The third touch trading strategy

The third touch trading strategy

2020-03-25 • Updated

The third touch (also known as the third strike) trading strategy is another strategy that we are going to introduce to our traders. Unlike complicated strategies with the usage of many indicators, the “third touch” requires only one element – a trend line.

Recommendations:

  • You can implement the strategy on all of the trading instruments, including stocks and commodities.
  • It is not recommended to use this strategy on the timeframes, which are smaller than M30. The smaller the timeframe, the lower the possibility of a good signal because  of the price noise.

Let’s consider the steps that you need to follow. At first, let’s look at the scenario when you want to open a long position.

  1. You see the upward movement and draw the trend line, which connects two lowest points. These points ideally should be the extremums. This is the most difficult part of the strategy.
  2. We wait for the correction to the downside and enter the market after the price touches the trendline for the third time and the bullish candlestick is formed. We open a long position at the closing price of this bullish candlestick.
  3. We place a stop loss below the previous support level.
  4. Our take profit level is calculated as follows:

The highest level after the “A” point – the lowest level at the “A” point = the number of pips you need to add to your entry level.

 We will use the EUR/USD chart with M30 timeframe as an example.

On March 11, the pair started to move up. We waited for the point “B” to draw the ascending trendline. After that, we waited for the third touch at the point “C” and opened a position on the closing price of the bullish candlestick at 1.1292. We place the stop loss level at 1.1265 (lower than the previous support). Our take profit equals the size between point A (1.1221) and the highest point after point A (1.1272). Thus, we place it at 1.1343 (the entry point + (1.1272-1.1221).

1.jpg

For the short position, you need to follow the following steps.

  1. When the downward movement appears, you draw a trendline between two highest points.
  2. After the second of the trendline, we need to wait for the correction to the upside. Next, we wait for the price to touch the trendline for the third time. The short position needs to be opened at the closing price of the bearish candlestick formed after the third touch.
  3. We place a stop loss above the previous resistance level
  4. Our take profit level is calculated as follows:

 The highest level at the “A” point – the lowest level after the “A” point = the number of pips you need to deduct from your entry level.

On February 14, the EUR/USD pair bounced from the 1.2434 level and corrected to the downside. After the short-term correction, the price jumped to the upside but failed to move higher than the point “B”. The situation helped us to suggest about the possible downtrend’s formation. We waited for the point “C” to confirm our thoughts and entered a short position after the bearish candlestick was formed. The entry was placed at the closing price of the candlestick at 1.2405. Our stop loss was set above the previous resistance at 1.2421.  Take profit was calculated as the entry point minus the distance between the “A” point and the lowest point after “A”: 1.2405- (1.2434-1.2387) = 1.2358.

2.jpg

Conclusion

In this article, we explained an easy-to-use strategy for trend traders. Its advantage is that it requires only trendline and the support and resistance levels. However, you need to be careful while trading the pairs and be sure that there are no events which may affect the movement of a trend.

Similar

Shooting star trading strategy
Shooting star trading strategy

In this article, we will discuss what the shooting star pattern is, how to recognize it, and how you can use it in your trading. Let’s get started!

Frequently asked questions

  • How to get the Trade 100 bonus?

    Boost your trading skills with free $100 from FBS. To activate this option, open a Trade 100 bonus account with $100 in it. Use the money during 30 days of active trading and trade five lots.  If you succeed, you can get your profit of $100. It is a win-win offer! Not only do you get a chance to profit, but you can also test the real markets and train your FX skills. 

  • How to open an FBS account?

    Click the ‘Open account’ button on our website and proceed to the Personal Area. Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading. 

  • How to withdraw the money you earned with FBS?

    The procedure is very straightforward.  Go to the Withdrawal page on the website or the Finances section of the FBS Personal Area and access Withdrawal. You can get the earned money via the same payment system that you used for depositing. In case you funded the account via various methods, withdraw your profit via the same methods in the ratio according to the deposited sums.

  • How to start trading?

    If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.

Deposit with your local payment systems

Learn more

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in 00:30:00

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

Beginner Forex book

Beginner Forex book will guide you through the world of trading.

Beginner Forex book

The most important things to start trading
Enter your e-mail, and we will send you a free Beginner Forex book

Thank you!

We've emailed a special link to your e-mail.
Click the link to confirm your address and get Beginner Forex book for free.

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera