First of all, I want to stress that this trading system of mine is no holy grail and anyone can use it successfully if they follow the rules of the trading system. I have been trading for years and this is one of my forex trading strategies that have helped me made profits consistently.
I have always kept my trading systems simple because it’s the simple system that works in this ever-changing brutal currency market. Surprised by that? Did you think that a successful trading system has to be sophisticated and difficult to use? Doing well from the forex market depends on how effectively the trader himself uses the trading system and not how good the trading system is.
So now I will reveal a forex strategy that I use very often to profit consistently from the market. After you read it, you may think that actually it’s such a simple system. But like I said earlier, trading should be simple, don’t complicate it. Below are the steps of my forex day trading strategy:
Step 1: Look at the main trend using daily chart. The first look from left to right of the chart should tell you it’s a down trend or up trend.
Step 2: After knowing what the main forex trend is, I will go to Forex Factory website to check for for any news releases. If there are upcoming news in 2 hours, I won’t even go to step 3 to look for trading signals because there is a high likelihood of whipsaws.
Step 3: If there is no news, I will put my forex trading plan into action. For example, if the main trend is up, I will only be looking for buy signals generated from my forex indicators, Vice versa if the main trend is down.
Step 4: Now this is the most crucial stage and my trading decision lies here. I use the crossing of 4 EMA (Exponential Moving Average) and 23 EMA to define buy and sell signals on the 30 minute chart. There are other indicators involved, the weekly pivot, Stochastic and MACD (Moving Average Convergence Divergence) must also follow the trend and cannot look flat. I filter whipsaws by trading only during high liquidity sessions and checking whether the trend is the same using 4 hourly chart. That’s all!
Step 5: The trade is set at a tight stop loss of around 35 pips while I have 2 methods of targeting profit. One is using healthy risk to reward ratio of at least 1:2. The second is using daily support and resistance.
That’s my successful forex trading system. It’s simple isn’t it? Of course risk management, money management and psychology should be combined in this trading system for it to work properly.
Source by Daniel S.