There exist many trading strategies. A trader should get to know some of them in order to make a good choice. Today, I am going to present the Japanese Trend Strategy. Let’s see what it is all about.
Key Takeaways🔑
| →The Japanese Trend Strategy works best in clear trending markets. |
| →This strategy utilizes Heiken Ashi candles and the RSI indicator. |
| →Always backtest and practice trading strategies, including the Japanese Trend Strategy, in a demo environment before transitioning to a live account. |
Contents
The basics of the Japanese Trend Strategy
As the name suggests, this strategy works well in times of trending markets. You will be able to open both, up and down trades with today’s strategy.
Preparation of the chart
Once you are logged in to your Olymp Trade account, decide what type of financial instrument you are going to trade. There are different currency pairs, commodities, indices, stocks and cryptocurrencies to choose from with Fixed Time Trades. Then, switch to Heiken Ashi candles. To do that, simply click on the chart type icon and choose Heiken Ashi.
Set the timeframe to anywhere from 5 to 30 minutes. Now, you will need to attach the Relative Strength Index to your chart. Click on the indicators icon and choose the RSI. You will find it among oscillators.
The oscillator will appear in a separate window beneath the price chart. It plots around the middle line with the value of 50.
Determine the amount of money you want to invest in the transaction. You can open a trading position for the time twice or three times longer than the timeframe you are using.
Opening trades with the Japanese Trend Strategy
Whenever you want to open a trade for the price decrease, two conditions should be met. There ought to be a visible downtrend on the Heiken Ashi candles. And the RSI oscillator should cross level 50 from top to bottom.
In order to open a position for the price increase, you should wait for the clear uptrend on the Heiken Ashi candles. Then check whether the RSI crosses level 50 from the bottom up.
👍 Pros and 👎 Cons of the Japanese Trend Strategy
👍 Pros:
- Effective in clear trending markets
- Uses simple yet robust indicators (Heiken Ashi and RSI)
- Applicable for various asset classes
- Flexible for different timeframes
👎 Cons:
- Requires accurate trend identification
- May not be suitable for volatile or sideways markets
- Demands continual chart monitoring
| Variable | Details |
|---|---|
| Strategy Name | Japanese Trend Strategy |
| Principle | Trend following |
| Key Indicators | Heiken Ashi candles and RSI |
| Ideal for Asset Type | Currency pairs |
| Timeframe | 5-30 minutes |
Conclusion
You can use the Japanese Trend Strategy when there is a clear trend in the markets. It works best on the major currency pairs such as EURUSD, GBPUSD, USDJPY, USDCAD or NZDUSD. The timeframe of the chart should be set somewhere between 5 and 30 minutes. Remember you can keep the trade open 2 or 3 times longer than the timeframe you have chosen.
In today’s strategy, the Relative Strength Index is utilised. You should first determine a downtrend or the uptrend and then look at whether the oscillator crosses the line with the value of 50. When both conditions are met, you can open a trading position.
Test the Japanese Trend Strategy in the Olymp Trade demo account. It is available completely for free. You will receive virtual cash that can be replenished when it is finished. After some practice, switch to the live account and earn profit.
Wish you an amazing experience with Olymp Trade!
FAQs on the Japanese Trend Strategy
- Q: Is the Japanese Trend Strategy suitable for all markets?A: This strategy works best in clear trending markets, and may not be as effective in volatile or sideways markets.
- Q: Can I use the Japanese Trend Strategy for other assets apart from currency pairs?A: While the strategy works well with major currency pairs, it can potentially be applied to other asset classes. Always ensure to backtest with different assets.
- Q: Is the Japanese Trend Strategy suitable for beginners?A: Yes, with the use of simple indicators and clear rules, this strategy can be learned and applied by beginners. However, practice and understanding of market trends are essential.
- Q: How important is the timeframe in this strategy?A: The strategy works within a 5-30 minute timeframe. But the choice of timeframe can influence the frequency and duration of trades.
- Q: Can I use other oscillators apart from RSI in this strategy?A: The strategy as discussed uses RSI. While it’s possible to use other oscillators, they may not provide the same results. Always backtest new modifications.