“Lines Of The Last Day” is one of the strangest strategies based solely on price action, which is highly suitable for financial traders who don’t have much time sitting beside a computer.
What is Price Action in Forex
The price action trading is a method of billable negotiation in the analysis of the basic movements of the price, to generate signals of entry and exit in trades and that stands out for its reliability and for not requiring the use of indicators. It is a form of technical analysis, since it ignores the fundamental factors of a security and looks primarily at the security's price history. What differentiates it from most forms of technical analysis is that its main focus is the relation of a security's current price to its past prices as opposed to values derived from that price history. This past history includes swing highs and swing lows, trend lines, and support and resistance levels.
Overview of the Lines of the Last Day Price Action Forex Strategy
Actually, the name of this technical system has said it all. The Lines Of The Last Day has been developed in order to help traders gather trading opportunities appearing at the beginning of the day. It uses normal trend lines drawn manually to determine the market’s high-probability direction in the first five to six hours since the day’s open. Therefore, it’s not really a with-trend or counter-trend strategy, but more like a technique to “cheat the market”. Traders that look to trade in a fixed period will perhaps prefer the technique since positions are normally finished for the first three to four hours after the opening of a new daylight candlestick.
What makes the strategy favorite is its simplicity and effectiveness. From June to November 2017, the testing result shows a profitability of nearly 2000 pips with the win ratio affirmed at 82.55%. The maximum drawdown is just 4%. The Lines Of The Last Day totally requires no supporting indicators.
How to use the Price Action indicator in Trading?
This technique is particularly designed for the Euro – Greenback pair with the purpose to collect trading occasions on the 1-hour chart. Nevertheless, you can as well apply it on the US Dollar – Japanese Yen.
In a bid to use the strategy, first you have to ascertain the following levels:
- The previous day’s high and low;
- The first candle of the new day’s high and low.
If you like this strategy, you might also be interested in this Doji candle
After finishing defining the necessary thresholds, you use the trend-line drawing tool (available in FinmaxFX MT5 trading platform) to connect the previous day’s high with the first candle of the new day’s high, and the previous day’s low with the first candle of the new day’s low. A triangle will be created, and you can use it to seek signals.
A bullish trading opportunity is presented when price breaks the triangle to the topside.
On the contrary, a bearish trading occasion is detected when price penetrates the triangle to the downside.
Below are the important terms when using this technique:
- Only one position should be opened at a time;
- No trading decisions should be made until the candle of confirmation is fully closed;
- With a bullish order, the stop-loss is placed just below the triangle. Conversely, with a bearish order, the stop-loss is located just above the triangle;
- The take-profit is three times larger than the size of the stop-order taking into account the spread;
- Given price trading halfway towards the expected area, the stop-loss should be transfered to breakeven;
- The maximum risk for each transaction shouldn’t be more than 2% of your total balance.
Pros and cons
- Highly simple and effective;
- Generates high-quality trading opportunities;
- Requires no additional indicators;
- Enables traders to trade in a fixed period of the day.
- Generates few signals. There’s only one trading opportunity per day.
The Lines Of The Last Day is a very simple but effective trading technique which is very suitable for traders who love to get quick results. Despite that it’s not really popular, the strategy deserves a try because of its efficiency along with lots of prominent advantages. You can use it as an addition alongside your main technical systems that identify signals throughout the day. However, don’t forget to combine risk and psychology managing methods with the strategy as there is nothing called “perfect” in the trading world.