Fixed time trading (FTT) is an approach based on a forecast of whether the price will rise or fall within a predetermined period. FTT can be done on many financial markets, including Forex, stock, crypto, and commodity. FTT seems simple. Still, you need to have well-developed techniques to predict the price direction correctly. Read on to learn the best of them.
Fixed time trades are usually set for 60 minutes. Therefore, one of the best trading strategies for beginners is to find a short-term trend and trade within it.
There is a popular phrase, “Trend is your friend,” which means that you shouldn’t trade against the trend. However, not many know that there is another phrase, “Don’t fight the tape.” The term “tape” stands for the ticker tape, which was used to transmit the stock price.
To predict the price direction for a short period, you need to find a trend on a 5- to 15-minute timeframe.
The only requirement is to be sure the trend is still strong. To confirm the trend’s strength, you can use the Directional Movement Indicator (DMI).
The DMI consists of three lines:
- The Average Directional Index (ADX) shows the trend strength regardless of its direction.
- The +DMI is a positive directional movement line used to determine an uptrend.
- The -DMI is a negative directional movement line used to define a downtrend.
The trend is strong when the ADX is above 25.
An interconnection of +DMI and -DMI lines is used to determine the trend direction. When +DMI is above -DMI, it’s an uptrend (1). When +DMI is below -DMI, it’s a downtrend (2).
Another fixed time trade strategy is based on a trend reversal. Here, you need to catch a trend formation using candlesticks, chart patterns, or indicators. Although trend trading is efficient on any timeframe, please remember that trends aren’t strong on very short periods.
The most effective reversal candlesticks:
- Hammer and inverted hammer
- Shooting star
- Morning star
- Hanging man
The most effective reversal chart patterns:
- Double top and bottom
- Triple top and bottom
- Head and shoulder and inverse head and shoulders
- Rising and falling wedges
The most effective reversal indicators:
- Fibonacci Retracements
- Bollinger Bands
If you find one of these fixed time trade signals, you can be sure the price will move in the direction of the forming trend.
In this strategy, you need to add two simple moving averages with periods of 4 and 60. The standard periods of 9 and 50 won’t work on low timeframes.
Color the lines differently to distinguish them. The signals are simple:
- When the MA with a short period breaks above the MA with a long period, you can expect the price to rise. It’s the so-called Golden Cross (1).
- When the MA with a period of 4 falls below the MA with a period of 60, the price is expected to fall. This pattern is called Dead Cross (2).
Three indicators strategy
It’s best to confirm a signal using another technical tool. For example, if you find a reversal chart pattern, you need to apply a technical indicator that will add confidence to your trading decision. If you combine signals from technical indicators, you need to use indicators of different types.
The three indicators strategy is based on MACD, RSI, and Alligator indicators. The signal of the rising price is received when:
- The candle closes above all three lines of the Alligator indicator
- The MACD histogram is above the 0 line
- The RSI breaks above the 50 level.
Inverse rules are applied for a price decrease so that:
- The candle closes below all three lines of the Alligator indicator
- The MACD histogram is below the 0 line
- The RSI breaks below the 50 level.
Tip: When using this strategy, you need to be cautious and patient to catch the moment when all three requirements are met.
Engulfing pattern strategy
This trading approach can be applied to any timeframe and financial instrument. Therefore, it’s considered one of the best trading strategies.
Engulfing is a candlestick pattern that predicts the price reversal, so it’s very effective for fixed time trades.
There are bearish and bullish Engulfing patterns. The first one predicts a price decline while the latter provides signals on its increase.
Bullish engulfing is formed at the end of a downtrend. The pattern consists of two candles – a small bearish and a long bullish one that fully engulfs the bearish one. The signal is stronger if the body of the bullish candle is larger than the previous two or three candles.
Bearish engulfing is formed at the end of an uptrend. The pattern involves two candles – a small bullish and a bearish one, which fully covers the bullish one. The signal is even stronger if the body of the bearish candle is larger than the previous two or three candles.
|Bullish engulfing||Bearish engulfing|
When you catch one of these patterns, you can open a trade in the direction of the engulfing candle.
The strategy will work if the trade duration amounts to at least two following candles. That is, if you use a 5-minute chart, you can expect the price to move in the signal direction for at least 10 minutes. You should be ready for the price to move up and down. Therefore, if you set a trade for a very short period, the strategy may lead to unsatisfactory results.
As you can see, the price formed a bearish Engulfing pattern (1). The next candlestick was bullish, but the second one was bearish again (2).
It’s not hard to open fixed time trades. However, trading can’t be done accidentally. You need a well-developed strategy that will help you react to rapidly changing price movements.