It is no secret that for most traders, active trading in financial markets entails losing money. Experienced investors advise going against the crowd, thus getting a chance for a profit. If we have access to the information about the direction of the prevailing trade, we can open positions in the opposite direction because most probably, the market will go against most traders.
A Forex strategy called Supremacy is a trading strategy based not so much on classic tech analysis but on studying the positions of other traders. For trading, only D charts are used, hence, you will need to take a look at the trading terminal only a couple of times a day. Thus, the system will suit those traders who do not have enough time to watch the currency pair every hour.
Description of Supremacy
Supremacy suits for almost all majors, as well as currencies in pair with the Japanese yen: EUR/USD, USD/CAD, AUD/USD, USD/JPY, USD/CHF, GBP/USD, NZD/USD, EUR/JPY, AUD/JPY, GBP/JPY. Your trading experience will later allow you to add to this list. You trade once a day on D1. Normally, the trader addresses the chart half an hour before the trading session ends and the next time – after the session opens the next day.
Trading by Supremacy, you should use several currency pairs, decreasing the risk of losses by diversification. The Supremacy strategy does not imply placing Take Profits, which means the trader lets the profit go to the full scale. At the same time, placing Stop Losses is vital.
The idea of trading by the Supremacy strategy is opening position against the crowd, i.e. against the main mass of open positions in the market. According to statistics, if there is serious prevailing of positions in one direction (over 60%), the market might reverse against them. For example, if we get to know about open positions and see that 75% of investors are selling EUR/USD, it is highly probable that the market will not be going down but reverse.
The only important question left is where to get such information from. The main option is to go to https://www.myfxbook.com/community/outlook and find the mentioned imbalance of positions. If some instruments show prevailing of one direction in more than 60% of positions, it might be interesting to us, and we can open positions. Conversely, a balanced instrument is of no interest to us, and we have to wait for necessary conditions to form.
How to open positions by Supremacy
Imagine we can see 75% of traders selling USD/JPY. This is a good moment for us, and we get ready to buy because most traders are sure of a soon reversal. We need to switch to the daily chart of the instrument at the end of the trading day and open a buying position at the current price, and for the second position, place a pending buying order at the low of the last daily candlestick. A day later, when we see another candlestick close, we close all open positions and delete the pending order if it has not been triggered by the price. Note that we do not care about the size of the current loss or profit. We do not wait, we track new market signals.
Similarly, if we notice that 70% of traders buy the AUD/USD pair, this means we should sell. Thus, we open a selling position at the current price and place a Sell Limit order at the high of the preceding candlestick. A day later, you may open the trading terminal again and close all the positions regardless of their results. It is vital to follow the rules of the strategy. Sometimes the trader watches the situation and may try to withstand losses. However, this is never to be done because we have clear and strict rules. If we suffer a loss, we take it and wait for new market signals.
Position opening rules
- Find an imbalance in market trades of at leat60% to 40%. The larger the difference, the more it is probable that the market will reverse against the traders.
- Open a position and place a pending order at the closing of the daily candlestick. For example, if we open the terminal on Monday, wait for the beginning of the Tuesday session, then open your position and place the pending order.
- Open the first position by the market regardless of any price movements.
- Pending orders are placed at the high or low of the preceding candlestick depending on whether we sell or buy.
Stop Loss and Take Profit by Supremacy
According to the rules of Supremacy, we must open as many positions with imbalanced pairs as possible. After the positions are opened, the trader may close the terminal and open it again on the next day, at the closing of another candlestick. If the prices failed to reach the SL or TP, we must still close the positions and simply delete all pending orders. The result of the positions may of course be either positive or negative.
As with other trading strategies in the financial market, it is crucial to control risks and always place a Stop Loss. Otherwise, closing the trading terminal for a day, you can miss serious changes in the market and lose all the capital. In such a case, a Stop Loss will surely protect your deposit from serious losses.
Supremacy tells you to place an SL for an open position 100 points away from the entry point. If you place a pending order at the high or low of the trading day, for such an order, an SL must not exceed 50 points.
Extra recommendations for trading by Supremacy
An important point is to stick to your money management rules. Never exceed admissible risks. Experienced traders recommend trading 0.01 per every 2,000 units of currency on the account when trading by Supremacy.
With the growth of your deposit, you may start withdrawing certain sums monthly. This method was recommended by a famous trader Jesse Livermore; he even suggested saving up 50% of every profitable trade; in the case of our strategy, we can withdraw profit every month.
Traders advise keeping an eye on the publication of all important news to try and catch movements. For example, if the market is expecting some news, you should open a position before this event, not waiting for the end of the trading day. Thus, you will increase your chances of catching a strong movement.
You may try playing with important price levels on the chart, graphic patterns of reversal, or trend continuation. I will give you an example: we have marked an important support level on the daily chart, and the price tests this area, while the imbalance in the traders’ positions reaches 70% in favor of sales. In such a situation, apart from the signal of the imbalance, testing of the important support level will also signal growth.
There is a more aggressive trading method, which consists of doubling the position size after each losing trade. However, always keep in mind that this is a simple Martingale, and for this approach to work, your capital must be quite substantial to withstand losses and increase position volume. This is an option meant for experienced traders who have already tried Martingale and realizes all the risks. On the other hand, it would be wise to try various types of money management.
Some traders recommend closing position after the swap if it is positive. If the swap is negative, you should close your positions before the end of the trading day not to get an additional loss.
Supremacy is a simple trading strategy that even a beginner can master in a couple of hours. It is based not on tech analysis or graphic patterns but on the behavior of the market crowd and the notion that the market will move against it.
Another advantage of the Supremacy strategy is the lack of the need to watch the chart more often than once a day: you only need to find an imbalance, open and close positions before the end of the trading day. The trader is not urged by their own psychology or market atmosphere. Keep in mind that any trading strategy can be supplemented by your own rules and opening/closing signals.