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HomeForexLarry Connors' Double 7 Buying and selling Technique - R Weblog

Larry Connors’ Double 7 Buying and selling Technique – R Weblog


On this materials, we are going to get acquainted with the “Double 7” medium-term buying and selling technique of the well-known dealer Larry Connors. We are going to study what it’s based mostly on, and the way it may be utilized in buying and selling. We are going to think about its benefits and drawbacks and provides an instance of buying and selling utilizing this technique.

How the Double 7 technique works

The Double Seven is a reasonably easy buying and selling system that was launched within the e book “Brief-Time period Buying and selling Methods That Work”. It was written by the well-known funding marketing consultant and inventory dealer Larry Connors in co-authorship with the developer of buying and selling programs Cesar Alvarez. The technique was created for buying and selling within the inventory market, and the authors used it to commerce main inventory indices (S&P 500, Dow Jones) or index ETFs.

The Double 7 relies on the idea that when buying and selling main market indices, an efficient technique is to purchase on pullbacks in a significant uptrend. A sound uptrend is outlined as the value being above the 200-day Shifting Common. A pullback is outlined as an in depth under the bottom low of the final seven days, during which case a purchase is opened. As soon as a purchase is opened, one should look forward to a brand new seven-day excessive to shut the place.

After studying the buying and selling guidelines, we are able to see that the “Double Seven” was developed for day by day charts and is just used to open and shut lengthy positions in a rising market. That’s, it really works solely in a single path – to purchase the asset, shorts (brief positions) aren’t used on this technique and Cease Loss orders aren’t set. When examined by Connors and Alvarez, the system confirmed constructive outcomes on inventory indices, ETFs, and extremely liquid US shares.

Setting the Shifting Common indicator

This technique makes use of the Shifting Common indicator to find out the present pattern. Shifting averages are included in most fashionable buying and selling terminals, plotted instantly on the value chart. Within the well-liked buying and selling platforms, MetaTrader 4 and MetaTrader 5, you possibly can set up the Shifting Common on the chart of the chosen instrument via the Predominant Menu: Insert → Indicators → Trending → Shifting Common. Within the setup window that seems, choose interval 200, line color and thickness, MA methodology: Easy.

Setting the Moving Average indicator
Setting the Shifting Common indicator

Methods to commerce the Double 7 technique

The algorithm for utilizing the technique in buying and selling:

  1. The value chart must be above the 200-day shifting common, indicating an uptrend.
  2. We should look forward to the day to shut on the low of the final 7 days.
  3. If factors 1 and a pair of are met, a purchase place is opened.
  4. The sign for exiting a place is to shut the day on the seven-day excessive.

Instance of buying and selling the Double 7 technique

  • Within the chosen chart section, the value of the S&P 500 inventory index is trending upwards and is above the Shifting Common with a interval of 200
  • When the value closes on the 7-day low, a purchase place 1 is opened. Quotes transfer upwards and the place is closed at a revenue when the 7-day excessive is reached
  • On the subsequent worth shut on the 7-day low, a purchase place #2 is opened. Quotes transfer upwards and the place is closed with a revenue when the day’s closing worth reaches the 7-day excessive
  • On the subsequent worth shut on the 7-day low, a purchase place #3 is opened. Quotes transfer upwards and the place is closed with a revenue when the day’s closing worth reaches the 7-day excessive
  • On the subsequent worth shut on the 7-day low, a purchase place #4 is opened. Quotes start to say no and the place is closed with a loss after just a few days when the day’s closing worth reaches the 7-day excessive
Example of trading the Double 7 strategy
Instance of buying and selling the Double 7 technique

Benefits and drawbacks of the Double 7 technique

Benefits:

Disadvantages:

  • On the finish of an uptrend and a downward reversal, the buying and selling efficiency declines sharply
  • There isn’t any risk of buying and selling brief positions (shorts) throughout a downtrend
  • Lack of Cease Losses can result in extended and vital drawdowns of the dealer’s deposit

Conclusion

The Double 7 is a reasonably easy trend-following buying and selling system developed by Larry Connors and Cesar Alvarez. It’s a medium-term funding technique that entails shopping for throughout corrections in a rising market with out using Cease Losses or leverage.

In line with a research performed by the technique’s creators, it confirmed regular constructive efficiency within the inventory market between 1995 and 2007. Since 2008, its efficiency stage has declined considerably and it’s troublesome to find out its diploma of effectiveness presently. Earlier than utilizing this technique in actual buying and selling, its efficiency must be examined on historic knowledge from latest years.

Materials is ready by

Has traded in monetary markets since 2004. The data and expertise he has acquired represent his personal method to analyzing property, which he’s joyful to share with the listeners of RoboForex webinars.

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