Insanely Stupid and Easy Forex Trading Strategy

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Hello there Fellow Forex Traders,

This is my very first post here and I’m delighted to see a community like this centered on providing advice for helping people to build successful forex careers.

I have been looking at several methods and developing my own over the past few months/year, I feel that we have a habit of over-complicating what needs not be at all complicated.

Why?

I think it may give a sense of control in a game where you don’t know what’s going to happen next. Hence, we come up with all kinds of complicated rules and methodologies that give us a sense of “sophistication” and confidence, when really we’re either riding a trend or trading between a whipsaw.

With that in mind, I wanted to share what I could come up with as the most basic Forex strategy possible.

Step One: Pick a Market. I personally like GBP/JPY and XAU/USD for their volatility.

Step Two: Identify Whether the Market is Trending or Consolidating. Use whatever you want (200 EMAS, MACDS, HHHL, LHLL, etc. but mostly just use your eyes…

Step Three: Wait for a small movement in the opposite direction of the trend.

Step Four: Execute your order on the next confirmation candle of a continuation of the trend. Calculate your position size so that if the price comes below your confirmation candle you lose 1% maximum.

Step Five: Set your take profit at 1 - 2% gain.

I haven’t done a lot of backtesting on this. I only trade with £500 whilst I’m new and I only trade between the London and New York sessions. I take a maximum of 2 trades per day and I journal each and every single entry to see if there was a better opportunity.

I hope this helps someone who is brand new, please let me know if I’m completely off my head and need to go back to the drawing board…

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No, I don’t think so. Your approach is entirely logical and also quite traditional:

Find a trend in an active market, wait for a pull-back, enter on the resumption of the trend move, enter with a suitable R:R and wait for the result! Simple but effective.

The key issues here are identifying an active trend (to limit the risk of whipsaws), and sensible, consistent risk/money management to generate a consistent net gain (working the probabilities).

Nothing wrong with “simple”. Good stuff! :slight_smile:

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Thank you for your feedback.

I think trends can be spotted very easily on higher timeframes and, if you’re really stuck, you can just go onto the daily timeframe, put on a 200 EMA and then determine the direction of the trend based on the position of the price above or below the 200 EMA.

I think that if you really want to make this complicated, you could start mapping out the major daily, weekly, and monthly support and resistence zones to make sure you’re not trading at a point where the trend could reverse.

Again, cheers for your comment it is very reassuring!

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I am trading something very like this off the daily charts but I ignore support and resistance. Yes, s/r levels sometimes cause a rejection but as long as the stop-loss is not too tight that’s usually just another pull-back and another entry opportunity. S/r levels are not often where opposite trends start. I also aim to pyramid positions as the trend advances.

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That is pretty much what is going on in this long-running and successful thread. Maybe worth a look-in if you haven’t visited there yet?

https://forums.babypips.com/t/trading-the-trend-with-strong-weak-analysis/77959

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Oh wow! I don’t know if I feel stupid or actually better about myself if it’s already been discussed there!

Thank you, I’ll take a look now!

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I think you should feel flattered! :laughing:
That thread is primarily about selecting the right pairs and is not a strategy as such. Entering on pull-backs is the logical extension of such an approach.

Well done! :+1:

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There’s never anything wrong with using a strategy that works.

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Thank you haha! I’m currently averaging about 5% gains a week using my current plan. But I’ve only been using it in a live account for the last 2 months so that’s not a good indication of long term results. I just hope that as I keep trading I will see better entries and maybe even optimise my stop loss placement. It occured to me that I may even want to set my stop loss at the 200 EMA…

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Very true!

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Maybe “beyond” rather than “at” the 200 EMA!

One rather obvious thing to remember, too: whatever TF for the 200 EMA you are looking at, the critical close is at the end of that period. E.g. end-of-day for a daily 200EMA and the end-of-week Friday close for a weekly 200EMA.

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What do you call a small movement and on what timeframe are you trading??

Cheers

Blackduck

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Hi Mate!

I consider a small movement one which doesn’t violate the trend in progression. I.E. If the price is rising, we wouldn’t want to see a pullback any lower than the previous continuation of trend bullish candle and CERTAINLY not lower than a previous low.

It does take some common sense, but if you see an uptrend with strong bullish candles and then a brief pullback with some smaller bearish candles, I’d wait for the next long bull candle and take the trade to the next potential level of resistence.

I hope that makes sense.

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Indeed!

I’ve just been tinkering with some backtesting and I’m finding that price will either reverse at the touch or dip into the 200EMA and then make subsequent moves to the upside.

My main issue is deciding some arbitrary pip count below the 200 EMA where my bias may still be affirmed.

Additionally, the more that I’m looking at price action, the more I’m realising that there’s better opportunities on the higher timeframes than the lower time frames. BUT they would require wider stop losses than the 10-15 pips I’m used to…

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Yes it makes sense. If you get a chance post a screen shot of a chart.

Cheers

Blackduck

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If your strategy win ratios between buying and selling trades are within 4% of each other, it’s a good strategy. And I also revere simplicity, like my Ichimoku set up, which tells me everything I need to know at one glance. I can run through the 27 pairs - don’t trade EUR/CHF - they’re in collusion - in half an hour.

best of luck.

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I think this is a really good way to trade, keeping it simple and not to complicated. Will give this a try myself.

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Well said. Who told you are new?
All we started as a new one day. Your concept is clear. Only not to buy/sell on push phase. Body of candle should not touch the lower/ upper zones. Only trade on confirmation trends. I never use SL. Buy on high volume and momentum,

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That’s the key aspect of this I’ve noticed during my backtesting of this today!

There is a window of opportunity where the volume is high enough for this type of trading to work. It tend to be between the overlap of the London and New York sessions and this is the only time I will be trading.

I have also noticed a tendency for the New York session to reverse a lot of the price action from the London session and then for the Asian session to play with my emotions.

I’d definitely reject the idea of not using a stop loss if you’re a beginner like me. I think that it’s a good way to clarify your exit, if anything, maybe you wouldn’t use a take-profit as to not limit your upside. But yeah, I think for most people limiting your downside to no more than 1-2% per trade is going to save a lot of accounts.

Just to clarify, if it’s working for you and you’re happy not using SL, then Godspeed!

I may look into the relevance of support and resistence zones btw. The more I look at them, the more I think that it’s probably just better to go on the timeframe above what you are trading and just find price targets, rather than mapping out each previous pivot point on the chart.

Let me know what you think!

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Oh and yeah, I’ve read a lot of books on trading, watched hundreds of hours of livestreams, educational videos, yada, yada

I think 99% of what is out there is rubbish or just not suited to my personality.

What does seem to work is trading with high volume and in the direction of the overall trend.
I am still very much a beginner, only been in the game for the past 4-5 months if I had to estimate.