Today I will share with you the strategy for Fixed Time Trades. We will use the already known tools: the EMA and RSI indicators as well as the engulfing pattern. The strategy has very simple premises. However, prior training is required to use it. Signals are identified on a 1-minute timeframe. The strategy works best in highly volatile markets. At present, Bitcoin is the instrument where we can get the best results for this strategy.
Key Takeaways🔑
| →The strategy for Fixed Time Trades using EMA and RSI indicators, along with the engulfing pattern, can be effective in highly volatile markets. |
| →The strategy involves identifying the long- and medium-term trends using EMA200 and RSI indicators, and then looking for bullish or bearish engulfing candlestick patterns for entry signals. |
| →Practice and testing the strategy on a demo account is recommended before implementing it in live trading. |
Contents
Preparation of the chart
As I mentioned before we will look for signals on a 1-minute candlestick chart. To start, select the bitcoin instrument and set the timeframe. Always make sure that the rate of return is at least 80%. There are times during the day when this value may be lower. This is when we do not trade.
We must attach 2 indicators to the chart. The Exponential Moving Average is our long-term trend filter. Set the period as 200. The second indicator, the Relative Strength Index, we leave at the default settings. The RSI will help us determine the medium-term trend. After adding the indicators your chart will look like the image below.
One more important point. We use a 1-minute chart to identify the signal but you should set the trade duration to 5 minutes. This is because we expect the price to rise within 5 minutes from the signal for a buy position, and we expect the price to fall within 5 minutes from the signal for a sell position.
EMA + RSI + bullish engulfing pattern for opening long positions
The observation of the chart is simple and is based on the strict rules in the strategy discussed today. The first thing is to identify the long- and medium-term trend. For long positions, the price should be above the EMA200. The RSI indicator should give a reading at levels above 50. If this is the case we wait for a trigger. Our trigger is the occurrence of a bullish engulfing candlestick pattern. To assess the accuracy of a bullish engulfing pattern we assume that it is correct when the body of the bullish candle covers the body of the preceding candle. Shadows are of secondary importance and are not taken into account. After a signal, we immediately open a 5-minute Fixed Time Trade for a price increase.
EMA + RSI + bearish engulfing pattern for opening short positions
A signal for opening a short position can only be expected when the price is under the EMA200. The RSI should be below the level of 50. If both conditions are met we should wait patiently for the occurrence of a bearish engulfing candlestick pattern. Then, immediately at the opening of the next candle, we open a 5-minute Fixed Time Trade for a price decrease.
Pros and Cons 📊
Pros 👍:
- The strategy utilizes commonly used indicators and candlestick patterns, providing clear entry signals for Fixed Time Trades.
- It can be effective in highly volatile markets, such as with Bitcoin.
- By following the strategy’s rules, traders can take advantage of potential price increases or decreases within a short time frame.
Cons 👎:
- The strategy requires constant monitoring of the chart to identify signals and execute trades in a timely manner.
- Speed and accuracy are crucial for successful implementation of the strategy.
- The strategy’s effectiveness may vary depending on market conditions and individual trading preferences.
| Signal | Description |
|---|---|
| Bullish Engulfing Pattern | A candlestick pattern where the body of a bullish candle covers the body of the preceding candle, indicating a potential price increase. |
| Bearish Engulfing Pattern | A candlestick pattern where the body of a bearish candle covers the body of the preceding candle, indicating a potential price decrease. |
| EMA200 | Exponential Moving Average with a period of 200, used as a long-term trend filter. |
| RSI | Relative Strength Index, used to determine the medium-term trend. |
EMA + RSI + engulfing pattern, what to look for when trading this strategy
As you may have noticed, the strategy has a simple set of rules. What it requires is speed. If the trend is clearly defined waiting for the trigger involves constant observation of the chart. Of course, in most cases, an entry that is a second or two late will not affect the result of the trade. However, it is beneficial to ensure the right conditions for full concentration during trading.
You can also slightly modify the criteria for entering the transaction. Our EMA filter defines uptrend if the closing price is above the EMA200 and downtrend if the closing price is below the EMA200. You may, for example, consider that this is not enough to assess the long term trend. The price very often consolidates around this important and respected average. You can therefore assume that at least the last 5 candles are all below the EMA200 to determine the downtrend. Conversely, you need at least the last 5 candles above the EMA200 to determine an uptrend
Another option is to shorten or lengthen the transaction. Check it out, test it out! You may find that you get more profitable trades by using a trade duration of 3 minutes, or perhaps 7 or 10 minutes will prove to be a better value.
Any changes you make must be tested. As always, before you start using the strategy discussed today, we encourage you to test it in a demo account at Olymp Trade. Do you have any suggestions? Anything you would like to add? Feel free to do so in the comments section below.
As always, we wish you winning trades!
FAQs 📝
- Q: What time frame is suitable for using the Fixed Time Trades strategy?
- A: The strategy is designed to be used on a 1-minute candlestick chart, with trade durations set to 5 minutes.
- Q: Which indicators are used in the strategy?
- A: The strategy utilizes the Exponential Moving Average (EMA200) as a long-term trend filter and the Relative Strength Index (RSI) to determine the medium-term trend.
- Q: What are the entry signals for the strategy?
- A: The strategy relies on identifying bullish or bearish engulfing candlestick patterns as entry signals, based on the EMA200 and RSI readings.
- Q: Is the strategy suitable for all market conditions?
- A: The strategy works best in highly volatile markets and may not be as effective during periods of low volatility or choppy price action.
- Q: How should traders approach testing and implementing the strategy?
- A: It is recommended to practice the strategy on a demo account first to familiarize oneself with the signals and refine the execution. Traders should also consider adjusting the strategy to fit their own trading preferences and conduct thorough testing before using it in live trading.