All Secrets of Trading on D1

Hello, friends, forex traders!

D1 charts have always been something special: in books they are described as a first step, which you should start with (but no one starts), people are afraid of them (“you need a big deposit, ahhh!!!”), there are legends about them “Any newbie can trade with profit on daily charts!”).

So what is a daily chart really? A holy grail or an illusion of stability? We’ll talk about it in this post. All the secrets of the daily charts, suitable strategies for them and other nuances will be revealed.

Short Summary

Historically, before the invention of computers, the D1 was the only working timeframe. Intraday trading existed, but for most traders, only the daily chart was available, which, moreover, was drawn manually. Accordingly, the settings of all indicators were initially calculated for the daily period. For example, RSI - 14 days, moving average - 20 days and so on.

To date, the D1 has been and remains the easiest in terms of complexity. At the same time, there is nothing embarrassing about trading in D1, as if this is obviously too easy as a task. Anyway, almost all books on trading recommend starting with the daily charts.

Advantages of D1

If you use the “coin toss” strategy, to get to zero (with an equal ratio of stop-loss and take-profit) on D1, you need a little more than 50% of successful trades. But, on a minute timeframe, the number of profitable trades should be 70-80%, which gives a colossal difference.

The reason for this is slippage and spreads, whose influence on high TFs is not so noticeable.

Also, there is much less noise on the daily chart, and on the whole, it is more and more clear. Graphic patterns are as close as possible to examples from books and are easily recognized. In turn, look for patterns on a minute TF, it’s like looking for a needle in a haystack.

Disadvantages

Of course, there will be more time for learning to trade on D1. For example, if you actively trade on M1, you will need several weeks for training. On H1 - a few months. On D1, it will take over six months.

In fact, there is nothing to worry about. Of course, it will take more time, but the result will be better. In general, almost any specialization requires training for at least six months.

Another drawback is that there are fewer strategies for D1 than for intraday timeframes. As a rule, a lot of strategies are made for M5, M15 or H1, while daily charts are given less attention.

In addition, it may seem ridiculous, but the next drawback is boredom. In fact, in D1 trading, there is almost no tension, chat does not boast of immediate successes and in general, in measured trade, there are much less cool. In any case, “I’m a scalper” sounds cooler than “I trade on the D1”.

Nuances of trade

There is such a moment - some traders are very afraid of swaps, arguing that they can kill the entire deposit. In fact, if you keep deals for several months, then this can really become a problem. If the holding time is about a week, then nothing terrible will happen - some big losses on the swap are necessarily compensated with plus swaps, or the profit on the transaction will be such that the swap of special significance does not take hold. In most cases, this can be completely ignored, you will enter a minute later / earlier, and this difference of several points can compensate the swap. That is, even spreads and commissions can have more influence than swaps.

As an option, you can open deals in the morning. In this case, during the Asian session, there is often a rollback. That is, if the trend is up, then it is possible that the price will roll back overnight and you will even enter the best price. But, this does not always happen. Be guided by a rule “the market will not disappear tomorrow”. If there is a rollback - we enter, if not – we don’t. The same about the deals from Friday to Monday. If there is a gap at the opening, we trade a gap. If there is no gap, then we enter the setup. It’s simple.

The next nuance is that some brokers have a non-standard candle closing time, because of which they might have six candles instead of five. This is a bit confusing, interfering with the performance of indicators and the definition of patterns. In this case, just for analysis, take a demo of a broker with five daily candles per week. Such brokers are the majority.

A lot of people try to optimize their trading by applying trailing stops on the daily charts, transfer to breakeven and so on. The most suitable option is simply to allow the market itself to close positions on the stop and take.

Another nuance is the news. In fact, the news on the daily charts can be safely ignored. But, for example, if you know that today there is a nonfarm day, and you already have a position with a good profit - close it.

Money Management

There is an opinion that it takes a lot of money to trade on D1. In general, this is nonsense, as today there are lots of 0.01, and cent accounts, so you can start even with $ 20. This is enough to make statistics. When you reach some results, you can open a PAMM-account, spread your monitoring Myfxbook and recruit investors. You do not need any billions on your account, overclocking strategies and no other crazy tricks.

The ratio of risk to profit for different instruments is different. If you take the average, you can bet 1 to 3. For example, stop loss is 50 points, take profit is 150 points.

On daily charts, you can use an approach to money management called a “fixed fraction”. That is, we use a certain fixed lot, for example, 0.01 lots for every $ 500 of the deposit. If the deposit amount increased - the lot increased, and vice versa, the deposit decreased - the lot decreased.

How is this calculated from the beginning? At the beginning, you choose the strategy. Further, trade the minimum lot (0.01) in the tester for all major currency pairs. Then calculate the maximum one-time drawdown in dollars, which, with a lot of 0.01, is equal to the number of points divided by 10. To this value, you can still add 20-30 percent, given that in the tester the result is always better than in reality.

Knowing the level of the maximum drawdown, we can calculate our level of risk. For many traders, the psychological limit is 25% of drawdown. Accordingly, having received a maximum drawdown of 100 points, which is approximately equal to $ 10, taking into account the risk of 20%, you will need $ 50 deposit for every 0.01 lot. More details about this method of money management are described in a separate article.

Strategies

Now consider what strategies can be used on the daily charts. If you, for example, take any strategy on the M15 and compare its result in points with the strategy for D1, then do not be surprised if in most cases it will be the same numbers. As a rule, the difference is only in the number of transactions - on small TF there will be much more of them. The reason is that there are more deals, and the yield is the same - slippage, spreads and so on.

First, configure the optimal chart window for yourself so that it is not too small and not too large. Further, what is worth watching is for 100 and 200 moving averages. 200 MA has been used for a long time as a trend indicator, it is a kind of standard. These periods reflect two natural cycles - six months and a year (there are about 200 working days per year). The type of moving average does not matter much, while EMA would be the best option.

As an option, you can trade on a rebound from the average. Bounce, as is known, occurs much more often than breakdown. In general, both rebounds, and breakdowns work out - there are signals and they work out. You can even trade intersections because even the simplest strategies using one oscillator work well on the daily charts.

Here, for example, the MACD oscillator. Even the most primitive strategy for crossing the zero line of the oscillator will work on the daily charts. In this case, consider the risk-to-profit ratio of 1/3. This does not mean that you need to trade like this, but even this strategy will work.

Fibo levels can be used to define clusters. You can even not look at the readings of deviations, just note for yourself the places of the greatest concentration of levels.

You can also work based on simple support/resistance levels. Mark all levels that catch your attention on the chart. If the level is implicit, it is pointless to mark it, since others will certainly not see it. You can trade directly through the levels. The only condition is the presence of an explicit rebound. And, it does not matter whether all the rules of the Price Action are respected, there is a rebound - we enter the deal. In general, the main thing that we are looking for on the daily chart is a clear trend and an input on the kickbacks.

Psychological aspects

One of the many advantages of D1 is the amount of time to think. Here you can draw an analogy with one interesting experiment in the chess game. In the course of it, grandmasters and second-class players were brought together. Regular games with 135 seconds per move and blitz games with 6 seconds per move were held simultaneously. There was not much difference between the game of professionals, while the amateurs had enough time to think. That is, if you are not a mega professional, D1 will give you a strong advantage - time to think about the deal.

To better tune in to trade, you can create a kind of ritual. For example, tearing off a new sheet in a notebook, opening a diary, brewing a cup of tea or coffee, in a word - anything. Such a systemic action allows the brain to switch to the analysis mode, less distracted by external stimuli. That is, it is a kind of training to switch to working mode.

Conclusion

Despite the fact that D1 gives a lot of time for reflection, do not overdo it and look at the market for too long, everything has a reasonable limit. As a rule, the first solution is the most correct one (provided there is at least some experience).

Here you need peace of mind, the ability to wait, as nothing might happen for weeks. In any case, you need to keep concentration and celebrate the slightest success, which can also help to maintain a diary. Even if you had a loss, but it turned out to be less than the previous one, it’s already a good sign of working on the mistakes. Perhaps, the slightest advantage given by D1 will transform your trade from loss-making to profitable.

Regards, Michael

ForexTraderPortal.com