Step Trading Strategy – Learn How That Works

This technique is a trend forex trading strategy, hence it does not work well in sideways consolidation ranges. Although, that fact could be levelled off with additional filters and classic money management rules. The main difference between a trend a sideways range is that reversals and volatility price action have different nature and technical depths. That’s why some indicators work well in one market condition and fail in the other. Correction depth is one of the key factors which is measured by technical analysis, and identifying correct entry levels is extremely important for the overall profitability at the end of the day.

What is a Step Trading Strategy?

Step forex trading strategy has exactly the same target in its approach for the entry points and trading signals. It’s not the most simple strategy though. Its rules are based on the latest market performance and include several layers of conditions before entering the market. This forex trading strategy is suitable for both aggressive and conservative traders, the only difference has to be made in settings is additional filters for trading signals frequency. Technical indicators used in Step strategy allow that flexibility to be added to the standard conditions.

The trading signal is a suggestion for entering a trade on a currency pair, usually at a specific price and time.

The strategy’s complexity pays out with the positive statistics and a small number of negative deals together with a low depth of the drawdown, which is positive for the risk management rules. In the period of 10 months this year, Step trading strategy brought 1160 pips of total profit (4-digits quotes) with an average income of 110 pips per month. Taking in the consideration the fact that we traded on EUR/USD currency pair which has comparatively low volatility, the strategy’s profitability is quite impressive. Other currency pairs have to be tested separately as different market conditions suggest using different technical tools. Such factors as trading volume and volatility are also important in the scope of statistical analysis. The best timeframe here is H1.

Technical indicators used in Step forex trading strategy includes:

  1. BBands_stop_v1 with the main parameter 20;
  2. MACD with changed default settings (6, 15, 6);
  3. Williams’ Percent Range with a period of 14 hours;
  4. Stochastic Oscillator with default settings (14, 3, 3).

How to use Step Trading Strategy?

Conditions for LONG positions are as follows:

  1. One of the candles closes with a change in the BBands_stop_v1 indicator which jumps below the current price and changes its colour to blue;
  2. The MACD indicator is above the zero marks. If that condition was not completed, then the signal could be expected for two more candlesticks until the BBands-stop-v1 indicator still shows buying signals;
  3. The rest two indicators have to monitored only after the trading signals were received from the main two indicators (condition 1 and 2). Moreover, additional indicator’s signals have to appear at the same candlestick;
  4. Williams’ Percent Range indicator points to growth compared to the previous candlestick’s performance. Otherwise, the signal has to be missed;
  5. The main line of the Stochastic oscillator has to be above the secondary line. Otherwise, the signal has to be ignored;
  6. Once all of the conditions are complete, a LONG position has to be opened;
  7. The stop-loss order is equal to 35 pips from the entry point;
  8. After going 35 pips in the right direction, the position has to be set for the non-risk mode;
  9. If the current price is in negative territory while the deal is still open, and BBands_stop_v1 changes its signal for the opposite one, then that deal has to be closed manually by the market price;
  10. The take-profit order has to be equal to 70 pips.