The chart above shows an example of identifying and making a long-term position on the AUDUSD currency pair on the 1W timeframe, where each candlestick represents one trading week.
For example, it is shown how strong intraday volatility on this timeframe looks like – it’s just an ordinary candlestick by which we do not even know that this week’s fundamental news influenced the price of the pair. And if you look at this week on a lower timeframe, for example, 1H, then there the price very often and abruptly changes the direction of movement, clinging to stop orders along the way and causing big losses to traders.
To work on large time frames, it is most effective to use the principle – “the simpler the strategy, the better.” And the simplest and most effective strategy was and remains the basic strategy of “breakdown of the trend line” or “change of trend”. The main thing is that you work according to the rules that are inherent in this strategy. These rules are more concerned with determining entry and exit points from transactions.
It’s simple, we wait until the price crosses the trend line, leaves the price channel, and then place a pending order. In this case, it is a sell order or Sells Stop. We set it at the level of finding the minimum of the previous trend that preceded the breakdown point of the trend line, on the chart, it is the green Sell line. The level of profit-taking or Take Profit, set at the first minimum of the previous trend – the pink line Take Profit 1. This is one of the possible levels of profit taking, there are others, but they are much lower on the schedule and there’s simply no way to focus on them until the first goal meaning. Also, it is necessary to set the Stop Loss limiter for possible losses – the brown Stop Loss line. As you can see from the chart, the expected profit and risks are approximately equal and amount to about 6500 points. It’s enough, to protect your stop from unplanned triggering due to market noise and high volatility. And if the stop does work, then this will happen only because of a global change in the market situation, which does not happen so often. If everything goes as we plan, the price will move smoothly towards the profit fixer and will not create fluctuations that can lead us out of a state of moral equilibrium, and pre-calculated expectations of profit will not cause us excessive greed and fear. Simply put – there are no strong fluctuations, there is no reason for excitement. This example is considered on a real chart at the time of writing, so in a couple of months, each reader will be able to check whether the price reaches Take Profit.
Consider another example, already from a less global 1D timeframe, where each candlestick is 1 trading day. Here is a chart of the USDCAD currency pair. Again, we are not inventing anything special and use the proven strategy to change the local trend. Why local? It is too early to talk about a global trend change, but it is quite possible to work inside the correctional upward channel.
As you can see, the entry into the transaction, as in the previous example, is already carried out at the level of the brown Sell line. The profit lock, according to the rules, is located at the level of the purple Take Profit line. Why not at the level of the first low of the trend, as in the previous example? Yes, because its level is located behind the support line of the global rising channel, and our strategy is aimed at working inside the channel, which means closing the deal inside the channel. The lowest minimum in the channel is our Take Profit level. Stop Loss is located at the level of the last maximum of the price preceding the place of the breakdown of the trend line – the red Stop Loss line. The top-level is 2000 points, which again allows us to avoid unnecessary triggers, and the size of the expected profit at the level of 3200 points will allow us not to wait too long for the transaction to be completed, it will take from a week to a month. The deal is again in the real market, and therefore it is easy to verify.