Any trading strategy includes signals to open trading positions. They can be formed differently: based on the indicator readings, candlestick models or graphical figures.But in order to increase the probability of a profitable deal, it is necessary to use forex filters. These can be additional indicators, levels, a certain sequence of candlesticks, etc.But today I want to talk about another category of filters. They are useful to consider and apply regardless of the trading method and the conditions of a particular trading strategy. These Forex filters can be considered fundamental. They work in any market and every trader should know about them.
Trade time
Selecting the optimal time for trading is important and has an impact on trading results. Traditionally, the best time to trade is considered the hours of increased activity in the market. And this is our European and American session. However, one of the international brokers collected and systematized the statistics on trading deals. And I made some unexpected conclusions. It turns out that the largest number of profitable deals in the most popular currency pairs, was made in the period from 22 hours to 14 hours Moscow time. It is clear that night trading is not suitable for everyone for various reasons. But from these data it is obvious that the best time for intraday trading is from 10 to 14 hours. I’d like to point out that you don’t have to trust such research blindly. You can perform your own analysis of the dependence of the profitability of transactions on the trading time and choose the best hours for trading.
Seasonality
It has long been noticed that some currencies behave in certain months of the year. This is a seasonal factor that can be taken into account in medium- and long-term trade. Information on the coincidences in the movement of currencies by season can be found on the websites of some brokerage companies. And it is possible to compare charts independently, for example, over the past 10 years and to determine the peculiarities of the market in this or that period of the year. Of course, you should understand that they are not a regularity but only a probability.
Volatility
This is one of the most important factors influencing trading results. Volatility can be a useful filter in trade decision making. Let’s look at an example. Average daily volatility on GBP/USD pair is 110 points. Suppose that the signal to open an order on the trader’s trading system came when the price passed 40 points. Obviously, there’s still plenty of room for possible movement. This confirms the expediency of opening a deal. And if the price has already passed 80 pips when forming the signal, it is better not to enter the market.These forex filters will be very useful in trading. Their use is not time consuming. At the same time, they will help to reduce the percentage of losing trades and improve the overall trading result.Fyodorov’s Inga29.04.2019