Simplicity Trading Strategy was designed for novice traders in order to make their trading more easy and consistent. The strategy gives signals when to open trades, where to place stop and take profit orders.
Simplicity is suitable for day traders. You can use it on 15M and 1H charts. This strategy is for trend market conditions only and it's very importent to follow this rule.
Simplicity consists of 3 indicators such as: Moving Averages with periods 20 and 50, MACD histogram and DMI with standart settings.
It’s very importent to understand how each indicator works, what type of signals produces and why we have to use it in the strategy. Let’s make it clear one by one:
- MA20 and MA50 give information about trend direction and reversal signals for entry. If price is above these MAs and they rise, we have an up trend. If price is below MAs and they fall, we have a down trend. When price touches one of MA and reverses, we have a reversal signal and a possible entry level.
- MACD confirms price reversal and give a signal for placing a pending order for entry above or below a signal candle.
- DMI is a very importent indicator. We must work only in trend markets and this indicator allows open trades when we have suitable conditions. When the strategy gives a signal for entry, we have to look at DMI. DMI consists of 3 lines, DI+ and DI- give us the direction and ADX shows the power of price movement. If ADX is above 20, we can open trades because we have trend market conditions. But if ADX is below 20 we must not trade. It's better to search other markets.
We open a LONG trade when: - MA20 is above MA50 and they rise - Price bounces from one of MAs - MACD confirms price reversal - DMI confirms up movement and ADX is above 20 Place a pending order above the high of the signal candle and stop below the nearest swing low.
We open a SHORT trade when: - MA20 is below MA50 and they fall - Price bounces from one of MAs - MACD confirms price reversal - DMI confirms down movement and ADX is above 20 Place a pending order below the low of the signal candle and stop above the nearest swing high.
As for profit targets we have to make it in 2-3 times more then your stop-loss size. For example if you place stop in 50 pips, your profit target will be 100-150 pips. Such R/R ratio will make your trading more stable.
Some of my friends are trying to find decent indicator which let them know when to buy, when to sell on chart, but I think it sounds like finding magical unicorn.
I've been trying to study some of basic indicators used in your chart, and other people's chart. I think using several basic indicators are enough to me.
So far, I think using several indicators(RSI,DMI,MACD) really helps me because the loss is minimized when I did wrong choice.
Thank you.
DLavrov
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@CharlesPark, You should note that only Technical tools like lines, levels, chart patterns and indicators can give you exact trading signals. The main thing is - you must use them correctly.
evandja
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Thank you, D!
edwincarstrading
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Great article, thanks for sharing and your time
ThatCrpytoGuy
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Thanks! Have just started to follow you and am very thankful for your clear teachings.
Inct73
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If you start with the 15M chart, do you have to consistently follow this chart until the end for determining the exit pont? So not switch to the 1H chart.
DLavrov
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@Inct73, The signals based on 15m and 1H are different. You can use both timeframes for searching trading signals. Or you can use just only 1 timeframe. But don't forget that if you open a trade based on a trading signal from 15m chart for example, exit must be made based on 15m chart too. The same goes about 1H time frame.
I've been trying to study some of basic indicators used in your chart, and other people's chart. I think using several basic indicators are enough to me.
So far, I think using several indicators(RSI,DMI,MACD) really helps me because the loss is minimized when I did wrong choice.
Thank you.