BEST INTRADAY TRADING STRATEGIES - BIG 3 - 80 20 RSI - STOCHAST
Question: What is the best trading strategy for Intraday?
Answer: Intraday trading will take a great deal of your time. This is because you will be focusing on the charts all day that you will be trading. This type of trading requires a great deal of focus. Make sure the focus is one of your strengths. If you cannot focus, intraday trading will be extremely difficult for you to master.
KEY TAKEAWAYS.
Intraday is shorthand for securities that trade on the markets during regular business hours and their price movements.
Day traders pay close attention to intraday price movements, timing trades in an attempt to benefit from the short-term price fluctuations.
Scalping, range trading, and news-based trading are types of intraday strategies used by traders.
Here is a list of strategies that we have compiled that work well for intraday trading:
Big Three Trading Strategy.
RSI Trading Strategy.
Stochastic Trading Strategy.
Big Three Trading Strategy.
Trading Indicators list:
20 Period Simple Moving Average.
40 Period Simple Moving Average.
80 Period Simple Moving Average.
Step 1 Apply Indicators to Chart.
You can make them green, blue, red, pink, etc. The color is your personal preference.
Again these are 20, 40, 80-period Simple moving averages. These are the best trend forex indicators and will help you determine trends and every time frame.
After studying charts and applying different moving averages, we discovered these three work very well together for this strategy. This is why we called them the big three 😉.
Step 2 of the best three trading indicators strategy: The Trend… Up or Down?
Once your “Big Three” indicators are on your chart, go ahead and find a current up trend or downtrend.
To find the trends, simply look at where the price action is. Then determine if it’s above the moving averages or below.
If the price is above the three moving averages you have an uptrend:
However, if the price is below the three moving averages then you have a downtrend:
If the market is flat and the price action is not making a new high or low and just staying stagnant.
I would avoid this type of market because we are looking for a trending market, not a flat or “sideways” market.
Step 3 – Wait for the entire candle to close outside of Moving averages + Pull Back in Price Action + Continuation of Trend
Wait for the price close below the lowest moving average in a downtrend:
Or, Wait for the price close above highest moving average in an uptrend:
Once you see this occur, you wait for the price to pull back and then move in the direction of the trend to make your entry. To determine this you can either go to a lower time frame or stay in the current time frame. Ensure the entire candle closed completely below or above the moving averages.
The price action does not have to necessarily go back and touch the moving averages (which does occur). But you need to confirm there was a pullback in the price and then a continuation of the current trend.
I prefer to wait for a break pullback before I go because, statistically, the price will most likely retrace during a bearing or bullish trend.
For a more risky approach to this strategy, you could technically get in a trade right when the price breaks the highest or lowest moving average. But this method may cause more harm than good.
The reason is that not every time it breaks these lines it is headed for a strong up or downtrend.
Which is why you need to wait for a FULL candle to close above/below these lines. Wait for a pullback and go to enter the trade.
What happened?
✓ Broke the above the moving average lines.
✓A full candle closed above the lines
✗ Retracement and the continuation of trend = this did not occur so you would not have entered the trade! It did retrace, however, the price did not continue to go in the direction of the trend.
We need these three elements for the trade to occur.
Which is why we call this the “Big Three” Trading Strategy
Three different steps to find a trade and execute it.
Stop Loss/Take Profit :
Place your stop loss below the bottom moving average line. Depending on what time frame you are in will vary on how large your stop is.
Scalpers may have a tight 5-10 pip stop
While day traders will have a 30-50 pip stop
Your take profit is when the price touches the 80-period line. The price crossed this line at +196 pips!
You can tweak these rules as you wish. But we found the best way to push your winners with this strategy is to wait until the price touches the 80-period line.
Conclusion
Big Three Trading Strategy is fun to use and trade with. It is not very messy on your chart because there are only three little lines to look at. Our team believes this strategy uses the best three trading indicators that work well together.
The moving averages are arguably the most popular forex indicators.
80 20 RSI Trading Strategy.
RSI Adjustments:
14 period, to 8.
70 and 30 lines, to 80 and 20.
This indicator comes standard on most trading platforms. You’ll just need to make the adjustments above.
How to Trade with the RSI Trading Indicator
This indicator will be the only indicator we use for this strategy. This is because we have a strict set of rules to follow before entering a trade. And these rules will, without a doubt, validate a reversal for us to open a trade. Before you use this strategy, make the above following changes to the RSI indicator:
Step One: Find the currency pair that is showing a high the last 50 candlesticks. (OR low depending on the trade)
The 80-20 Trading strategy can be used for any period. This is because there are reversals of trends in every period. This can be a swing trade, day trade, or a scalping trade. As long as it follows the rules, it is a valid trade. We also have training for building a foundation before a forex strategy matters. In this step, we only need to ensure it is the low or the high of the last 50 candles.
Once we determine this low or high, then we can move on to the next step. I drew vertical lines on the price chart so you can see the 50 candle low that we identified. If you need to use horizontal lines on your chart to verify that the candle has closed the lowest the last 50, you can do so. This is not necessary but may be helpful for you to do and see how strong the trend is.
Step Two Using the RSI Trading Indicator:
When we find 50 candle low, it needs to be coupled with RSI reading 20 or lower. (If it’s high it needs to be combined with the RSI reading 80 or higher.). In our RSI chart we have a reading that hit the 20 line on the RSI and was the low the last 50 candles.
Once we see that we had a low, the last 50 candles, and the RSI is BELOW 20, we can move to the next step. Remember that this strategy is a reversal strategy. It is going to break the current trend and move the other direction.
Step Three: Wait for a second price (low candle) to close after the first one that we already identified.
The second price low must be below the first low. Although, the RSI Trading indicator must provide a higher signal than the first. Remember that divergence can be seen by comparing price action and the movement of an indicator. If the price is making higher highs, the oscillator should also be making higher highs. If the price is making lower lows, the oscillator should also be making lower lows. If they are not, that means price and the oscillator are diverging from each other. Which is why it’s called “divergence.”
Just because you see a bullish or bearish divergence, doesn’t mean you should automatically jump in with a position. We have rules in place that will capitalize on this divergence so that we can make a significant profit.
Keep in mind, that this step may take time to develop. It is very important to wait for this second low because it gets you in a better trade making position.
Price goes down/RSI goes up. That is the Divergence. Remember that our example is a current downtrend looking to break to the upside. If this was a 50 candle high, we would be looking at the exact opposite of this step.
Once this criterion has been met, we can go ahead and look for entry. This is because the charts are showing us that a reversal is coming soon.
Step Four: How to Enter the Trade with the RSI Trading Strategy.
The way you enter a trade is very simple. You wait for the price to head in the direction of the trade and wait for a candle to close above the first candle that you identified that was previously 50 candle low.
If you are struggling with this step, save the picture for reference. This will help guide you when looking for a trade.
Step five: Once you make your entry, place a stop loss.
To place your stop, bump back 1 to 3 time periods and find a reasonable, logical level to put your stop. You are looking for prior resistance, support.
We placed our stop below this support area. That way if the trend continued and did not break, it could hit this level and bounce back up in our direction.
I recommend you follow at least a 1 to 3 profit vs. risk level. This will ensure that you are maximizing your potential to get the most out of the strategy.
You can adjust as you wish. Keep in mind that most successful strategies that identify breaks of a trend use a 1 to 3 profit vs. risk level.
Stochastic Trading Strategy.
Step #1: Check the daily chart and make sure the Stochastic indicator is below the 20 line and the %K line crossed above the %D line.
We’re day trading, but having in mind the higher time frame sentiment and trend.
This is a crucial part of the strategy because we only want to be trading in the direction of the higher time frame trend.
The multiple time frame concept is important because it can give you a more robust reading of the current price action and more it can help you better time your entry and exit points.
Note*: On the daily chart, it’s not necessarily for the stochastic moving averages to be below the 20 level. They can be moving away from the oversold territory and the signal can still be valid, but it shouldn’t be above 50 level.
Step #2: Move Down to the 15-Minute Time Frame and Wait for the Stochastic Indicator to hit the 20 level. The %K line(blue line) crossed above the %D line(orange line). (Our chart was a 1H - it works too)
This step is similar to the previous rule, but this time we apply the rules on the 15-minute time frame: wait for the Stochastic indicator to hit the 20 level and the %Kline (blue line) is crossing above the %D line (orange line).
The 15-minute chart is the best time frame for day trading because is not too fast and at the same time not too slow.
It is said that the market can stay in overbought and oversold condition longer than a trader can stay solvent. So we want to take precautionary measures, and this brings us to the next step on how to use the stochastic indicator.
Step #3: Wait for the Stochastic %K line (blue moving average) to cross above the 20 level
We want to trade smarter, right?
Well, because the %k is the fast moving average it’s enough just to wait for it to cross above the 20 level because the %D line will follow suit. We don’t want to wait too much either as this will result in a reduced profit margin.
Right now is the time you should switch your focus to the price action, which brings us the next step of the best stochastic trading strategy.
Step #4: Wait for a Swing Low Pattern to develop on the 15-Minute Chart
What is a Swing Low Pattern?
A Swing Low Pattern is a 3 bar pattern and is defined as a bar that has one preceding and one following bar with a higher low.
Day trading stochastics: When to Enter?
This brings us to the next rule of the Best Stochastic Trading Strategy.
Step #5: Entry Long When the Highest Point of the Swing Low Pattern is Broken to the Upside.
So, after following the rules of the Best Stochastic Trading Strategy, a buy signal is only triggered once a breakout of the Swing Low Patterns occurs.
Step #6: Use Protective Stop Loss placed below the most recent 15-minute Swing Low
You want to place your stop loss below the most recent low, like in the figure below. But make sure you add a buffer of 5 pips away from the low, to protect yourself from possible false breakouts.
Step #6: Take Profit at 2xSL
Knowing when to take profit is as important as knowing when to enter a trade. The Best Stochastic Trading Strategy uses a static take profit, which is two times the amount of your stop loss.
Note** The above was an example of a buy trade using the Day trading with the Best Stochastic Trading Strategy. Use the same rules – but in reverse – for a sell trade.
Conclusion for this stochastic strategy:
Day trading with the Best Stochastic Trading Strategy is the perfect combination between how to correctly use stochastic indicator and price action. The success of the Best Stochastic Trading Strategy is derived from knowing to read a technical indicator correctly and at the same time make use of the price action as well.
