Understand The Techniques Of Trading Strategies

Understand The Techniques Of Trading Strategies

What is STA Strategy?

The Stop-Trail-Add (STA) Strategy is a scaling technique used to maximize profits while minimizing risk. This idea is to take advantage of a favorable price action by adding to a position but still limiting the risk by moving the stop loss. It is usually expressed as the S-T-A ratio.

Three Letters Stand for:

1. The size of your initial STOP loss in pips.

2. The size of your TRAIL as a ratio of your original stop.

3. The units that you ADD as a ratio of your original position size.

How to Determine the size of Stop-Trail-Add?

The Currency pairs have unique behaviors, so the size of the Stop-Trail-Add should be appropriate for the pair you are trading. You don’t want to get stopped out too early with a uber tight STA, knowing that you could catch the move with the larger STA.

One way to determine your Stop-Trail-Add is to experiment with the pairs that you regularly trade and keep track of the STA sizes that would be profited. Through a consistent and deliberate practice that Dr. Pips low always recommends, you’ll be able to gauge which STA works for your favorite pairs.

Another way to determine your Stop-Trail-Add would be to use the pair’s average true range (ATR). This also depends on whether you are in a day trade or a swing trade.

What is an Average True Range (ATR)?

The ATR measures the usual pairs range based on the lows and highs of previous price action. It comes with the parameter X, which determines how far back in previous price action you will go. For instance, if you are using ATR (10) on a daily time frame, the indicator gives you the value for the pair’s average range for the past 10 days.

ATR can be used to determine support and resistance levels for the day or the week.

How to calculate the weekly and daily ATR?

You don’t have to worry about the calculations as there’s an indicator that would churn out the figures for you.

Just you have to make sure that you know what the ATR is measuring and what the parameter stands for, and then apply that ATR to the proper time frame.

To get the DAILY ATR, values on the DAILY time frame and divide it by two. Add this figure to the DAY open price to get the top of the day range and subtract the same figure from the DAY open price to get its bottom counterpart.

For the WEEKLY ATR, values on the WEEKLY time frame and divide it by two. Add this figure to the WEEK open price to get the top of the week's range. Then, subtract that same figure from the WEEK open price to get the bottom of the WEEK’s range.