The yesterday’s high/low strategy is designed to enter trades when the market has pushed outside the ranges traded on the previous day. This is particularly effective when the previous day pushed in the same direction as the current day is trading, meaning we are having at least 2 days of push in one direction. If you study daily charts, you will often find that price likes to put in pullback and reversal moves, often on the third or fourth day of a push.
This strategy also works well as the market will often seek liquidity to make its moves and this is in the form of stop orders and pending orders placed by traders which are often at daily high and low points in the market. The stop orders are placed by traders already in the market in the wrong direction, and the pending orders by traders anticipating a breakout move. When price pushes outside the previous day’s high or low to gather liquidity if then tends to move back the opposite way, this is what we are taking advantage of.
If you enter on the first day of what will become a multi day push, and you go into drawdown, you can average into the position waiting for the down day (profit take move) to come and take advantage of that move to exit the positions taken and profit.
To trade this strategy manually you can use the Market Reversal Alerts Indicator and any indicator that displays yesterday’s highs and lows on your chart, of which there are many free ones available.
To trade this strategy automatically, you can purchase the Market Reversal Alerts EA for MT4 on the marketplace.
Variation on the strategy:
The Yesterday’s High/Low SWEEP!
The yesterday’s high/low sweep strategy is a variation on the one above. This only requires price to have pierced or swept the high or low of yesterday, rather than actually be trading above or below it.
This movement indicates the market has reached for liquidity at the highs and lows and is potentially reversing, often to the opposite side of the previous day in many cases. This is a slightly riskier strategy as it could just be part of a move that will continue, but if that is the case you can trade in the same way as the previous strategy and average into the positions waiting for a profit take move from the major market participants to exit the positions.
To trade this strategy automatically, you can purchase the Market Reversal Alerts EA for MT4 on the marketplace.
Market Reversal Alerts EA Results For 1 Year with 99.9% accuracy tick data trading the M5 time frame using this strategy.
Set file available in this blog post on the MQL5 website.
