Are you looking for a reliable and effective strategy to trade on the forex market? Are you a little bit confused by complicated terms and signals? Let me show you a strategy that is not only simple but also very powerful. You will be able to detect the best entry points with it and earn profits. The strategy is known as the Barcode strategy.
Key Takeaways🔑
| →The Barcode strategy is a simple yet powerful strategy for trading on the forex market. |
| →The strategy is based on the DeMarker indicator, which helps identify market direction and oversold/overbought zones. |
| →Always practice using a demo account before trading with real funds. |
Contents
Preparations
The first thing you have to do is preparing your chart. Log in to your Olymp Trade account and decide on what instrument you are going to trade. Now go to the indicators and search for the DeMarker. The Barcode strategy is based on this single indicator.
The basics of the DeMarker indicator
DeMarker (DeM) was founded by Thomas DeMark, a famous technical analyst. His oscillator compares the minimum and maximum prices in the current cycle with those in the past one. It is possible to define the market direction with it as well as the oversold and overbought zones.
There are two important levels in the DeM window. They are 0.3 and 0.7. The first one indicates that the asset is being oversold and the second that it is overbought. Intersecting these levels is a signal the trend will soon reverse.
Adjusting the DeMarker indicator for the Barcode strategy purposes
You will have to introduce some changes in order to use DeM in the Barcode strategy. You can do it by clicking on the pen icon in the indicator window.
Set the parameter to 1. Then choose the display type by opening a dropdown menu and selecting Histogram instead of Line.
The indicator will now remind you of the barcode. The red bars that cross below the 0.3 will indicate the oversold area and the green bars that rise above the 0.7 level – overbought.
Trading forex with the Barcode strategy
The crossings of the important levels are signals of the trend reversals. Set the period of 1 minute for your chart and see below when you should open a trading position.
Going short
Observe the bars of the DeM indicator. Wait until you see three subsequent green bars that stay above the 0.7 level. The fourth bar should be red and situated below the 0.3 zone.
In addition, the red bar should match a red candlestick on the price chart. You can now open a short position.
Going long
If you want to open a long trade you should look for three consecutive red bars below the 0.3 level in the DeM window. The next bar should be green and in the overbought area that is above the 0.7 mark.
Moreover, the fourth green DeM bar should correspond to a green price bar on the chart.
Pros and Cons of Using the Barcode Strategy
Advantages:
- ✅ Simple and easy-to-understand strategy.
- ✅ Relies on a single indicator (DeMarker).
- ✅ Provides clear entry signals for short and long positions.
Disadvantages:
- ❌ Requires timely execution of trades based on indicator signals.
- ❌ Works best in trending markets; may generate false signals in sideways markets.
- ❌ Like any trading strategy, it carries risk and does not guarantee profits.
| Signal | Action |
|---|---|
| Three subsequent green bars above 0.7 level followed by a red bar below 0.3 level | Open a short position |
| Three consecutive red bars below 0.3 level followed by a green bar above 0.7 level | Open a long position |
Conclusion
The Barcode strategy can bring you many trading opportunities during the day. Apply a good capital management strategy. Invest no more than 5% of overall capital in a trade. Target around 10% to 15% daily profit and stop trading in case of losing 30% of your total capital.
The Barcode strategy has a high win rate. And, as you now see, it is really easy to use. You just set the right parameters for the DeMarker indicator and wait for the signals. Then, depending on the conditions in the market, place the short or long order.
Head to the Olymp Trade practice account which is free of charge. Check how the strategy is working and after some time of training, earn profits in the live account. Tell us how you like the Barcode strategy in the comments section below.
Best of luck!
Q&A – Barcode Trading Strategy
- Q: What is the Barcode strategy?
- A: The Barcode strategy is a simple and powerful strategy for trading on the forex market using the DeMarker indicator.
- Q: What does the DeMarker indicator measure?
- A: The DeMarker indicator compares the minimum and maximum prices in the current cycle with those in the past one to determine market direction and oversold/overbought zones.
- Q: How do I identify entry signals for short positions?
- A: Look for three subsequent green bars above the 0.7 level followed by a red bar below the 0.3 level.
- Q: How do I identify entry signals for long positions?
- A: Look for three consecutive red bars below the 0.3 level followed by a green bar above the 0.7 level.