What is the 3 5 7 rule in trading?

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By Nick

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Looking for a simple yet effective trading strategy? Try the 3 5 7 rule. Count how many days, hours, or bars a trend has been going in one direction, then on the third, fifth, or seventh bar, look for a bounce in the opposite direction. It’s based on market cycles and is a self-fulfilling prophecy, as many traders use this rule. Confirm the reversal with other indicators and use proper risk management. Give it a try and see how often it works.

The 3 5 7 Rule in Trading: A Simple Strategy for Profitable Trading

If you’re a trader, you know that making profits consistently is not an easy task. You need a strategy that works and can help you make the right decisions at the right time. The 3 5 7 rule in trading is a simple yet effective strategy that can help you do just that.

The strategy is very simple: count how many days, hours, or bars a run-up or a sell-off has transpired. Then on the third, fifth, or seventh bar, look for a bounce in the opposite direction. Too easy? Perhaps, but it’s uncanny how often it happens.

This strategy is based on the principle that markets tend to move in cycles, and after a certain number of days or bars, there is a high probability that the trend will reverse. By using this rule, you can identify these reversal points and take advantage of them to make profitable trades.

How to Use the 3 5 7 Rule in Trading

To use the 3 5 7 rule in trading, you need to follow these simple steps:

1. Identify the trend: Look at the chart and identify the trend. Is it a bullish trend or a bearish trend?

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2. Count the bars: Count how many bars have transpired since the trend started. You can count days, hours, or bars, depending on your trading style.

3. Look for the reversal: On the third, fifth, or seventh bar, look for a bounce in the opposite direction. This means that if the trend is bullish, look for a bearish bounce, and if the trend is bearish, look for a bullish bounce.

4. Confirm the reversal: Once you identify the reversal, confirm it with other technical indicators such as moving averages, RSI, MACD, or any other indicator that you use in your trading strategy.

5. Enter the trade: Once you have confirmed the reversal, enter the trade with a stop loss and take profit level based on your risk management strategy.

Why Does the 3 5 7 Rule Work?

The 3 5 7 rule works because it is based on the principle of market cycles. Markets tend to move in cycles, and after a certain number of bars, there is a high probability that the trend will reverse. This is because traders who entered the trend early start taking profits, and new traders start entering the market in the opposite direction, causing a reversal.

The 3 5 7 rule is also a self-fulfilling prophecy. Many traders use this rule, and when they see a bounce on the third, fifth, or seventh bar, they enter the market, causing the trend to reverse even further.

Conclusion

In conclusion, the 3 5 7 rule in trading is a simple yet effective strategy that can help you make profitable trades. By counting the number of bars and looking for a bounce on the third, fifth, or seventh bar, you can identify reversal points and take advantage of them. Remember to confirm the reversal with other technical indicators and use proper risk management when entering the trade. Happy trading!

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