Trading strategy “Two Fingers” (“Two fingers”) has such a name for a reason. Those who are familiar with her will confirm this without hesitation. It is an easy to use yet effective strategy that visually resembles the “V” sign. Experts say that despite its ease of use, it works very well. That is why many traders use it. Especially those who want to save time.
Every trader is familiar with the unspoken rule of trading: intraday trading is more difficult than on wider time frames. Many people disagree and do not adhere to this rule, but it is precisely on the example of the Two Fingers strategy that one can be convinced of the correctness of this thesis.
Strategy Principle Two Fingers
It is important to note that the strategy is relatively young and has not yet managed to earn an iron reputation among traders. What is the principle of its work and what attracts its adherents?
The key idea of the Two Fingers strategy is that the main trend is the daily time frame, and the entry points are identified by looking at the pullbacks on the younger chart, for example, H4.
Nothing new and supernatural – experienced traders will say. And there is. As the author of the strategy insists, everything ingenious is simple. This is how most trading strategies work.
In order to properly apply Two Fingers, you need to look at the longer directions of the daily charts. Most often they last for weeks or even months. At the same time, we must not forget about kickbacks. The main thing is to join the largest of them in order to keep a reserve for changes in value. Thus, the trader has the opportunity to make sure that the price will move in accordance with how the rate will change. The most advantageous entry point is best seen at the shortest time frame.
How the Two Fingers strategy is installed
The Two Fingers strategy is universal. It can be used not only in the Forex market, but also in the precious metals market.
How are those two fingers installed? Let’s get started. It is necessary to determine in which direction the trend is moving on the daily D1 time frame. This is done using moving averages. Experienced traders note that it is important to set them with a period of 22 and 5. Do not forget that if 5 is above 22, then the trend is moving in an upward direction, and if on the contrary, then in a downtrend.
When you have carefully studied the trend, you can start waiting for the fractal. According to Williams, it appears in five Japanese half-top candlesticks. We need to wait for the fractal to start acting against the course.
When the second candlestick after the fractal appears, you can mark a horizontal line, following the high or low, depending on what goal you are pursuing. It all depends on the sale or purchase.
After that, it is worth switching to a different time period – H4. Expect the appearance of the OsMA indicator on it. He must reach zero. The value of the selected currency at this moment should be below the drawn horizontal line. This gives a signal that you can be sure that there is no change in direction and the analysis is being done correctly. If the price is above the line, it means that you missed the signal and you shouldn’t react to it.
Stop loss & Take profit of Two fingers
We must not forget about such concepts as Stop loss or Take profit. Experienced traders are advised to set the first one outside the local extremum in H4 or above the control candle in the D1 daily interval.
You can exit positions only if OsMA crosses on H4 in the opposite direction. After waiting for the deal to return to positive territory, the trader will be able to change the Stop loss to a less unprofitable position and wait for the re-crossing of the moving average in the daily time interval D1.
The Two Finger strategy is used to hold fixed trades longer. Their retention time is from 1 to 3 days. If there is a pronounced trend in the market, the time can be increased.