Forex Trading Strategy Nick8217s Forex Price Action Strategy Welcome to the latest edition of my Forex trading strategy. My Forex trading strategy is based entirely on price action, no indicators, no confusing techniques, just pure price. I have been developing, tweaking, and improving my price action strategy since 2005. This trading strategy is ten years in the making it has survived major changes in market conditions, high volatility periods, low volatility periods and everything else the Forex market has thrown at it. And that is the beauty of trading a price action strategy8230 8230 Indicator based strategies are locked to the market conditions they were created for. Price action is fluid, it easily adapts to changing conditions, to different pairs, to different time frames and even to different traders. Most importantly, price action allows you to keep your trading simple . Keeping Your Trading Simple The key principle of my Forex trading strategy is to keep trading simple. I am against over complicating trading. Because the simpler your strategy is, the more effective you will be as a trader. One of the main goals of my price action strategy is to keep my charts clean. The only thing I place on my charts are support and resistance areas. I use these support and resistance areas in conjunction with candlestick analysis to trade Forex. Packing my charts full of indicators would make it impossible for me to read price action. Trading with no indicators makes my Forex trading strategy simple, stress free and highly effective. What does a clean Forex chart look like Here8217s a picture of my EUR/USD 4hr chart. My clean and simple Forex trading strategy This chart is clear and easy to understand, there is nothing that distracts you from reading price. This is why I love my Forex trading strategy . Some trading strategies are an absolute mess of indicators. Check out the image below, some people actually trade like that A messy indicator based Forex strategy Why would you want to trade like this Indicators Required for this Trading Strategy So to trade my Forex Trading Strategy I use no indicators. I generally don8217t like using Forex indicators, as I find the data worthless, as they lag current price. If you want to be in the moment and take trades based on what8217s happening right now then you have to base trades on current Price Action . Which Currency Pairs can you Trade Successfully using Forex Price Action My Forex Trading Strategy will work on any currency pair, which is free floating and regularly traded. This is because my method is based on Price Action . This means you can use this trading strategy to successfully trade any currency pair you find on your Forex trading platform. That being said, I personally prefer to concentrate on just a few currency pairs at any one time. I find it too distracting to try and keep track of too many pairs at once. I mainly trade the EUR/USD, USD/CAD and AUD/USD. I generally trade these currency pairs as they are the most predictable and their movement is smoother. You don8217t find random jumps unless there8217s been some highly unexpected news, which is pretty rare. If you prefer to trade a particular Forex session such as the London, New York and Asian session then choose the main currency pairs that are active at those times. Price Action Trading Works Better on Longer Time Frames Since this Forex Trading System is based on Price Action you can trade any time frame from one hour and above. I mainly concentrate on the one hour, four hour and daily charts. These are consistently the most profitable, as the patterns are easier to spot and lead to more consistent profits. Types of Price Action Analysis Primarily, I use two forms of Price Action Analysis : Support and Resistance lines. Candlestick analysis. How to Enter Trades using My Forex Trading Strategy Due to the recent economic uncertainty and countries losing their credit ratings etc, currencies aren8217t trading as they normally would. This has led to me to trade reversals exclusively. I look for strong reversal setups forming on top of my Support and Resistance areas. Once a pattern forms, that indicates a reversal, I set up a trigger price and enter the trade. I take several trades each week and average at least an 80 win rate. Trading Strategy Targets and Stops Targets: My targets are on average 80 pips. Stops: My stops are on average 40 pips. These targets and stops differ during different market conditions. I usually allow price action to determine my target and stop. This means I will read the candles and set my stop based on recent highs and lows. A common place for a stop will be above or below the most recent high or low. How to Adjust the Trading Strategy Around News Releases I use the Forex Calendar from forexfactory to keep track of economic data. Statistically I have found that I do not need to avoid trading during high impact news releases. In fact, by trading through most news releases, I end up making more profit8230 8230 Why is this Banks and other large trading institutions pay millions for analysts and data feeds this allows them to make educated guess about upcoming economic data releases. These guesses are factored into price before the data is released. If a trade set up forms before a major economic data release, it can be a sign that large institutions are position themselves for the release. If price action is telling you to short, there is usually a reason The only news I avoid is unpredictable news or very high impact news, here is a quick list: Speeches by central bank leaders or politicians. Interest rate announcements or anything directly related to interest rates. NFP report, the name changed a while ago to the 8220Non-farm employment change8221 report.. You should also watch out for important political meetings like the G7 and G8 summits. The recent G7 summit in June 2017 caused a lot of unpredictable moves in the Euro. For the most part, news can be safely ignored. The only thing I do not do is enter a trade that is triggered by a news release. News based moves tend to retrace quickly, so if I have an entry trigger, I remove it before any major news release. As you can see, my Forex Trading Strategy is straightforward and will allow you to make pips in any market conditions, with almost any Forex currency pair. Professional forex traders Joined Sep 2009 Status: Price Action 469 Posts I just needed to ask the following questions. 1) Are you a professional Forex Trader (i. e. working for someone you have to attain results for to keep your job) 2) What systems, strategies, methods do you use 3) How does your average Forex trader become successful 4) What have you been taught, that enables you to succeed. Ok Ive been trading for about 2 years full time, I have traded literally hundreds of systems from all over the place. Forex Factory, TSD, Baby Pips, etc etc, to name but a few. I have used another 50 robots to try and do it for me, some are actually quite good, but most of the time just break even long term. I have never come across in that time any information about profitable trading, from real professionals in the industry, just loads of people claiming to have found the quotHoly Grailquot and they have the system. the system that will create unbelievable wealth for you. oh I forgot that wealth will be achieved with little or no effort from you. So what works then, is it. Breakout Swing Trend Scalp Grid Support amp Resistance Pivots Dumb Luck Toss of a coin Money management Ive tried and seen them all, backtested them until the early hours of the morning, sometimes at the expense of no sleep at all. going quotBlind Sidedquot looking at charts. Ive designed EAs, written EAs, paid people to do it for me based on my Strategy. but only moderate success to date. So come on you Professional Forex Traders lets get down to the quotnitty gritty quot What is realistic and works over time. Lets put our heads together and get this sorted. We want the definitive answer. IMPORTANT ADDITION ADDED ON 19/09/10 Please read the questions asked above (Numbers 1,2 3 amp 4), if they dont apply to you or you feel that they do but are not willing to make a constructive addition to this thread then please do not post anything on here. Any non polite or irrelevant posts will be erased and blocked. This thread is about gathering information from anyone professional/successful that is willing to share there knowledge, wisdom, experience and techniques used to trade. No one has to, but if they do then everyone on here would be interested. Although many that have posted on here, including myself, have expressed opinions about trading, this thread is not really about that, or is it about debate as to what works, or is it exploring with other traders what might work, or is it the search for the Holy Grail, there are hundreds of other threads that deal with all those issues on FF. Its about asking if anybody wants to mentor/teach others looking to take there trading to a successful amp professional business level and make a success of it. The only question that really remains is do those individuals exist on this forum I just needed to ask the following questions. 1) Are you a professional Forex Trader (i. e. working for someone you have to attain results for to keep your job) 2) What systems, strategies, methods do you use 3) How does your average Forex trader become successful 4) What have you been taught, that enables you to succeed. Ok Ive been trading for about 2 years full time, I have traded literally hundreds of systems from all over the place. Forex Factory, TSD, Baby Pips, etc etc, to name but a few. I can say Im in the same situation as you. Ive invested a lot of money on forex programs and materials. Your questions are relevant. I would like to contribute. What are you suggesting with this thread Cheers If I Change, the whole World changes I just needed to ask the following questions. 1) Are you a professional Forex Trader (i. e. working for someone you have to attain results for to keep your job) 2) What systems, strategies, methods do you use 3) How does your average Forex trader become successful 4) What have you been taught, that enables you to succeed. Ok Ive been trading for about 2 years full time, I have traded literally hundreds of systems from all over the place. Forex Factory, TSD, Baby Pips, etc etc, to name but a few. From what you have listed above I found only the jobs that are guaranteed profitable is to program EA for others (or sell it). Joined May 2008 Status: EMPEROR 456 Posts The numerous strat and EAs that you have tried is the bane of most retail traders. Let me ask a question Have you seen a fighter pilot specialised in say an F 16 aircraft wake up the next day and jump into the cockpit of a Tornado or Mig 21 and fly. Or have you seen an ENT Specialist perform the task of a gynaecologist because he is a doctor. Consequentely jumping from one system to another is a recipe for failure. You only need two strategies, one for a trending market and the other for a ranging market. Also vital are understanding of current market sentiment, Good money management and the virtue of patience. Secondly, the sooner retail traders learn that technical analysis is only part of the equation to become succcesful in this biz on a long term basis. You cannot be succesful in the long term without understanding the fundies that drive price action. We have all heard about the expliots of Jesse Livermore or more currently George Soros. What was there secret, simple predicting future price action through fundamental analysis and market sentiment. Thirdly what instituitonal traders have going for them is simply being able to see order flows and taking advantage of it on the back of sound analysis of market sentiment. I just needed to ask the following questions. 1) Are you a professional Forex Trader (i. e. working for someone you have to attain results for to keep your job) 2) What systems, strategies, methods do you use 3) How does your average Forex trader become successful 4) What have you been taught, that enables you to succeed. Ok Ive been trading for about 2 years full time, I have traded literally hundreds of systems from all over the place. Forex Factory, TSD, Baby Pips, etc etc, to name but a few. The numerous strat and EAs that you have tried is the bane of most retail traders. Let me ask a question Have you seen a fighter pilot specialised in say an F 16 aircraft wake up the next day and jump into the cockpit of a Tornado or Mig 21 and fly. Or have you seen an ENT Specialist perform the task of a gynaecologist because he is a doctor. Consequentely jumping from one system to another is a recipe for failure. You only need two strategies, one for a trending market and the other for a ranging market. Also vital are understanding of current. So what your point is then is that we are barking up the wrong tree looking at this industry thinking we can rely on a mechanical system to do it for us, indicators alone are just not going to do it. Our focus must be on predicting price movement through reading news and we must be up to date with world wide events that will almost certainly effect a countries currency. sounds logical if thats what your point is, its a bit like investing in stocks, you just wouldnt unless you could see a reason behind such an investment, a reason for the price of a stock to move in the future from an influencing event. I can say Im in the same situation as you. Ive invested a lot of money on forex programs and materials. Your questions are relevant. I would like to contribute. What are you suggesting with this thread Cheers I guess my goal is to find out from other traders a realistic solution to trading Forex. Am I wasting my time in the pursuit of making money on currency trading the way I have been doing it and am doing it now Is it time for a change of direction with what Im doing, am I actually going in the right direction, is it time for a complete re-think on my trading plan Has anyone got a mechanical system/systems they have found have worked for them over time I wanted to know from a Forex trader that trades full time for a bank or the like, what his/her daily routine was like and how they went about it. It wasnt really to try and come up with a new system, another massive thread dedicated to hundreds, if not thousands of posts, using endless indicators, that will invariably result in long term failure. but to try and find from a real hard working forex trader what they do. I guess that was the idea behind the thread, the pursuit of knowledge. Consequentely jumping from one system to another is a recipe for failure. You only need two strategies, one for a trending market and the other for a ranging market. Also vital are understanding of current market sentiment, Good money management and the virtue of patience. Secondly, the sooner retail traders learn that technical analysis is only part of the equation to become succcesful in this biz on a long term basis. You cannot be succesful in the long term without understanding the fundies that drive price action. We have all heard about. Good answers, but I have to disagree about jumping from one system to another, I think an open mind initially is required and the willingness to learn all aspects of an industry/ profession. Otherwise its impossible to make judgements in the future, you have nothing to compare anything too or experience to draw on. But if you would be kind enough to give an example of how you would use what your saying above on a day to day basis when trading, then Id be more than happy to listen. They both favor longer term trend following. which many people forget. has significant drawdown periods. Yes I looked at those threads myself previously as well. The idea that trend following is the answer is not a bad one. Have you read quotTurtle Tradersquot, I know its about stocks mainly, but its an interesting read. That whole method is based on just that with Money Management being a key point. Your last remark is also relevant to something I stumbled across today, it was a system you had to pay a monthly subscription to use, about 150 per month, which made me lose interest straight away to be honest, but it was unusual to find something that gave out a years worth of back tests that showed only about a 45 win rate, with about 30 drawdown, but still made on average (or claimed too) of 2000 per month on each currency pair. It looked like they were trading 1 lot, so there EAs for each pair where averaging about 200 pips a month. They where trading 10 pairs. So potentially 2000 pips per month or 20,000 Might have to go back a have another dig around on that one. Ive seen many of this type of product before, but on reflection never one admitting to those type of results with respect to the system win rate. When reading the forum and considering opinions i try to keep in mind a few things. 95 of traders are losers (or however you want to interpret this beaten down stat). So right off the bat at least 95 of the posts here are total bullshit (maybe even this one). Im not profitable so take this with a grain of salt Interesting points but this is a 4 Trillion a day industry. Even if I found the Grail and was making 1M a day trading, my trades would have no effect on the market what so ever, the rest of the world wouldnt even no I existed. So I have to respectfully disagree that I could affect anyones liquidity. There is definitely a suspicion by many that there is some hidden force scheming behind there backs, when I think its more a case that they simply dont know how to trade and therefore lose. Its much easier to blame others for ones failure than to look at yourself as the problem. Not saying thats the case with you, Im just making a general observation. As has been shown in the past, any true edge posted on a public forum will lead to its worthlessness in short order. Think about that for a second. Even if somebody did post the holy grail, by the nature of supply and demand, the grail would thereafter cease to exist. So next time your back-testing/ forward-testing/ re-testing any method or idea derived from any public forum, keep in mind youre probably taking advice from a loser and theyve already ruined any edge they may have had by sharing their info with you and everyone else. Is this how it works in reality If I reveal my magical system to hundreds or thousands of people, wont their following my signal push price the way I, ultimately we, want it to go 10,000 people each buying 1 contract of the EURUSD at the same time will cause price to go up, will it not Alright then, heres my magical system buy on the 5EMA cross of the EMA34 high, sell on the 5EMA cross of the EMA34 low. I work full time and I sporadically use this method. It works depending on the analysis done about where the currency may be going i. e. basic fundamentals which is hard to put into words. What you wrote about Czech, holds true for horse/dog betting. 10,000 people betting on a horse/dog will shorten its betting payout price dramatically. Here you need to be secretive. Is this how it works in reality If I reveal my magical system to hundreds or thousands of people, won8217t their following my signal push price the way I, ultimately we, want it to go 10,000 people each buying 1 contract of the EURUSD at the same time will cause price to go up, will it not Alright then, here8217s my magical system 8211 buy on the 5EMA cross of the EMA34 high, sell on the 5EMA cross of the EMA34 low. I work full time and I sporadically use this method. It works depending on the analysis done about where the currency. OK so your whole strategy is based on Fundamentals, when you have some idea which way a currency will go, presumably by either a News release, Newspaper article or TV news story, you enter with the cross of a 5/34 EMA in the direction you suspect price will go. OK so next question. do you have a favorite currency pair and what time frame do you consider it is best on. Very simple strategy, but hey, Ill look at anything. So from what you say your not employed to make money using this type of strategy, this is just one you use to confirm entry after you have gathered fundamental information. Well the News must be key to this strategy as Im confident that if you made a simple EA to trade entry and exit on an EMA cross your account would deplete at a rapid rate long term. Cheers thanks for the input, appreciate it. Learn Forex: Three Simple Strategies for Trading MACD In our previous article, Trading with MACD. we saw that this utilitarian indicator can help a trader see quite a bit of information - including the possibility of noticing trend changes at a very early stage of a currency pairrsquos move. Unfortunately, one of the drawbacks of the indicator using default input settings is that many of the signals that are generated may not work out the way the trader wants. So while this can be a valuable indicator, it is necessary to enhance the strategy or approach with additional means of determining which signals to take and which to avoid. In this article, we are going to look at 3 different ways that traders can look to utilize the MACD indicator based on the market condition they are looking to trade. Traders looking to trade trends with MACD may feel very lsquoat-homersquo with the indicator, as MACD is generally utilized as a mechanism to enter into trending situations. Traders can look to filter trends with the 200 period moving average, and taking trades only in the direction of the trend. So - when price is above the 200 period Moving Average - traders are only looking to buy on bullish MACD crossovers of the Signal Line. The chart below will illustrate further: Created with Marketscope/Trading Station II This strategy can be utilized on any timeframe longer than the hourly chart. Charts of shorter time periods may prove too lsquolaggingrsquo for many short-term tradersrsquo tastes. Both indicators are built and traded from the same time frame, so no additional work outside of adding the indicators is required of the trader. Strategy Tools: 200 Day Moving Average, MACD with (12, 26, and 9 inputs) Entry Criteria: Take MACD Signals ONLY in the direction of the general trend, as graded by the 200 period Moving Average. Exit Criteria: Contra-cross of MACD OR price Crossing the 200 period Moving Average. (So if trader had taken a long entry with a MACD Buy signal - they would exit the position on either a MACD Sell signal OR price crossing below the 200 period Moving Average.) The Ranging Swing Trader The next strategy isnrsquot as flexible as the first in the fact that it is specifically built for the 1 hour charts, with some assistance from the 4 hour chart (although the 4 hour chart specifically will not be used.) But just because multiple time frames are utilized by the trader, it doesnrsquot mean that the entirety of the traderrsquos analysis cannot be done on the same chart time frame. In this strategy, the trader wants to first grade for ranging market conditions, and this can be done with the ADX indicator. Traders can use an hourly chart, and build the ADX indicator based on the 4 hour chart simply by clicking the lsquoData Sourcersquo tab in the indicatorrsquos properties boxes on Trading Station II (shown below). Created with Marketscope/Trading Station II After applying ADX built on values from the 4 hour chart, traders can add a line to the indicator with the horizontal line tool at the value of rsquo30.rsquo This is the filter for the strategy. If ADX is greater than 30 - then traders do not look to trade this range-based strategy as prevailing trends may be too strong for cogent entries. If, however, ADX is below 30 - then traders can look to take each and every MACD signal that generates from the indicator. Created with Marketscope/Trading Station II Strategy Tools: Hourly chart with MACD applied, ADX based on the 4 hour chart Entry Criteria: Take MACD Signals ONLY when 4 hour ADX reads below 30. Exit Criteria: Stops and Limits with Limits being set at 2 times the stop amount. Stops and Limits can be obtained by using the 4 hour Average True Range amount. While being one of the most difficult market conditions to trade (since it is nearly impossible to predict when a reversal of price may actually take place), trading Reversals is also one of the most attractive to retail traders. With one look at the SSI, and noticing the penchant that many retail traders have for attempting to call tops or bottoms helps illustrate this. Reversals can bring big moves to the trader. They can also bring big losses. Which is precisely why it is so important to use strict risk management when trading in these conditions and traders should be ready to cut their losses quickly the reversal proves unlikely. In the article, How to Trade MACD Divergence. Walker England shows exactly how this can be done. The picture below will illustrate a classic case of Bullish Divergence. In this instance, notice that price has went on to make a lsquolower-low, rsquo while MACD has printed a lsquohigher-low. rsquo Notice that while prices were in the process of printing a new low, the higher low established by RSI illustrates lsquodivergence. rsquo This, in-and-of-itself is often used by traders to trigger entries in reversal markets. Traders will wait for the crossover of the MACD and Signal line, and look to enter the trade with the lsquohigher-crossover. rsquo The illustration below will show the exact point with which traders would look to enter, using the same chart we investigated previously. Created with Marketscope/Trading Station II Strategy Tools: Any time frame chart with MACD applied (default inputs of 12,26, and 9) Entry Criteria: Take MACD Signals when Divergence is present. Exit Criteria: Stops and Limits with Limits being set AT LEAST 2 times the amount of the stop. Stop should be set to the low of the move (with Bullish Divergence) or the high of the move (with Bearish Divergence). Traders may also incorporate a trailing stop, as shown in Trading Trends by Trailing Stops with Price Swings. by incorporating price action into the trade management. --- Written by James B. Stanley You can follow James on Twitter JStanleyFX. To join James Stanleyrsquos distribution list, please click here . DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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