Technical analysis along with fundamental analysis of securities is the basis used for trading in various securities like stocks, commodities, currencies, and more. It involves analyzing the price and volume of the security to understand the market trends and take suitable market positions to earn profits. Traders can use various trading strategies that can help them make strategic decisions and understand the behavior of the security to any micro or macroeconomic changes. Open high open low is one of the many trading strategies that can be used by traders to understand stock markets and create an optimum investment portfolio. Read More: What is an iron condor strategy?
The open high open low strategy is an intraday trading strategy that can be used for analyzing stocks and understanding their price movements to evaluate optimum buy and sell signals. This strategy is fairly simple and can be easily interpreted by even novice traders as against other complex strategies. This strategy is used prominently in intraday trading as it requires analysis of the stocks rapidly and taking buy and sell positions instantly according to price movement. The "open high open low" strategy is a technical analysis method used to identify the potential direction of price movements in financial markets, such as stock markets or commodity markets. The strategy is based on the idea that the direction of the market can be determined by looking at the relationship between the key price points like the open price, high price, low price, and close prices of an asset. OHLC can be visualized by using charts called candlestick charts which are commonly used for technical analysis of the financial market, in which an "up" candle represents an open price that is higher than the close price and a "down" candle represents an open price that is lower than the close price.
Some key highlights of the OHOL strategy include:
Here are the basic steps to executing an OHOL strategy:
The security's price should be volatile enough to provide ample opportunity for buying at a new high and selling at a new low. A security that has more or less static prices may not provide good opportunities to apply this strategy.
The stock should be sufficiently liquid to allow for easy buying and selling without a major price impact. This implies that traders should preferably use this strategy in high-volume stocks to successfully execute it.
The security's price should be trending in a particular direction, either up or down. This is crucial to provide a clear indication of buying and selling signals.
This is a crucial point of consideration while using any trading strategy as the potential profit from the trade should outweigh the potential risk. This strategy must be used within the overall risk management of the trader.
It is important to note that traders should use additional technical indicators to provide further acknowledgment that the strategy is working and to confirm the entry and exit points. Also, this strategy might not always be effective and can be high risk, so it is recommended that you conduct thorough research, consider multiple factors, and apply it with caution.
This strategy is one of the easiest strategies to apply and hence is quite popular among traders. The key to successfully applying this strategy like any strategy is a thorough understanding of the market and the price trends. Without this basic understanding, there is a high possibility of losses even in these types of simple trading strategies. Hope this article helped provide a basic understanding of this strategy and how it functions. Keep watching this space for more information on such trading strategies and understand them in a more simplified manner. Till then happy reading!
Read More: Top Live Market Data Feeds for Day Trading
If you are a regular trader you would have frequently noticed a gap in the price...
Stock trading is not a simple and straightforward concept and requires a detail...
With the outcome of the Indian General Elections around the corner, theIndian st...