I promise you guys some time ago that I’ll share one of my most simple but effective Forex trading strategy. Before we begin, there’s something that I’d need you to understand. Let us begin, shall we?
The Benefits of Long Term Forex Trading Strategy
- Trading on daily or weekly chart would mean significantly less screen time on the market, meaning more time to spend on your leisure or entertainment.
- It’s so simple that any newbie with IQ 90 and above can execute perfectly.
- People with full time jobs are able to employ this trading system, 5 mins a day from Monday to Friday.
- Trading on long term charts means less “market noise” and sharks won’t be able to take you out so easily.
- Less screen time also means less pressure for you psychologically
…And The Drawback
- You won’t be getting trades everyday. In fact, it’s reasonable to expect probably 1 valid trade per month. So you will need patience. A lot of them.
- Your trades are positional in nature, so expect to keep them anywhere from a few days to weeks.
- You’ll be require to set comparatively larger stop losses. We are talking about 200 to 500 pips depending on the currency you trade.
This trading system is about the most easy to learn, effective but slow among other Forex strategies that I have encountered. Now you have learned the benefits and drawbacks of this strategy, decide for yourself if this trading system suits you. If you are a 9-5 guy and would like to make money with Forex trading then this strategy is for you.
To setup this Forex strategy, there’s 2 essential indicators that you’ll need:
- Relative Strength Index (14), and
- Bollinger Band (20)
Note that the above indicators a freely available on your MT4 platform and there’s no need for additional purchase or downloads.
Step 1: With your account and EURUSD chart ready, add the RSI and BB indicators to your chart. Do not change any settings as the default is perfect. The default settings for RSI is 14 period and BB is 20.
Step 2: Change your timeframe of your EURUSD chart to D1 and select candlesticks.
You should have a chart that looks similar to the following (click to enlarge):
When you’re all done, it’s time ready for some monitoring. All you need to do is repeated check back on the chart at a specific time of the day. Depending on where you are, I’d normally check it out when the London sessions closed.
The Rules of Entry For Buy Positions:
1. When price pierced through and closed lower than the lower channel of the Bollinger Band
2. When RSI is below 30 showing signs of oversold and weakening momentum
1. I let the profit runs until there’s sign of weakness in the momentum – price narrowing down and ranging for 3 days or more
2. If you do not know how to gauge the market’s momentum, just set your TP at a specified level of 200 pips, or on the next resistance level.
1. I always use 200 pips stoploss for EUR/USD and 300 pips for GBP/USD.
2. You are free to tweak around with your SL and TP as long as you keep your money management healthy… Which means TP should always be larger than SL!
That’s about it! This Forex strategy may be boring but it’s extremely profitable over the long run. Unlike many day trading systems, you do not need to possess pinpoint precision over your entries, SL or TP levels, because there’s significantly less market noise on a D1 chart. If you still can’t get it, then you should rely on expert’s Forex signals and let others do all the dirty work for you.
Please note that this I trade this solely on EUR/USD and GBP/USD. You are liable to your own losses if you choose to apply my personal Forex trading strategies in this post and blog.