Win at Forex - A Simple 3 Step Forex Trading Strategy for Big Gains
- Author Monica Hendrix
- Published May 12, 2008
- Word count 642
So you want to win at forex? Then you need a logical robust forex trading strategy you can apply for success and that's exactly what were going to look at here.
Let's go through the 3 simple steps to get you up and running on the road to profits.
- Your Trading System
Let's start with a form of trading that has worked and will always work - trading breakouts to new highs or lows. It's a fact that most major forex trends start from new highs and lows and by buying breakouts, you can be in on all the big trends that yield the big profits.
You need to trade longer term and this means looking for resistance points on a daily chart. Ideally, you want at least 3 tests and the more the better and to make the breakout even more valid look for the spacings of these tests to be wide apart.
Be patient, good breakouts don't come around every day - but by waiting for them you get the odds in your favour. Trading frequency has no bearing on profits, so trade only when you see a valid break of resistance and this will occur only a few times a month.
- Confirming the Trading Signal
If you want to trade breakouts you need to make sure that price momentum is on your side to increase the odds of success and now you need to make momentum indicators an essential part of your forex education. If you don't know what they are look up our other articles.
In summary - they are leading indicators, to gauge the strength and momentum of price. You want momentum to support any break before executing your trading signal as the odds of continuation of the trend are greater.
Good ones to look at are Relative Strength Index (RSI) stochastic, Average Directional Movement (ADX) - There are others - but these are a great place to start.
- Money Management and Stops
The good thing about breakout trading is your stop level is obvious - behind the breakout point.
What you have to be careful of is making sure your stop remains behind normal volatility and protects you, so it's not to close to see you taken out by random volatility and allows you to stay with the trend. For this, wait for the price to get moving, until you have a cushion of profit and then trail your stop behind the 40 day moving average and use the 20 day moving average, to add to positions.
You can experiment with different averages - but these are two that tend to work well in strong trending markets.
Another trick is to bank partial profits on surges to overbought levels and buy dips to put the position back in i.e. the 20 day moving average or nearby trend line support. This is a great trick for smoothing your equity curve.
Putting it all Together...
The above is a simple forex trading strategy to help you win at forex trading.
Breakout trading works and will continue to work. If you confirm your breakouts with momentum, you have the odds on your side with your market timing and the stop loss and money management tips; will keep you in all the big forex trends.
Forex trading is not about complicated methods or trying to be clever, it's about having a simple robust trading system; you understand, can have confidence in and therefore can apply with discipline.
Simple Robust Forex Trading System + Applied with Rigid Discipline = Forex Success
Keep in mind you need to have the discipline to apply your forex trading strategy if you don't - you don't have one.
Trading is all about maintaining rigid discipline and this trait is vital for success.
Anyone can make money with the above tips and win at forex. Try the above for yourself and see.
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