How to Develop Winning Strategies for Boom and Crash

Spread the love

The main purpose of this article is to guide you on how to develop winning strategies for Boom and Crash. Admittedly, it doesn’t take long to develop a strategy, but it does take long to back test and refine it to suit your trading needs.

Learn the Secret of Forex Trading, Click here to download a free e-book now

If you are patient enough in back testing and trading your strategy on a demo account to refine it and monitor your trading history, you will make money in the long run. The truth that no one tells you is that every successful Forex traders has a good forex trading system; developed and refine over time to help the trader in making good trading decisions. So let’s begin:

How to Develop Winning Strategies for Boom and Crash

This short guide is intended to guide struggling forex traders and those who are new to the forex market. So, if you fall in this category, please read on to the end and remember to ask question using the comment box if you need further clarification.

What kind of trader are you?

This is the first question you should answer when you are planning on developing winning strategies for Boom and Crash. To help you answer this question, let me ask you some simple questions.

  • How long do you look at the chart?
  • How long do you hold or want to hold your trading positions?
  • Which timeframe do you use in analyzing your trades?
  • What is your risk capacity?

Answering this four questions correctly will guide you in deciding your kind of trader. Once you can establish this, you will be able to move to the next step.

Category One: Scalper

If you are a trader and you look at the chart many times in a day, and you hold your trading positions between seconds and some minutes you are a swing trader.

Category Two: Day Trader

If you are a trader and you look at the chart few times a day and you hold your trading positions up to 4 hours or more, you are a day trader.

When it comes to developing a trading strategy or system to guide your trading decisions, the focus of the swing trader is different from the day trader, because a swing trader will be looking at short term gains, that is trading trends within trends, while a day trader is looking at the larger picture.

For instance, on a buy trend, a swing trader can sell between short retracement and make quick profit, while a day trader will just place a buy, put stop loss and look at the chart few times in a day to modify his/her positions.

Key take away

  • Know the kind of trader you are.

  • Your kind of trader will determine your trading system

Which Indicator do you wish to use.

Whether you are a day trader or a swing trader, your main aim is knowing and determining the trend of the market early so that you can make profit from it. To determine the market trend, you need some indicators to guide you. While some traders uses Price action to determine their trades others need some form of indicators to guide them.

Read: The complete Guide to Price Action trading Strategies

If you are new to trading it helps if you can research and identify some trend indicators that can guide you in determining the trend direction. When I started trading, my number one indicator for trend was Moving average. I used Exponential Moving average 200 (price above 200EMA – Uptrend, below 200EMA – Downtrend). So that when the price is below 200EMA and not close to a major support, I look for sell opportunities. When it’s above 200 EMA and not close to a major resistance point, I look for buy opportunities. I also use moving average crossover at some point.

As I advance in trading, I move over to trendlines. Trendlines are good especially if you know how to draw it well. So look for trend following indicators that works for you.

After adding a trend following indicator, you need another indicator that will help you in confirming the trend. They say two good heads are better than one. For instance, If I am using trendlines for trends, I will also mark key points on the charts, these key points may include Order block (Supply and demand Zones) So that if the trend is an uptrend and I miss an entry, my goal is to wait for a little retracement then join the trend or wait for a major retracement and sell.

There is always some price action reaction at the Supply and demand zones, these reactions will guide my decisions. I have written down some conditions that I must follow at those zone, for instance, in an uptrend if it breaks a strong supply (resistance) zone, I will look at the market structure to spot the next supply zone and the reaction of the market to the zone in questions before making my decisions.

They are many other trend confirmation indicators like MACD, Stochastic, and RSI. Explore them and find out which one is good for you.

Key take Away

  • Find a trend indicator e.g., Moving average (moving average crossovers)

  • Find a trend confirmation indicator

Define your Risk

Managing your risk is one of the greatest secret to trading success.

  • How much are you willing to lose per trade?
  • How much are you willing to lose in a day?
  • If you meet your daily lose margin for the day, what next?

You have to define your risk. Don’t be scared, loosing is part of trading. I know not many traders like talking about loosing, but as a trader with some experience, I can tell you that you cannot completely rule out loosing from trading that is while this part is very important.

Your risk is largely dependent on your equity, it is important to know the percentage of your equity you are willing to risk per trade. Is it 5%, 10% or 20%, this is what will determine your Stop loss and take profit level.

Key Take Away

  • Your risk is largely dependent on your equity

  • Your risk is what will determine your Stop loss and take profit level

  • Never place a trade without Stop loss and take profit

 

Mark out Point of interest (POI) in the Chart and define your entries and exit

Once you know your risk appetite, you have to mark out your POI on the chart and clearly define your entry, exit and stop loss point.

Strategies for Boom and Crash

For example, in the chart above, we have two line and a trend line. If your POI was the intersection between Support line and trend line or between Resistance line and trend line. You can pick your entry for a buy after the intersection of the support line with trend line, then exit before the resistance line and do the same for a sell.

Key Take Away

  • Mark your POI on the chart

  • Determine your entries and exit

  • Know your Stop loss

Develop your trading strategies for Boom and Crash

In this stage you have to compile everything together and design some rules you must follow when trading using the trading system. Discipline is very important in trading, you don’t need to force a trade, you must follow your set rules if you want to be successful in trading.

The rules can be something like.

When the price breaks the trendline, wait for it to reach the next support or resistance (depending on the direction), monitor the reaction at the S or R zone, if it do this, buy, if it do that sell, if it doesn’t do any, wait.

Key Take Away

  • Compile your strategy

  • Design your rules and follow them

Test Your trading strategies for Boom and Crash

Finally, you have to test your new strategy on a demo account. Testing your strategy on a demo will help you redefine it, monitor progress and update it if necessary. It is important to follow all the rules you write down on your trading system while testing it.

This will help you understand the strategy and make some adjustment before going over to your real accounts

Final Thoughts

After testing it on your demo and finding it worthy, you can now apply it in your real account. Please always risk responsibly. Risk management is a key ingredient to successful trading.

Disclaimer

Deriv offers complex derivatives, such as options and contracts for difference (“CFDs”). These products may not be suitable for all clients, and trading them puts you at risk. Please make sure that you understand the following risks before trading Deriv products: a) you may lose some or all of the money you invest in the trade, b) if your trade involves currency conversion, exchange rates will affect your profit and loss. You should never trade with borrowed money or with money that you cannot afford to lose.


Spread the love

Leave a Comment