This simple 5-step strategy will help you simplify your trading while providing you with consistent profits. Trading strategies do not have to be complicated to be extremely successful. In fact, over time, simple trading strategies have proven to be more successful than very complex strategies. The reason for this paradox is that a simple strategy is easier to follow and easier to implement.
Follow the 5-step strategy:
1. Check the trend using your daily chart. The chart should tell you if the market is in an up or down trend.
2. Once you know what the trend is, check for basic news releases that may impact your trade. Do not skip any of the following steps if there are major news releases within 2 hours of your trade. You can get the current financial news from a new news feed on the financial market of your choice.
3. If there is no news within 2 hours of your trade, execute your trading plan. For example, if the main trend is up, look for "buy" signals from your technical indicators, and vice versa if the main trend is down.
4. This is the most important step and your decision on whether to enter a trade is here. A common strategy is to use the intersection of 4 EMA (exponentially moving average) and 23 EMA on the 30 minute card to decide whether to buy or sell. You will need other indicators such as the Weekly Pivot, Stochastic and Moving Average Convergence Divergence (MACD) to confirm your trade. These indicators should also follow the trend and not look flat. You can further expand trading to your advantage by trading only during high liquidity sessions and confirm the trend using a 4 hour chart. If everything looks good, you're done!
5. The final step to managing your money is by setting the trade at a tight stop loss of around 35 pips while using one of two methods of profit targeting. The first method is to use a healthy risk-reward ratio of at least 1: 2, and the second is to use your daily support and resistance.
As you can see, a good trading strategy does not have to be complicated to succeed. Simplifying your trading strategy greatly increases your chances of successful trading. This five-step strategy should help you achieve consistent profits with your trade.