You want a simple easy to understand trading strategy with clear rules, tight money management and strong pyschology. A simple Support and Resistance strategy can be more than enough.
Pro tip: most of the banks traders I traded with used lines (support and resistance and or trend lines) as their main strategy. There were traders using indicators but they mostly developed that on their own. You can definitely use a stochastic to help manage a trade I’ll go into this more later.
I asked many traders on my journey to define their “edge.” This has to be one of my most asked questions when I was a newbie trader and met a more experienced trader. Some gave great insights about strategy and money managment but my most respected and influential mentor told me:
“You are going to expect me to say a head and shoulders pattern or a doji at support and resistance is my bread and butter set up and it always makes me profit. But I am going to be honest with you my edge is pyschology. I don’t care about my trades, I don’t care about my trade performance, I don’t care if I win or lose or about my win rate. I care about making money. As soon as my idea is invalidated I’m out of the market. If price comes back my way tomorrow, oh well. When I fire up my charts the next day, I don’t even remember that trade. I am always seeing a new chart and I get in when my strategy tells me. You can always get back in the market. You can always make back lost money as long as you still have an account.”
For those that are curious or want to say this is all fluff with no strategy I’ll share his core strategy with you. His trading strategy consisted of bounces and price flips (break outs) from support and resistance no indicator for the entry but he did use stochastics in his trade management to guide his profit taking. Will his strategy work for you? I can’t know. Is it profitable? Absolutely.
Now let’s be clear you can always make back lost money does NOT mean revenge trading. It means making the money back and more over time with valid trade setups according to your strategy.
Trading at a bank we did follow fundamentals. We did understand core drivers of price and central banks. We did pay attention to news releases and forecasts. But for the average retail trader avoiding news will be the best way in my opinion. I am hesitant to share much on fundamentals as I do not feel it is very applicable to the average retail trader. It also encourages gambling in those traders who lack a grounded state of mind.
The key difference between the successful traders I came across in institutional settings vs the average retail trader that sneaks off for an extra long bathroom break at his fulltime job the first friday of each month to place an overleveraged bet on the direction of the Euro Dollar after the nfp, is precise and measured execution.
Retail traders fire up their charts pick their favorite time frame, God only knows why they have chosen a particular time frame as their favorite… Maybe they wore the number on their high school football team so might as well trade the 5 minute chart right?
That is wildy different to what institutional traders do. We spend a lot of time in the beginning learning about particular currencies ( I did not say currency pairs. I mean just one currency and its drivers and history.) as well as what news events have the biggest impacts on each currency then we follow our trading plan. If we lose too much money there goes our job.
Rules are strict and you are going to have to set strict rules for your trading as well.
If I or any of my fellow traders pull up a chart and our entry signal isn’t there you turn the screens off and try to come to an agreement on which burger joint has the best burgers for lunch. There is no forcing trades.
That, or fill orders for corporations necessary for exchanges for overseas purchases as well as speculation, mainly losing transactions, that provide key liquidity in the currency markets or transactions based on “balancing the books” for said institution. This doesn’t apply to the average retail trader so if you don’t have anything to trade it’s best to just go grab a bite to eat or practice a hobby.