Many simple FIX API Forex strategies are based on a simple algorithm or a combination of two or three signals from technical indicators. It should be understood that the simplicity of the strategy is certainly an advantage. But there are reasonable limits. The working system should have clear limitations: entry and exit parameters, working timeframe, risk and money management options. Only with these data, we can assume that the trading strategy is working.
Thus, choosing a simple trading system, it is necessary to pay attention to the following parameters:
- Working timeframe (M1/M5/H1/D1);
- List of trading instruments (currency pairs, spot market assets);
- Analysis tools (technical indicators, figures of trend reversal or continuation);
- The parameters of risk and money management (risk per deal, transaction volume).
Full working algorithm must include these four key parameter. Let's consider the example of a classical wave pattern.
- Elliott wave theory is suitable for operation on any timeframe, from M1 to W1, as waves of a minor timeframe get included in waves of the senior level. The first parameter is present.
- The classic wave analysis is ideal for all assets of the financial market, including currency pairs. The second parameter is also executed.
- To predict the future movement of the wave pattern it's nesessary to: know the core principles of Elliott wave theory, as well as the Fibonacci grid. The grid should be set on impulse waves, with the aim for subsequent waves ranging from 138.4% to 161.8% of the previous trend wave. The tool set is also present in this strategy.
- According to the classical theory, the target for the waves are Fibo Levels (138.4% to 161.8%), and the Stop Loss is set by the local minimum/maximum (or at the beginning of the entrance wave).
It is a real example of how to define a simple strategy. FIX API traders often miss this point. It should be noted that only a full-set transaction algorithm can guarantee profit.