Am I on the right track?

[Johnny_orionFX]

Hello everyone. I’m a beginner (about 4 years, hehe) and based on my studies from Baby Pips, I created a strategy for USD/JPY. An account with $1,000 for swing trading, 1% risk per trade, 2 or 3% profit target, and a lot size of 0.02. I’m still testing it on a demo account to learn how to trade, but I already have the money to trade live once I prove the strategy is solid. Here are the strategy details.

Strategy Summary (USD/JPY)

Trend (D1): Use 50 EMA to determine trend:

Price above 50 EMA → Uptrend → Look for buys.
Price below 50 EMA → Downtrend → Look for sells.
Entry (H4):

Draw Fibonacci on the main move:
Uptrend: From last swing low to last swing high.
Downtrend: From last swing high to last swing low.
Enter at retracement (38.2%, 50%, or 61.8%) with confirmation (e.g., pin bar).
Indicators:

50 EMA (H4): Price should align with D1 trend.
RSI (H4): Ideal 40-60; avoid <30 (oversold) for buys or >70 (overbought) for sells.
Stop Loss (S/L): Above (for sells) or below (for buys) the next Fibonacci level or swing high/low.

Take Profit (T/P): At Fibonacci levels (e.g., 0%, 23.6%) or extensions (e.g., 161.8%).

I know it’s pretty simple, but it was inspired by topics posted by more experienced traders here on the forum. Besides technical analysis, I also do fundamental analysis to avoid some bombs like the ones from last week (lol). Am I on the right track? What can I improve?

[TYGMedia]

Hi @Johnny_orionFX, nice to know you.

I actually didn’t want to post anything anymore. But somehow you have interesting question. I hope, posting here wont cause any trouble but can share some perspective with you.

You already have good strategy, but it’s not detail enough. The well established strategy is actually has more detail. You need to work on it.

Let me show you some example:

You are using EMA 50 on D1 and also H4 to look for trend. By using this methodology you are actually use MA Crossover. When both of them align, then they tell you the trend.

Instead of using 2 TF, you can combine them into one. Since the lowest TF is H4, so you can stick to H4 to trade.
Next you can calibrate the EMA on D1 to H4. 50 EMA on D1 is more and less 300 on H4. So you trade EMA 50 and EMA 300 on H4.

Next you put RSI on H4. Since RSI is momentum indicator, using it on HTF wont be so effective. But it doesn’t mean it cant. You only need to build the stats.

My opinion about Fibonacci, it’s very subjective, unless you have detail about how to use Fibo in your trading plan. Many fibo users have difficulties to decide where the points to put fibo line, especial during reversal. Fibo gives a lot of traps.

The most important thing is you have to build your trading stats using your strategy. From here you will know how good is your strategy. Try your strategy in 3 market phase, during uptrend, sideways and downtrend. During 2022 USDJPY was strong uptrend, compare to 2023 sideways + uptrend. 2024 was sideways to downtrend.

You can try to build out the stats according to these 3 time windows to findout how good it was by backtesting it.

Next finally you have to forward test on 2025. When you have done it for 3 months, you try to backtesting it to compare the result. When the forward test is 80% similar to your backtesting … and profiting, you can start to trade with live account (small volume).

Next thing, by lookin at the chart

You have to make sure you are ready mentally to implement the strategy. The most challenge is the waiting time. When you see other can trade and open position. you will do a lot of waiting. Some trader can’t wait that long. They will usually jump in, that make the strategy inapplicable

[Miss_Apprehension]

@Johnny_orionFX

1% risk per trade, 2 or 3% profit target,

I think it’s easily foreseeable that the kind of method you’re describing might be profitable with equal-sized targets and stop-losses (“R = 1”), but I’m finding it really difficult to imagine that it can work, in practice, with the targets twice the size of the stop-losses.

Let alone three times the size.

I certainly wouldn’t be able to manage that, and wouldn’t want to try.

The system might “work” and have an “edge” and be “profitable” but when you have a 25% drawdown, which you definitely will with the figures you’ve given, how will you know whether or not it “works”?

That’s a problem I wouldn’t want to encounter, myself, but it’s one you’ll have for sure, even if your system’s as good as you hope.

I would definitely change that part, myself, before trying it.

[SchmaltzHerring]

@Johnny_orionFX

Use 50 EMA to determine trend:

Nothing wrong with that idea, at all, but surely you should be looking at whether it’s rising or falling, not at whether the price is above or below it?

If the price is still above an EMA that’s turned and is now falling, you’d surely want to find a short entry, not a long one?

(I also strongly agree with the comments of our apprehensive friend, above. I’ve never seen a retail trader maintain profitability with a reward-to-risk of 2:1 or 3:1 and I don’t really believe it’s possible, to be honest. But certainly, if this isn’t profitable at 1:1, it surely has no chance, in practice, at 2:1?!).

[pink_hat_trader]

@SchmaltzHerring

surely you should be looking at whether it’s rising or falling, not at whether the price is above or below it?

I always assume that’s what people actually mean, when they say “above”/“below”?

They mean “above a rising one”/“below a falling one.”

As you say, nobody’s going to open a buy trade when their MA is declining?

[Johnny_orionFX]

Thank you for your help.
I wrote in a simple way, sorry about that. But basically, analyzing these charts, at the moment, I would be looking to go long on USD/JPY (first chart) and short on AUD/USD (second chart), anticipating a reversal to Fibonacci levels, as the RSI is currently at oversold and overbought levels, respectively. Alternatively, I could wait for these levels to be reached and then carry out the trade in favor of the trend.

[TYGMedia]

hi @Johnny_orionFX,

Thanks for your appreciation. If you want to make it work, you have to write down the strategy and follow it strictly. It’s a practice of mine. By writing down it, you can see the flaw and know how to improve it. You will also can have the stats that will lead you to use or throw it.

For example:

• EMA 50 on D1 to detect trend. When the whole candle above that means UpTrend.
• EMA 50 on H4 to validate trend. Have to be align with D1.
• Entry using RSI, looking for Pin Bar when RSI above overbought Short, otherwise Long.
  (Don’t write yours here, your strategy will be stolen if you are not willing )

By writing the rule and compare it with the market, you will know mistakes and alternatives as long as you has discipline. It will help you to fine tune yours strategy.
Example, you will know on which condition RSI will work, why kind of pin bar can be considered.

Good luck

[Miss_Apprehension]

@TYGMedia

Entry using RSI, looking for Pin Bar when RSI above overbought Short, otherwise Long.

This one, at least, is definitely a viable method based on completely sound principles.

It takes practice and interpretation and familiarization but I believe it’s possible to trade successfully just from that one pattern.

As Linda Bradford Raschke says, you only need one pattern, to make a living.

[FranziskaSchulz]

I love the strategy, far apart using indicators; they can of course be useful but I personally do not like using them

[samewise]

@TYGMedia

Thanks for your appreciation. If you want to make it work, you have to write down the strategy and follow it strictly. It’s a practice of mine. By writing down it, you can see the flaw

This is a great tip! I found it really hard to write down my exact rules the first time out, even after trading for .months on the same strategy.

Partly because the strategy evolves.

Also, we’re talking stats, so you want a ton of trades as proof that your strategy works or not. On the daily, in unless you’re trading a lot of different pairs at the same time (probably not), you might be waiting days and weeks for your trade to end. That takes building a pool of closed trades a really long time. Something to think about. I say if you have the time, can you trade the hourly?

[TYGMedia]

Hi @samewise, nice to talk to you again.

@samewise

This is a great tip! I found it really hard to write down my exact rules the first time out, even after trading for .months on the same strategy.

It’s actually not difficult. You have to be precise. This practice has been my practice , event to junior FM in my institution. Before they jump into big fund, they have to write down the strategy and proof it. Most retail trader don’t do this because, they don’t treat trading as serious business. As FM, we will need to be precise. We don’t assume, every movement has to have strong reason.

Stats means your strategy result as in backtesting and forward testing. As a FM, your client need proof of your skill. Without consistent live account performance, who will trust us baseless :-).

From backtesting we got our hypothesis about a strategy. Forward test is used to verify the strategy. There are some strategies need days or week, but there are some only need about hours event minutes. You pick methods that you can do.

The same strategy can have varient. For example I have a strategy, just like I defined previously. When I find out I can use specific Doji instead of Pin bar, I will have second alternative strategies.

When you trade in a firm, everything has to be a reason. It has to be documented, when we want to change it, it’s also has a reason. As retail we can change it in a blink, but the same thing how big your profit will be.

This explanation also tells to be a good trader, we need time. It’s not just search the internet for a strategy and BAMMM!!, become top trader

I trade many instruments, I have many strategies. Some can be automated, some have to be manual.

[samewise]

@TYGMedia

This explanation also tells to be a good trader, we need time. It’s not just search the internet for a strategy and BAMMM!!, become top trader

Can they hang this quote at the top of the website when you first register? Ha!

[EmeraldEyes]

I wouldn’t say your on THE right track, but you’re on a track. The entry strategy you’ve outlined is fine.

A few years ago, I decided to upgrade my CPU… Slapped a radiator & fans on an upgraded lid/heatsink, over clocked the hell out of it… just to run through entry strategy scenarios to find the most optimal settings or patterns to the most efficient. Then I rented CPU power through the Mql5… would run scenarios of 10,000+ trades on all the major pairs. Left my PC on for a full week… heating the house while I remotely connected from work. Here are my takeaways (EurUsd all time frames):

-Trade entry criteria didn’t matter for profitability.
-Over the large sample set, Longs & Shorts resulted in the same expected value under the same set of rules.
-Large R multiples above 10 had a higher than expected success rate, but failed the most.
-Most successful trade scenarios happened between 0.6-1.1R
-If one strategy outperformed during a time frame, it eventually under performed afterwards and mean reverted back to expected value.
-Underperforming strategies did the opposite. They outperformed later and ultimately reverted back. Strategy reversion or reversing was too unstable to predict.

Pick a strategy that fits your lifestyle, time constraints, risk appetite. Focus on one, critique as your trading evolves.

[TYGMedia]

@samewise

Can they hang this quote at the top of the website when you first register? Ha!

Thanks @samewise … I like your personality. You are looked like an easy going person

I am in the middle of meeting. You make me laugh, make me feel more confident to win a contract , when I get the deal, I will invite you to have a dinner together

[samewise]

@EmeraldEyes

-Trade entry criteria didn’t matter for profitability.

I can’t wrap my head around this. Mind sharing a little more about it? Entry doesn’t matter, so completely random, like, i see a setup, I’m entering now?

@TYGMedia

I like your personality. You are looked like an easy going person

Thanks man! I try not to take things too seriously. It’s a lot less stressful life.

Good luck on that contract! You go this!

[EmeraldEyes]

@samewise

I can’t wrap my head around this. Mind sharing a little more about it? Entry doesn’t matter, so completely random, like, i see a setup, I’m entering now?

Trade entry criteria didn’t matter for profitability. Similar to how you can’t create an entry strategy that will be an overall loser. Efficient market hyp. or whatever we call it. After 10,000 trades, I had the same results on every strategy on every time frame compared to a 1 min Bollinger Band Strategy of Buying the 20, 2, 2 upper break or selling the upper break.

[TYGMedia]

Hi @Miss_Apprehension, Nice to know you. I hope you are a real person, not a puppet sock character. I dislike Babypips for having many puppet sock’er.

@Miss_Apprehension

I believe it’s possible to trade successfully just from that one pattern.

The reason of many trader fails, simple by trading by assumption. If you look at all opinion here, most of them assumption. To succeed in trading, you have to rely on fact.
When we are still dealing with opinion and assumption, it’s actually telling you are far from profiting.

When we’re still playing in belief system, nothing can be done. We can belief anything but the fact will tell the truth.

Nothing personal, I will try tell the fact. Can we trade successfully by using one pattern? Answer is yes, definitely. But can we have a living from it, I will say … you wont unless you are trading using a large amount of volume to compensate it.

The fact is, most trader will use many pattern. I’m trading with many strategies at once.
Example:
I can be using Pin Bar on EMA H4 for my strategy. When I find out Doji can actually on H1, that will be another strategy. Let say then I find out I can trade other instrument with EMA + Stochastic, that will be another strategy.
Overall I will be using 3 strategies. Even they are considerable the same, they are actually operated differently.

Is it real? Yes, I actually trade this way. I have many others trader also implement the same methodology. If you only rely on one strategy, the result will be zero sum game, like some others explain here.

I feel so bad for many trader, got trapped by wrong perspectives. Btw, this also becomes a perspective, since I can’t prove it here …

@samewise

Good luck on that contract! You go this!

Thanks @samewise … I got the contract, finally … let’s have dinner together …

@EmeraldEyes

Trade entry criteria didn’t matter for profitability.

Hi @EmeraldEyes, nice to talk to you again. I just wont to add, your opinion is correct when you trade the market mechanically. If you are start to find a precision spot, it will give different stat. I usually run an EA when the PF is more than 1.5. The best PF I can have, in real account will be 2.3. Bigger than that the number of trade will drop significantly.

[samewise]

@EmeraldEyes

After 10,000 trades, I had the same results on every strategy on every time frame compared to a 1 min Bollinger Band Strategy of Buying the 20, 2, 2 upper break or selling the upper break

Oh that’s crazy. So then what’s the next thing you look at, if not entry, for deciding on a system?

[samewise]

@TYGMedia

I got the contract, finally

Nice work!

@TYGMedia

Nothing personal, I will try tell the fact. Can we trade successfully by using one pattern? Answer is yes, definitely. But can we have a living from it, I will say … you wont unless you are trading using a large amount of volume to compensate it.

I think SMB Capital talks about this, some of their traders trading a single pattern for years and years and being profitable. They said a lot of their successful traders over the years kept it simple and didn’t use a crazy amount of indicators or tools.

[pink_hat_trader]

@samewise

some of their traders trading a single pattern for years and years and being profitable

Makes sense.

As I keep reading here, Linda Bradford Raschke famously said in various interviews that you only need one pattern to make a living.

@samewise

They said a lot of their successful traders over the years kept it simple and didn’t use a crazy amount of indicators or tools

“The people I know” are maybe representative of nothing, but nobody I know who trades with steady successes is really using indicators at all other than maybe an MA for directional bias. Some aren’t even using charts.