The Philosopher Strategy - Zen and the Art of Trading on W1
When you looked at the charts, it never seemed to you that you were missing something? One small detail that you simply did not notice. After all, everything is much simpler than they want to make us believe. It is on such a detail that the trading system, which will be discussed today, is built.
Today we’ll talk about a very interesting Philosopher strategy. Even the name makes it clear that this vehicle is for those who understand something in this life and are in no hurry.
Trading instruments: currency pairs, bitcoin, oil, gold, stocks - anything
Trading time: once a week
Recommended brokers: Alpari, RoboForex, AMarkets
The idea behind the trading system
The “Philosopher” strategy is designed for weekly charts (in MT4, the weekly timeframe is designated as W1). That is, one candle on the chart with us means one week.
So it is intended either for those who are in no hurry, or vice versa, for those who have very little time, and they can allocate a maximum of a minute on weekends on weekends.
Transactions on this strategy are made once a week. You can enter at the opening of the market, but it will be more optimal to enter on Monday morning - at this time prices are more attractive, and the entry time does not make much weather on the weekly timeframe.
The strategy is very simple and with its help you can trade “everything that moves”, because the system is based on a simple and “reinforced concrete” idea. We wait until three candles in a row in one direction appear on the weekly chart - either “bullish” or “bearish” - and after that we enter in the same direction. And that’s all. That's so simple.
The fact is that this pattern - three consecutive weekly candles in one direction - shows that there are a large number of large traders in purchases or sales.
Because in order to move the price for three consecutive weeks in one direction, you need a very, very much money. And when this happens, it means that someone really needs the price to move. Well, this impulse avalanchely attracts other participants to the market.
Not necessarily very strong trends are formed. But counting on the continuation of the movement, equal to the formation found, from the opening of the first candle to the closing of the third, without tails, is quite possible. Often you can see more powerful movements.
Once again, the idea is very simple: if we see three weekly candles in a row in one direction, it means that there is a lot of money in the market that pushes the price in this direction.
You probably already understood the basic rules: waiting for three unidirectional candles in a row and enter Monday morning in the same direction.
In this case, the candles should be obvious - their body should be visible with the naked eye without approaching the schedule. Doji with almost no body, we do not take into account.
Moreover, if a candle, whose body is not visible on the long-term chart, interrupts our formation, then we start counting three candles in a row anew. In other words, it should be obvious to “even the child” who won this week - “bulls” or “bears”.
Stop loss put right behind the formation. It will not work very often - the strategy is very reliable, but sometimes it happens. Take profit set at a distance equal to the formation. As a result, it turns out that the stop loss and take profit in the Philosopher strategy are approximately 1 to 1. You can, of course, experiment with your own options, but this approach is most effective from the point of view of winrate.
If, after working off the signal, we again see three candles in a row in the same direction, then re-entry may be too risky. More reliable if there will be at least one opposite candle between two unidirectional signals, - the market still needs to adjust.
If the price almost reached take profit and began to adjust, it’s better to go out. Let the profit be somewhat less, but it will still be. This technique protects not only from loss of profit, but also from triggering stop loss.
Those who use the classic Price Action can also keep track of strong levels, and if the price rests on one of them, exit with less profit.
When, if the opposite entry signal for this strategy was formed before our transaction closed at take profit or stop lossbetter not argue with the market. Close the current trade and immediately enter a new signal. This is normal practice.
Money Management Strategy
Money management in this system is very important. The strategy uses large take and stop, so lots should be small. Fortunately, centoviks allow you to organize a competent money management, even with a deposit of $ 100.
The transaction volume should not exceed 1% of the deposit. Well, for an accurate calculation, it is most convenient to use the lot calculator in the “Tools” section on our website.
On weekly pound quotes, three bearish candles formed in a row. We are waiting for Monday morning to enter - quotes open with a gap, but given the target take level of 382 pp, the accuracy of the entry does not play a big role in the transaction.
After selling GBPUSD, we set a take profit equal to the distance from the closing price of Friday to the opening price of the first of the three candles in the pattern. Stop loss is set just above the upper tail of the first candle.
Despite a long fall, quotes did not reach take profit. This is just the case when you should go out and not wait for the weather by the sea. As described above in the rules of the strategy, if the candle visually didn’t reach the teika with its tail, we exit.
The trader who left the short would have to close the deal at a loss due to the occurrence of the opposite signal. Three growing candles - a signal to close any opposing positions and open a long at GBPUSD.
As you can see from the chart, the pound did not grow, and the deal closed at a loss in stop loss.
The rules of the trading system do not cancel the principles of technical analysis, as can be seen in another example of applying the “Philosopher” strategy in gold trading. Three candles in a row, the first of which passed the minimum requirements for “body visibility”, gave a buy signal.
After one week of growth, a reversal pin bar is formed far enough from the set take profit. The resistance level speaks in favor of fixing the position, the reversal of the candlestick drew the “Double Top” pattern. A trader would get a stop if he did not exit the position.
On the same chart, quotes later again give a signal to the long, but in this case the bulls manage to “pierce” the resistance. On the next wave, speculators break through resistance with an impulse, and the price ultimately reaches our take profit.
The examples of complex cases are specifically given above, since the setup is visible to the naked eye, you can find simpler examples in large numbers yourself by opening the terminal.
On classic currency pairs, the strategy works flawlessly. Even on such “wild”, according to some traders, currencies like the pound.
The “Philosopher” strategy is also suitable for use on very aggressive instruments, for example, gold. Stop-loss, of course, will be beaten out more often than on more “quieter” instruments, but the trading system remains effective.
In addition, the “Philosopher” perfectly protects against flat, as three unidirectional candles clearly indicate the completion of consolidation and the formation of a trend.