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A trader’s strategy is the most important tool when trading. To become a versatile trader, you must become familiar with more than one strategy. As time goes by, you find one you like, and they will become second nature. But, like any skill, mastering reversal and momentum strategies for Olymp Trade take studying, practice, and execution.
Your Olymp Trade momentum strategy is what guides your trading decisions. In trading, you rely on a strategy to know when to open or close a trade. The best way to get stable results is by following a strategy. Traders can get lucky without one. However, that luck never lasts.
Your strategy is vital whether you are a new or experienced trader. If you want to become a professional trader and make consistent money, check out the strategies in this article.
What is a Trading Strategy?
A trading strategy is a filter for emotions. It is a lens through which to view the market and a set of rules that guide traders by helping them understand when to open a trade or save their money. If a trader does not see the right conditions, he or she should not throw away their money.
A trading strategy helps forecast whether an asset’s price will rise, fall, reverse, or plateau. A trader’s job is to analyze and profit from markets conditions.
Most traders adopt turnkey strategies that have been proven to work. As traders grow and gain skills, they upgrade their strategies, create new ones, and forge their own techniques.
Understanding how to spot reversals and gauge momentum are essential when determining whether to go long or short on an asset and for how long. Let’s look at some reversal and momentum strategies that traders use on Olymp Trade and other platforms.
What is a Reversal Strategy?
A reversal strategy’s goal is to profit from the reversal in market trends. If the NASDAQ has been falling, if a trader spots a strong signal that a rally is coming, then they are aiming to profit from the reversal of that bear trend.
What is a Momentum Strategy?
A momentum strategy is a trading style in which traders buy and trade assets that are rising and sell them when they have peaked. They aim to capitalize on volatility by finding buying opportunities in short-term up-trends, and then sell when the securities start to lose momentum.
No Strategy is 100%
There are many types of strategies for platform Olymp Trade and none of them can guarantee a 100% success rate. Trading by nature is risky, and a strategy helps traders make sense of the data to ultimately make the most favorable decision.
The better you understand the strategy, the better results it should yield, but even Warren Buffet takes the occasional loss. It’s all about mitigating those losses and maximizing your earnings.
Relative Strength Law – Reversal Strategy
This is a simple counter trend strategy that won’t take long to get the hang of. The main idea is to profit when a trend changes direction, which are trend reversals.
This reversal strategy is based on the RSI (Relative Strength Index) oscillator, after which it is named. The RSI generates 2 key signals to be aware of: overbought and oversold. They help traders identify potential trend reversal points.
Understanding the RSI is simple, when an asset is overbought when the line rises above 70. Conversely, when an asset is oversold when the RSI line falls below 30. The signal to open a trade is when the line crosses back over 70 or 30 markers towards the middle.
When using this strategy, with Fixed Time Trades set the trade length equal to your chart’s time frame. Even when using Forex, the longer the time frame the slower traders can respond to shifts in momentum. Set your chart to 1-minute to trade with agility and react efficiently.
How to Set Up
- Set your Olymp Trade chart to Japanese Candlesticks
- Set the time frame to 1 minute
- Add the RSI oscillator to the chart
- Click the pencil and set it to a period of 5
When to Open an Up Trade
The signal to open up trade is when the oscillator comes up from the bottom oversold area toward the middle. Basically, as the line crosses from below to above the 30 lines, open an Up trade.
When trading Forex, close your trade once the RSI changes direction. The closer the line gets to the middle, momentum wanes.
When to Open a Down Trade
Open a trade when the oscillator crosses the overbought threshold for the middle. Essentially, when the line goes from above to below the 70 line, you open a down trade.
When trading Forex, close your trade once the RSI changes direction. The closer the line gets to the middle, momentum wanes.
Pro-Tip
The best time to use this reversal strategy is between 7:00am and 5:00pm GMT.
Momentum Strategy for Olymp Trade
Sliding on Averages
This momentum strategy is based on the Simple Moving Average (SMA) indicator; one of the most popular indicators for traders of all levels. This strategy utilizes two SMAs to identify when to open trades.
The two SMAs help reveal trends as they are strengthening. The SMA works by averaging a set number of previous prices, which smoothes out random price fluctuations, making trends easily discernable. By combining two SMAs together, this indicator becomes more powerful.
Add two SMAs set at 4 & 60 to your chart, be sure to color them differently. Simply put, when they cross, open a trade. For Fixed Time Trades make sure to match the trade duration to the chart’s timeframe.
Olymp Trade – Setting Up
1.Add two SMAs to the chart on Olymp Trade trading terminal
2. Set the 1st SMA to 60 (Orange) and the 2nd SMA to 4 (Blue)
2.1 The longer period of 60 is the “slower” indicator, meaning it is impacted by price fluctuations more slowly. Each point along the line is influenced by the previous 59 prices making it less responsive to short-term trends.
2.2 The shorter period of 4 is the “faster” indicator, meaning it is more responsive to the current trend.
2.3 Make sure they are displayed in different colors.
3. Set the time frame to 1, 10, or 15 minutes.
When to Open an Up Trade
If the fast SMA (4) intersects the slow SMA (60) from below, open an Up Trade.
When trading Forex, close the trade when fast SMA (4) loses momentum or a reversal pattern has been shown, whichvever comes first.
When to Open a Down Trade
If the fast SMA (4) intersects the slow SMA (60) from above, open a Down Trade.
When trading Forex, close the trade when fast SMA (4) loses momentum or a reversal pattern has been shown, whichvever comes first.
Pro-TIp
Avoid trading when important economic news is being released.
Conclusion
There are a lot of Olymp Trade reversal and momentum strategies out there. There are countless strategies to choose from, yet these work on Olymp Trade and other platforms. They are simple yet effective strategies any trader can use to start building their career. Take these strategies for a spin and see if they suit your trading goals.
Trading is a business. Just like any business, it is never without risk. However, armed with a strategy and self discipline, anyone can become a profitable trader with hardwork and consistancy.