The business sectors aren't generally extremely dynamic constantly. Truth be told, the most dynamic exchanging period is amid the most active exchanging period in the vicinity of 8AM and 5PM GMT. Amid this exchanging period, there is a cover with the Tokyo exchanging period early in the day and the NY exchanging period at night. That makes a considerable measure of liquidity and unpredictability, making it the perfect time to exchange.
The Most dynamic open cross formula takes advantage of this fact to capitalize on the amount of profits that you can potentially make. If you take a look at real-time Forex charts, you will notice that there are huge spikes in price that occur especially in the morning hours, when the most dynamic exchanging period opens. It is because Forex traders in Most dynamic are just starting to trade, leading to a cross in the markets. (How to use: Cross trading strategies)
If you can catch that cross using this trading formula, then you will be in for a great trading day. This formula will focus on the first 3 hours of the Most dynamic trading period, which is where the largest volatility will be. Afterwards, the rest of the trading day will follow the trends set during this time, and you can just ride the wave. (How do you: Identifying the false cross trading formula)
How to place trades based on this formula
It is actually an easy formula to follow once you know the necessary steps, and it won’t require any expertise – even a beginner can use this formula. Furthermore, you won’t need to add any more technical indicators but one. Our preferred indicator for this Most dynamic open cross formula will be the simple MA set to 50 periods. This will not be the primary indicator, but it will be useful in supporting the formula. (Do you know about the: DeMark trend-trading method?)
Getting things ready
The first step would be to switch back to the hourly charts. Remember, this formula is meant to focus on the first 3 trading hours of the Most dynamic exchanging period, so we need to move down to the hourly level. Besides, this is more of an day trading formula rather than a swing trading formula, which means that we won’t be holding on to trades overnight. (Learn: All about swaps)
Additionally, we need to focus on the major currency pairs like the EUR/USD, GBP/USD, etc. These are the main currencies being traded by major traders, and they will have the most volatility. Besides, the high liquidity generated will ensure that spreads are tight, and that is very important to day traders. The best Forex ECN brokers will have an even tighter spread because the liquidity providers will have a lot of activity. (Do you know: How to find best Forex spreads)
Once you have loaded up the chart, the next step is to identify when the most dynamic exchanging period begins. This time will vary among Forex trading brokers because they may have their servers in different locations. In my case, I learned that my broker’s server is set at the GMT+2 time zone, which means that, according to their Forex trading platforms, the most dynamic exchanging period will begin at 10AM (GMT) rather than 8AM (GMT). In the image below, I have highlighted the times when the Most dynamic trading period commenced in the past 4 trading days using vertical lines available on all Forex trading platforms.
Finding the trading opportunities
Now that everything is ready, we will look to the previous bars to see whether there may be a cross or not. The safest way to do this is to look at the 4 previous bars, but the formula can work with 3 just as well. Since I prefer to play it safe, I usually look at 4 previous bars, but a more aggressive trader may choose to only analyse 3. Either way, the formula will still work.
In the image above, I have highlighted the 4 previous bars appearing before the opening candle for the most dynamic exchanging period. In this formula, we need to see whether the first three bars for the most dynamic exchanging period made a cross above or below the range created by these 4 bars. If they did, then we know there has been a cross, and we trade in that direction. For example, if there is a cross to the upside, then we can expect the market to keep trending upwards, therefore we place a buy order at that point. The function of the MA is to provide more support to the analysis. For example, if there is a cross to the upside, and prices are above the 50-period SMA, then there are even greater chances for an uptrend.
In the example above, we had 4 trading opportunities based on this formula. In the first situation, the 4 previous bars had set a swing high and swing low highlighted by the red rectangle. Three bars into the most dynamic exchanging period, you can notice that the bars were already reaching the swing high set by the 4 previous bars. The simple MA also supports a move to the upside because the prices failed to breach below it. It showed that there wasn’t enough selling pressure to crack the MA, hence the bulls were still in charge. From this analysis, you could have place a buy order with your broker, and the rest is clear. (The: 7 Powerful Barstick Patterns to Learn and Understand)
A similar situation happened on the second rectangle, but the third told a different story. On the third rectangle, even after 7 barsticks, the prices would not break out of the range set by the 4 previous bars. There clearly was no cross that day, and you should have skipped and looked for an opportunity in another pair.
Managing the trade
This being a day trading formula, we need to lock in our profits as soon as the trend changes. To do so, you should keep moving the stop loss as the trend continues. On an uptrend, ensure the stop loss is below the previous swing low. You don’t want it to be too close to trigger a sell when it may just be a correction. The opposite should be true for a downtrend. However, if you can’t keep doing it manually, set a trailing stop, which is also not too close. (Know all about: Looking for market correction)
I do not recommend using a take profit in this formula because we want to rake up as much profit as possible. That is how the best traders make money in the Forex market – by milking the winning trades as much as possible. (The: 10 steps of successful traders)
All this can also be illustrated on the short video below to help you understand how it’s done more clearly: