If you are a beginner trader and struggling to find a working trading strategy, here’s a strategy that worked for me when I was a beginner trader.
It’s a simple five-step process.
Step 1: First, I opened the chart I wanted to trade.
Back then, I was only trading forex, but the strategy rules also work on stocks and crypto.
Back then, I didn’t use any indicators with this strategy because I thought indicators didn’t work.
So the strategy I used was a pure price action strategy.
Step 2: Take note of the extreme reversal points on the chart.
These are the price points that made the price move strongly in the opposite direction.
They have to be clear reversal points.
I mean, there has to be a big reversal move.
This strategy only worked for me when the reversals were big and clear.
Step 3: At the end of the reversal, draw a horizontal line.
I called this the extreme reversal price point.
And I called the strategy the extreme support resistance strategy.
Step 4: If you have drawn the horizontal lines on the big reversals only, then these big reversal points will be noticeable to many traders.
If they are clearly visible, many people can react to them.
For example, they might set stop losses on the opposite side of it, take trades when the price breaks outside the extreme edge, and even take reversal trades from the extreme edge.
Out of all these, what I traded was the reversal from this extreme edge.
I basically saw it as a strong support resistance line.
When the price came near this extreme point again, and then touched it, and then had a strong rejection, I took a reversal trade.
For example, if the price moved down big before, then that’s an extreme edge resistance.
When the price comes back to that price level again, I wait for the price to touch it, and then suddenly and strongly move down, like it got rejected from the higher price levels.
When that happens, I see it as increased trading activity or people reacting to the price level.
For example, traders’ stop losses getting triggered, and new traders entering trades in the breakout and reversal direction.
If the rejection happens, that is, the price makes a sudden big move in the downward direction, I saw it as higher overall selling pressure at this price point.
Once I got the sellers’ confirmation, I waited for the candle to close so I knew that sellers were still stronger, and then I took a short trade.
If the price moved up again before the candle closed, then the sellers were not strong enough to hold the price down, and so I didn’t take the short trade.
A similar thing happens with the extreme support reversal point.
I look for sudden strong buying pressure there.
Step 5: I set the stop loss on the opposite side of the extreme edge and the candle.
I used a one-to-one reward-risk ratio most of the time.
Nowadays, I prefer a 0.5 to 1 reward-risk ratio for reversal setups, and many times draw support resistance as areas.
But this was one of the first strategies that worked for me. It was one of my favorites in my around eight nine years of trading journey!
That’s all.