A REALLY SIMPLE TRADING STRATEGY
I would love to talk with you a very straightforward trading egy or methoddology that may be applied to any market.
It forms part of one of my couple egies that employ even now 11 years later, albeit tweaked to match my egy.
For new traders it may be the first building block towards producing your own egy and is extremely powerful when applied with discipline and correct risk/trade management.
It may be tweaked and molded to match the traders risk appetite and experience at their leisure and when they feel comfortable.
You can add other specialized components to boost the probability of forecasting the correct path price will take along with fundamentals should you would like to comprehend the secular trends.
Let us begin:
Primarily, I suggest you start on a 4 Hour chart.
I recommend you remain on the 4 hour chart until you get used to employing the methodology and then by all means go lower or higher.
About the 4 hour chart there looks like an abune of little trends that remain intact in order to have a good amount of pips (50-100 ) once they get some traction and momentum so I favor this time frame and have done for many years with this specific methodology.
That's not to say that I really don't keep an eye on the greater time frames for bigger trends that I will ride as long as you can. I will go into multiple time frame analysis in the future in the post.
Is your market trending or nowadays?
Below is a 4 hour chart of AUD/USD using 50 period simple moving average.
If you are extremely new to trading, then the 50 period moving average is plotted using the automatic calculation of average closing price over the preceding 50 4 hour candles.
You see when price has traded under the 50 ma (simple moving average) and closed negatively and notice, this is important it's a decent close below the 50 ma. It's these tiny details that help build the confidence within our forecasting. Remember you can see the future on the chart above where as this won't be the case, when trading live - this is to illue my stage for identifying whether it's trending or ranging.
When you see price close and begin to move away from the 50 ma creating space this affirms a momentum in the move, and that I become curious.
This gives me another piece of information, that when price is below the 50 ma I only want to be short and when price is trading above the 50 ma I only want to be long.
Watch below.
Today this has given me a reason to believe this could be the beginning of a large or small trend that's forming and I want to get involved.
Entry technique
For your entrance, we employ a simple visual tool to assist us, anyone imagining what that's yet? Yep, another simple moving average. A 21 period moving average.
We wait patiently for price to return to the 21 ma to acquire an entrance. It's the first bit of 21 ma that we want! It may be an'atmosphere kiss' as in virtually touching or a complete touch. If it is 4 pips or more away sit on your hands until it's 1 pip or touching. If you don't receive the trade you wait. You cannot trade all of them. Let price come to you.
If you are extremely new to trading, then now I would like to point out the sooner you know and digest that the lifetime of a trader is as much shedding as winning you'll become comfortable losing, and let me re-phrase that, losing little in relation to your account. 1-2% that is how you live and build your winners gradually as time passes.
With a little account state #2000 you would trade with 0.50 a pip to get a maximum risk of around #40 or 2% of account
It is those traders who manage their losses and maximize their gains who live and earn some cash.
That is the short entry explained briefly, today we must look at risk and trade management. I will be updating this thread as soon as possible.
With this type of egy, in addition, it gets you used to really reading the markets. That is so important if you would like to become consistently profitable.
No apology to this EA crew but you are not reading the market, anticipating an arrow to sell or by.
I truly encourage aspiring traders to try to read the markets, that way you will end up much more informed and instinctive.
In the event that you only do as another man you will only be as good as another man but you don't want to be just as good as another man that you would like to be much better!
We've covered entrance on the short side and the particulars I love to see such as distance and momentum and only being long when price is above the 50 ma and only being short when price is below the 50 ma
Today we could add some further analysis
If we would like to extract up to the market as you can what should we be looking at?
That is correct the Daily, Weekly and Monthly charts along with other entrance opportunities with in the same methodology.
This will give us an understanding of the longer term trend and/or possible turning points and limit risk.
After we determined the bigger more dominant trend we can begin to work out targets and/or predictions.
I specifically picked the 21 ma to get an entrance technique. However, I stress this does not always have to be that the 21 ma.
Notice that there is reactions from the 21ma but not always. This will be likely for your 34, 50, 100, 200 and 500
I suggest you plot each of these in your charts to determine exactly what I mean. It's then your choice where to enter and what ma to enter on.
Exactly like support and resistance it's a zone, not a specific line. It may be, however more often than not it's spread within a few pips onto a lesser time frame to a 50 or more on a bigger time frame.
The idea is to pick the sweet place. That's why sometimes the 21ma will respond and other times it's going to function as 34, 50 etc.. .
The reason I am telling you this is because of many methodologies(egy) that you ought to have a fluid egy, some-what elastic and pays to remember this.
The main reason you are required to have this open mind with fluid egy is simple, that the market never really repeats exactly what it's done historically so that you must adapt yourself!
This way of thinking is what provides you with a much greater understanding of the markets than many because you previously egy with an open mind rather than strict rules. That is where most novices will fall fast.
Novices rely on strict principles and are not really reading the market.
A systematic approach may continue to be flexible.
Watch below.
Depending on varying factors would depend on where you get in.
With the first air tag of the 21 ma the risk is still small if your stop is placed above preceding support that is now resistance.
This will not always be true. Occasionally price will move away from the other moving averages and momentum will carry it quickly and then the first bit of the 21 ma might be looking good however, you must always bear in mind your risk and stop positioning.
Placing a stop at a predetermined amount each time isn't wise if it does not match the market.
Position sizing according to risk is how the egy ought to be adopted.
Instance of set stop price.
Account size $2000
2% $20
Cease placed at set distance irrespective of market requirements.
This isn't placing probabilities in your favor.
Instead, you adopt the flexibility previously mentioned and wait patiently to get the correct setup so that you may set your stoploss in the correct position or you also lower your place size so it's possible to put the stop farther away.
Watch below
That leads me onto looking at the bigger higher time frames for aiding the probability onto your side.
The chart above is AUD/USD 4 hour
Day traders would be looking for longs, maybe even swing traders that were not reading the market might equally would like to be long.
I would be looking for shorts.
Check the weekly chart out below to determine why.
Notice that trend line? That is my short goal. That's the reason I would be selling some other rallys.