Trading strategies play a very important role in the success or failure of traders in IQ Option. However, many strategies are too complicated and require investors to spend too much effort to understand and use. But there are also extremely simple strategies that investors only need to look at the chart and know how to trade and make a profit. The Three Indians trading strategy is one of the simple yet effective ones that I am about to introduce to you.
What is the Three Indians trading strategy?
Three Indians is the trading strategy described in the book by the famous trader Linda Raschke. It is considered to be quite accurate, effective, and suitable for most traders. Of course, for those with more experience, the efficiency is even higher.
The Three Indians perform well even in recession or bull market conditions. With this trading strategy, investors will rely on specific signals from the market by trendline to predict whether the price will increase or decrease in the future and decide on their next trading direction.
Note: In a bull market, the trendline will act similarly to a resistance level. On the contrary, in a bear market, it acts as a support level. And traders can rely on this feature to decide their trading on IQ Option.
How to set up trading signals with the Three Indians strategy
The Three Indians strategy is set up based on a candlestick chart with three consecutive bearish cycles. The price of each descending cycle is represented by the trendline. When it has dropped to the 3rd low in a row, the price would likely bounce back.
In bull market conditions, let’s identify three consecutive bullish peaks by connecting them with a trendline with an ascending price level. You will confidently place a bearish order when the price hits the third highest high. Because there the market will have a high probability of reversing from bullish to bearish.
How to trade with the Three Indians strategy
To use the Three Indians trading strategy effectively, you need to perform the following 3 steps sequentially.
1st step: Draw a trend line on the candlestick chart so that it passes through the lows (in the case of a downtrend), or the line passes through the highs (in the case of an uptrend).
2nd step: When the bullish or bearish trendline has been tested twice and the third time will be a signal for investors to put a trading option for themselves.
3rd step: If trading options in IQ Option, skip this step. If you are trading Forex, this will be the step to set up Stop loss and take profit.
If you are executing a bullish reversal in a downtrend, the stop loss should be the 2nd bottom (2nd touch of the price to the trendline).
If you are placing a bearish order in an uptrend, the 2nd top of the bullish line will be where you place your stop loss. In case the distance from peak 2 to peak 3 is too far, you can set a stop loss at a nearby peak as shown below.
On the take profit part, there will be at least 2 times the distance from the entry to the stop loss.
The most important thing about this Three Indians trading strategy is that the investor must draw the trend line correctly to be able to find the most optimal lows/highs. If used proficiently, traders will make profits easier than other ways of trading. However, if the pattern selection is incorrect, you are very likely to suffer a loss. Therefore, practice this Three Indians trading strategy on a Demo account before trading for real.