Late last year during a mentoring class on Boom and Crash with some of my mentees, I tried to answer the big question around how to develop a simple forex strategy that works in every timeframe. In this article, I am going to summarize the discussion in a way that will assist any forex trader to develop a workable strategy that will guarantee maximum returns on investment.
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It is important to note that without a workable strategy, you are just wasting your funds and time in the market, so if you don’t have a workable strategy, it’s time to pause, reflect and invest in building simple forex strategy that will assist your forex journey.
Table of Contents
Simple Forex Strategy that Works in Every Timeframe
What is a Forex Strategy?
Simply put, forex strategy includes a set of laid down rule(s), step(s) and procedure(s) that will help you invest in the forex market (trading) and make good returns on your investment. Don’t get me wrong, not all forex strategy can guarantee good returns on investment; that is while I always placed emphasis on a workable forex strategy.
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How do you develop a workable strategy?
Before we continue, I am currently enjoying synthetic indices trading with Deriv, If you are not on Deriv already, I will suggest, you open a demo account by clicking here, then start building your strategy by using their demo, don’t open a real account until you are satisfied with your strategy.
The reason most people fail in trading is that they are very concern about making millions over night from the market that they forget the fun of getting knowledge and building a strategy that will grow their income and help them to assist other people in the long run. That is while you will see them constantly searching for strategies, indicators, copy trading, EA and money ‘doublers’, etc.,
If you want your story to be different, please start by developing a strategy: to develop a simple forex strategy is very easy. Like I told my mentee, three important things you must address while developing your strategy is:
- Your equity
- Trading pairs
- Risk Management process
You have to know the equity that you will be comfortable to trade, you have to know your proposed pairs (don’t trade all pairs, just get like 3 or 4 pairs, study them, understand their history and you will enjoy), the risk management process (what will be your lot size per trade? what are your daily target for loss/profit?, etc.,).
Then after answering the above question, you can now start on with the strategy. Let say you are going to use Trendline as your strategy (Which is what I am currently using): You should first know and understand Trending market and ranging market.
How do you spot a trending market?
- There is urgency in market momentum
- Pullbacks candles are short-lived
- For Uptrend: you will see long wick at the bottom of the candle
- For Downtrend: you will see long wicks at the top of the candle
- Most traders use Average Directional Movement (ADX) to spot trending market, ADX values more than 25 usually depicts that the market is trending, and the higher the number the stronger the trend
My strategy for trading trending market?
- Draw a trendline on Daily timeframe (You need to learn how to draw a trendline, if you don’t know how to draw it), then open H4, H1 or any timeframe you are comfortable with. If it’s H1 for instance, ensure that you adjust the trendline if need be to fit in H1
- Mark the last swing low and the last swing high on the chart based on your trendline.
- For trading reversal while on Downtrend: 0nce price gets to the swing low, wait for the candle to reverse back and close above previous LH
- For trading reversal while on Uptrend: once price gets to the swing high, wait for the candle to reverse and close below previous HL – This is the first confirmation. Some people enter just once the spot these condition, but I have a second condition.
- The second confirmation is usually a divergence (I used MACD default setting for divergence) or ADX momentum, if I am trading Volatility or Currency pair.
- Once you master how to spot these conditions in real time on demo and trade them successfully, you will be able to add other conditions to your strategy. This will help you to use only confirmatory entry not risk entry.
- I don’t like complicated strategy.
There are so many opportunities in ranging market, but it always tricky. If I spot a ranging market in Crash 500, Crash 1000 or any of the boom indices, I will draw a horizontal line at the supply and demand zone based on any timeframe mostly from M30, then sell crash at the supply zone and buy boom at the demand zone, I always put at least 20 pips SL, incase the range is broken. Once I get a crash and it get close to the demand zone created by the range I will close and wait for a pull back, I will only sell again when it gets to the supply zone.
If you are trading Boom and Crash, please don’t buy crash during a ranging market or sell boom during a ranging market. You can only buy crash and sell boom in a trending market.
If you have any questions, be sure to drop a comment and I will respond to you via email
Trading Forex is risky, you can lose your capital, please apply proper risk management and trade with only what you can afford to lose.