Awesome sauce Daily / H4 strategy


Over the past few months I have been developing this system to provide an accurate low risk entry point that produces high rewards.

It takes 10 minutes to check the charts every 4 hours freeing up a lot of time to play games. Jokes. I use this spare time to find potential trade setups, stay in tune with the market news fundamentals and spend more quality time with my family.

[B]Check past/future fundamentals and market sentiment[/B]

At the beginning of each week I check previous weeks economic data to paint a picture of where the market is and where I think it will go, based on the fundamental news. I then make a mental note of the news schedule for the week ahead. Once I am happy with the fundamental position of a currency I proceed to the next stage.

Daily I check previous day fundamentals to refresh my brain. I don’t care too much what’s being released today/tomorrow unless it’s major fed talk, interest rates, banks etc.

[B]Check daily charts for trend and major support/resistance[/B]

The daily chart will be used to confirm overall trend/range of the market. It provides a broader view of what’s happening with the currency and has less noise.

[B]D1 Indicators:[/B]

[li] 200 Simple Moving Average (SMA) applied to Close
[/li][li] Trend lines drawn to chart manually
[/li][li] Support/resistance drawn to chart manually
[/li][li] Stochastics (15,3,3) to confirm overbought/oversold
[/li][li] Fibonacci in trending markets

Your chart should look like this – notice how I am using a Line Chart and not a Candlestick chart. This makes it easier to draw trend lines, see trends, see patterns, and takes less focus off of the candle noise. We are simply looking for the trend and channel ranges to trade here.

[B]The thought process:[/B]

[li] Price is trading below the 200SMA – Down trend
[/li][li] Stochastics are overbought and have crossed – Confirmation of downtrend possibility
[/li][li] Price created lower high with a 100 pip distance to the nearest trend line
[/li][li] ?? – as you can see here, price will have two options when it reaches the lower trend line. Bounce and go back up again or continue downwards creating a substantial breakout move.

[B]Check H4 charts for trend pullback OR crossover entry opportunities[/B]

The H4 (4 Hourly) charts provide a more intricate entry point without suffering from too much noise. Generally, price will be moving in the direction of the Daily trend, we use a pullback OR moving average crossover as method for entry in to the market.

[B]H4 Indicators:[/B]

[li] 20 Exponential Moving Average (EMA) applied to Close
[/li][li] 40 Exponential Moving Average (EMA) applied to Close
[/li][li] Ichimoku Kinko Hyo (Up Kumo & Down Kumo only – “cloud”)
[/li][li] Support/Resistance lines from PivotPointUniversal indicator
[/li][li] Pivot type: Fibonacci
[/li][li] Period: Weekly
[/li][li] Time: Server

Your chart should look like the image below. Remember we are looking for the moving averages to crossover or for the price to pullback to the moving averages.

We will only trade at the close of an H4 bar. Great for freeing up your time. Bad if you’re twitching to make lots of trades.

[B]The thought process:[/B]

[li] Crossover occurred and price broke out of the Kumo cloud. Price bounced off of the resistance line 3 times (red dashed lines). No trade.
[/li][li] Price retraced back to the 20EMA & 40EMA and bounced. At the close of the second bullish white candle we enter long trade. Notice how we didn’t enter on the previous retrace 5 or so candles before as it was trading within the Kumo cloud.
[/li][li] Our stop loss would be set 20 pips below the nearest support area, in this case the pivot point (yellow horizontal line).
[/li][li] Our take profit would be taken from the daily chart. Closing 0.5 lots at 1.52000 and closing remaining 0.5 lots at 1.53000. A method known as scaling out of position.
[/li][li] We have a trade with risk reward ratio of around 1:5.
[/li][li] Price bounced off of the moving averages again, this would be another chance to get in to the trade if you missed the first bounce. As we have 1 lot on the trade at present and the bounce was close to the previous bounce we wouldn’t enter more trades here.
[/li][li] By this stage we would have banked around 100 pips at the 1.52000 level. Price bounced at this level retracing back to the moving averages. We enter another position when rice touches the moving average.
[/li][li] Stop loss 20 pips below the EMA40 (red moving average)
[/li][li] Take profit of 1.54000 (200 pips) closing half of position at 1.53000
[/li][li] 200 Pips banked from stage 2 remaining 0.5 lots and 100 pips banked from stage 4 trade. We have one trade with 0.5 lots on at the moment. You’ll notice price bouncing around a lot around the moving averages. This is price uncertainty and people closing out of positions banking profits as we did. Be cautious taking the bounce trade here. I would have taken the trade with take profit at the 1.54000 and 1.55000 levels.
[/li][li] Take profit of trade 5 reached and 0.5 lots closed at approx. 100 pips. Again more uncertainty with price not making higher highs. I would have moved stop loss of trade 5 remainder to break even.
[/li][li] Price eventually turned and closed out trade 6 at breakeven. We should expect to see a crossover of moving averages soon and once we see bearish candle break of Kumo cloud or a retrace back to the moving averages we will enter, providing we are working in line with our Daily charts.

Without wasting time on the maths that’s about 500+ pips in 2 weeks from one currency pair. Trade on 11 pairs and there’s potential for quite a few “stress free” pips :slight_smile:

[B]Some things to note:[/B]

[li] It can be a good idea to move the remainder 0.5 lots to breakeven until you can read price action.
[/li][li] Don’t trade when price is in the Kumo cloud.
[/li][li] Watch for price action stalling (failing to move higher or lower consecutive bars).
[/li][li] Trade inline with the daily chart trend direction.
[/li][li] Wait for the 4 hour candle to close before placing a trade.

Visually the strategy looks good. After 6 days of forward testing the results so far…

[B]Final thoughts[/B]

With all trading strategies the most important thing is that it works for you, that it fits with your trading psychology. Some traders prefer fast price action, in and out of many trades per day, others prefer to trade every few hours keeping things simple and creating time. Find what works for you and then trade it. Document your results and reflect on any bad trading decisions made.

I hope this strategy is profitable for you and welcome any questions, comments or suggestions.

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