil, and their exports account for about 60% of global trade in black gold. OPEC estimates that its member countries accounted for more than 80% of the world's proven oil reserves in 2021.

Members meet regularly to agree on how much crude oil to collectively sell on world markets. Each member country is assigned its own production quota to which it must adhere.

In case of sharp price fluctuations, OPEC can regulate quotas and, through them, the world's crude oil supply. If the price of the resource falls, OPEC reduces production – this reduces supply, thereby increasing prices. If the cost of crude oil rises excessively, the cartel can increase production to help bring prices down slightly.

For example, during the economic crisis of 2020 caused by the COVID-19 pandemic, oil became very cheap: at one point, futures went from $50 per barrel to even below 0. To stabilise prices, the OPEC+ participants decided to substantially reduce the volume of crude oil produced by cutting quotas. The supply level fell, which made prices rise gradually and rebound to the level of $50 per barrel by the end of the year. Eventually, the price of crude oil reached $100/bbl.

Criticism of OPEC

OPEC criticism dates back to the 1970s when the organisation was perceived as a monopoly. In 1973, member countries from the Middle East banned crude oil sales to the supporters of Israel in the Arab-Israeli conflict, namely the US, Portugal, the Netherlands, and South Africa. As a result, the price of a barrel of crude oil quadrupled by 1974 and impacted end-users negatively with fuel shortages, and the cost of petrol skyrocketed. The embargo seriously affected the US and other economies.

In response, Western countries in their attempt to reduce their dependence on OPEC stepped up efforts to produce oil offshore in the Gulf of Mexico and the North Sea. Subsequently, global oversupply and lower demand led to a significant drop in the price of black gold.

Still, some countries periodically accuse the cartel of collusion, through which they believe it manipulates the price of crude oil by interfering with market pricing.

The US has drafted a bill, NOPEC (No Oil Producing and Exporting Cartels), which would allow US courts to punish association members and their partners for manipulating production volumes. But the project is still in draft form.

The future of OPEC

The world economy needs stability and predictability when it comes to crude oil prices, production, and export volumes. Therefore, OPEC is likely to retain its position as a price regulator in the short term. The cartel's position looks quite stable in the context of the current energy crisis, and the expected growth in demand for black gold in the coming years.

It is worth noting, however, that in the long term, there are factors that could reduce the impact of the organisation's decisions on the global economy. These could include an increase in the supply of cheap shale oil by non-alliance countries and an increase in the use of renewable energy sources.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

How and Why the US Government is Promoting Green Energy

Author : Eugene Savitsky

Dear Clients and Partners,​

Today we will talk about the government's economic stimulus packages for clean energy in the US. We will look at the American Recovery and Reinvestment Act signed by Barack Obama in 2009, and the Inflation Reduction Act signed by Joe Biden in 2022. Let's analyse the impact of these laws on the development of green energy in the US.

America’s Recovery and Reinvestment Act

The US economy was harmed by the financial crisis in 2008. By 2009, unemployment had reached 10.2%, which marked the highest level in 25 years. The US government needed to take urgent measures to jumpstart the economy and create new jobs. In response to the 2008 Great Recession, the American Recovery and Reinvestment Act (ARRA) of 2009 was drafted and passed by the US Congress.

This act provided for investments of 90 billion USD in clean energy. At that time, this was the largest investment in the energy sector in the history of the United States. This economic stimulus package laid the foundation for dramatic changes in the energy system, such as massive electrification of land transport and an increase in the amount of energy from renewable sources.

Electrification of the automotive industry

In 2008, Elon Musk's Space Exploration Technologies Corporation (SpaceX) and Tesla Inc. (NASDAQ: TSLA), which were on the verge of bankruptcy, were rescued by NASA contracts. In 2010, the US Department of Energy granted Tesla Inc. a USD 465 million loan to back it up.

It can be assumed that the active development and growth of this car company have triggered accelerated electrification of the global car industry. Many manufacturers have supplemented their model ranges with electric and hybrid cars. According to EV-Volumes, the number of environmentally friendly cars on the road has increased from a few hundred thousand to nearly 27 million units over the past ten years.

In 2010, Tesla Inc. was the only publicly traded company in the US that focused exclusively on electric vehicles. The return on investment in this corporation by 2020, before the COVID-19 pandemic-induced crisis, exceeded 5500%.

Promoting alternative energy sources

According to the Energy Information Administration (EIA), from 2011 to 2021 inclusive, wind power generation increased by more than 200% to 132,753 MW. Solar power generation increased 88-fold to 93,151 MW. In addition, solar photovoltaic modules, which are capable of producing 1 W of energy, have fallen in price from USD 2.15 to USD 0.27.

At the time of writing, the largest US solar energy companies by market capitalisation were Enphase Energy Inc (NASDAQ: ENPH), First Solar Inc (NASDAQ: FSLR), and Sunrun Inc (NASDAQ: RUN). They were valued at USD 33.4 billion, USD 18.7 billion, and USD 5.9 billion, respectively.

With energy-saving technology becoming widespread, the classification of household appliances according to their energy efficiency level has emerged. Fluorescent lamps, which were previously used mainly in industrial plants, were introduced for home use. Moreover, less efficient and more energy-intensive incandescent lamps were gradually replaced by more economical LED lamps.

Why a law to reduce inflation was passed

The situation in the US today is very different from what it was after the 2008 crisis: unemployment is at a low level and inflation is in positive territory – there was deflation in 2009. However, the government was now facing a new challenge: the likelihood of continued high inflation.

This has been facilitated by reduced investment in conventional energy sources, which has led to a reduction in hydrocarbon production and a substantial rise in the cost of hydrocarbons. With hydrocarbons being used to generate electricity and transport products and components, their cost constitutes a significant part of the cost of many products.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

How to Trade the "Day Movement" Strategy

Author : Victor Gryazin

Dear Clients and Partners,​

In this review, we will look at the short-term strategy "Day Movement". It is based on identifying and trading a sideways price range (flat) formed before the start of the European trading session.

Description of the “Day Movement” strategy

The "Day Movement" strategy is b ased solely on technical analysis – it does not use any additional indicators. The main prerequisite for trading this strategy is the presence of a flat. The flat is a sideways price movement without a strict upward or downward direction. Local maximums and minimums of price fluctuations are located at approximately the same level, and quotes move within a limited range.

According to the rules of this strategy, it is necessary to wait for a sideways range to form on the chart before the start of the European session. The time of formation of the range is from 18:00 server time (GMT+2) on the previous day to 08:00 am on the current day. If the range is formed, two pending buy and sell orders are placed: Buy Stop and Sell Stop, 10 points above and below the limits of this channel, respectively.

In pending orders, it is possible to set Stop Loss and Take Profit values immediately or do this immediately after opening a position. The Stop Loss level for a pending buy order (Buy Stop) is set just below the bottom line of the price channel. The Stop Loss level for the order to sell (Sell Stop) is established a bit higher than the upper line of the side channel. The Take Profit is set twice as high as the distance to Stop Loss, but no more than 100 points.

If the price has not reached any of the pending orders by 15:00 (GMT+2), they should be deleted, or the expiry time should be set when the order is initially placed. The strategy applies to currency pairs such as EUR/USD, GBP/USD, and AUD/USD. The recommended time frame is H1. If the market is currently experiencing a strong trending movement, then this strategy should only be used in the direction of the trend.


How to buy using the “Day Movement” strategy

The conditions for opening a buy position:

1. A local sideways range (flat) should form on the H1 chart of the currency pair EUR/USD, GBP/USD, and AUD/USD. The time of its formation is 18:00-08:00 (GMT+2).
2. A pending Buy Stop order is placed 10 points above the top of the range.
3. The Stop Loss limit is set beyond the lower limit of the sideways corridor, and the Take Profit is set at twice the Stop Loss value.
4. If the price has not reached the Buy Stop order by 15:00 (GMT+2), it should be deleted or originally set for expiration at this time.

An example of buying by strategy

• On the H1 time frame of the currency pair GBP/USD, a sideways price corridor was formed between 18:00-08:00 (GMT+2) within the time frame set by the strategy, with the boundaries of 1.2253-1.2290
• A pending Buy Stop order is set 10 points above the top of the price range at 1.2300
• During the European session, quotations rise, breaching the upper limit of the range. A Buy Stop order is activated, and a buy position is opened. Stop Loss is placed beyond the lower limit of the range, and Take Profit is set at twice the Stop Loss.

How to sell using the “Day Movement” strategy

The conditions for opening a sell position:

1. On the H1 chart of the currency pair EUR/USD, GBP/USD, AUD/USD should form a local sideways range (flat). The time of its formation is 18:00-8:00 (GMT+2).
2. A pending Sell Stop sell order is placed 10 points below the lower limit of the range.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

Situational Vs. Systematic Trading: Which One is More Efficient?

Author : Andrey Goilov

Dear Clients and Partners,​

To be successful on financial markets, you need a neat trading system that will give you a clear understanding of how to enter and exit the market either with a profit or a loss. The rules of money management are also worth sticking to as they will psychologically prepare you for a series of losing trades as well as profitable ones.

Trading with a high-quality system is different from trading without one is also better in the sense that you do not need to think about whether the situation on the market is good enough to enter. You simply follow the rules and open or close trades, moving along the price chart.

Unfortunately, no one can tell if the current pattern will be executed or you will have to close it at the Stop Loss. To find out, you just have to trade the chosen method. Of course, you can use certain lifehacks and take measures to increase the probability of the execution of the signal, such as trading on a demo account until you receive two losing positions and only then moving to a real one. There are plenty of ways and methods of trading in the world, and every day millions of traders try to conquer the market.

In this article, we shall have a look at the pros and cons of both systematic and situational trading, discuss their differences, and speak about the practicability of each of them.

Systematic trading

Here, we are talking about a simple indicator-based system that will give the same signals to a dozen of different traders. As a rule, systematic trading does not allow for more than one opinion about the current market situation; the trader just needs to open a position and wait or to wait for a signal to enter the market.

In one of our posts, we spoke about the Ichimoku indicator. At first glance, it seems too complicated, but it boils down to trading the trend and waiting for the entrance signal to form. After that, we open a position and wait for the signals to form. For example, if the price breaks through the Ichimoku Cloud bottom-up, then you can buy.

If the price breaks through the Cloud top-down, the trend is likely to be descending, so you can sell. You do not need much time to make a decision, following the rules is enough.

Sure, in the times of a flat, you will be getting the breakaways all the time and either be opening and closing too many positions bringing no profit or suffering a series of insignificant losses. However, as soon as a trend begins, the market will be bringing the prices farther and farther from the entrance point. In such a case, you simply need to move the SL and hold the profit until the market reverses and closes your position.

Pros of trading along with the rules

It can often be heard that a good system is no more than 20% of success on the market while the remaining 80% is the ability to follow the rules of money management and stick to your own rules in the hard times, which will happen periodically.

As Victor Niederhoffer used to say: "In investments, as well as in life, the question is not whether you will be knocked down but when it will happen and whether you will manage to get up and keep fighting. The risk of failure is an essential part of human experience which is especially visible on financial markets dominated by speculation, which is the readiness to accept commercial risks".

A huge advantage of such an approach is the easiness of market analysis and decision-making. The lines have crossed — we sell, the lines have crossed back — we close the position and open a new one. If we hand the method to other traders, they will see the same crossings and will sell the same way due to the signal lines crossing. What is more, the trader feels less emotional pressure as he leaves decision-making to the system.

A drawback here is the behavior of the system in a flat. In such a situation, the prices remain in place, while the trader receives signals both to buy and to sell, constantly locking in losing positions.

Situational trading

This approach to trading and market analysis is different from the systematic one. In most cases, situational trading is graphic analysis where traders look for various patterns, such being, for example, Head and Shoulders, the Wolfe Waves, or any other pattern of technical analysis.

The difficult part here is that on D1 the Head and Shoulders pattern may be inversed, while on H1 it may be normal, and this is perplexing. What is more, if other graphic traders look at the very same chart, in the same lines they might see a Triangle or any other pattern, or simply say that it is not worth entering against the trend here.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team