The Easy Forex Strategy For Beginners That Really Works
Are you new to trading, seeking out a reliable Forex strategy?
A challenge facing many new traders when developing their forex strategy is the ability to identify the overall trend for intra-day trading.
This problem can be alleviated by using the 200 EMA - (Exponential Moving Average).
The 200 EMA is one of the most popular indicators of all time with Forex traders the world over, and for that reason alone is worth noting due to the psychological effect on the market place price can have when hovering around the 200 EMA.
Using The 200 EMA Strategy
This Forex strategy requires you to set up 3 different time frame charts:
A 4 hour chart
1 hour
15 minute
Now add the 200 EMA indicator to each chart for the 3 time frames. You could color it red or whatever you prefer to make it stand out.
Some like to tile the 3 chart windows in a vertical style so it is easy to compare them side by side. It can distort the chart a little but for this strategy you don’t really need to see the chart in full screen mode.
Now it’s simply a matter of browsing through the currency pairs you have chosen to trade.
If you prefer to trade only pairs with a smaller pip spread, they amount to about 9.
Here they are:
EUR/USD | GBP/USD | USD/CHF | USD/JPY | EUR/JPY | USD/CAD | AUD/USD | NZD/USD | EUR/CHF
Search through and see if price is going against the 200 EMA on the 15 minute chart on any of the currency pairs.
So for example, look at the EUR/USD pair and note the position of price relative to the 200 EMA on the 3 time frames.
Price is what we call ‘bucking the trend’ if it is well above the 200 EMA on the 4 hour and 1 hour charts but below it on the 15 minute chart.
So the main trend is going up while price is now in retracement, temporarily going against the overall trend.
You now need to look for a good entry point to get into the market in line with the basic principle of buying the dips in an up trend while selling the rallies in a down trend.
Using the EUR/USD example, you would look out for a distinctive candle that would indicate possible price exhaustion as it bucks the trend on the 15 minute chart. The probability is it would soon resume moving in the direction of the trend.
This is an easy exercise and it can be done once or twice a day, taking just a few minutes.
Take Note When Price Bucks The Trend
Sit up, take note, when you see price going beyond the 200 EMA on the smaller time frame, the 15 minute chart, while on the larger time frames, 4 hour and 1 hour, it is well beyond the 200 EMA in the opposite direction. Seize the change to make a high probability trade and bank some profits.
Once you see how powerful this easy Forex strategy is, after a little practice in a demo account, you will no doubt be convinced it deserves a place in your trading tool kit.