|
Current strategy has won the hearts of many Forex traders. And why not when it has a great winning potential.
Strategy requirements/setup:
Time frame: daily
Currency pair: any
Trading setup: SMA 150,
RSI (3) with horizontal lines at 80 and 20,
Full Stochastic (6, 3, 3) with horizontal lines at 70 and 30.
Trading rules:
Entry for uptrend: when the price is above 150 SMA look for RSI to
plunge below 20. Then look at Stochastic - once the Stochastic lines
crossover occur and it is (must be) below 30 - enter Long with a new price bar.
If at least one of the conditions is not met - stay out.
Opposite for downtrend: when the price is below 150 SMA wait for the
RSI to go above 80. Then if shortly after you see a Stochastic lines
crossover above 70 - enter Short.
Protective stop is placed at the moment of entry and is adjusted to the most recent swing high/low.
Profits are going to be taken next way:
Option 1 - using Stochastic - with the first Stochastic lines cross above 70 (for uptrend) / below 30 (for downtrend).
Option 2 - using a trailing stop - for an uptrend a trailing stop is
activated for the first time when Stochastic reaches 70. A trailing
stop is placed below the previous bar's lowest price and is moved with
each new price bar.
This strategy allows to accurately pin-point good entries with sound
money management - risks/protective stops are very tight and potential
profits are high.
Current trading strategy can be improved when it comes to defining the
best exits. For example, once in trade traders may also try applying
Fibonacci studying to the most recent swings. This way they can predict
short-term retracements and make sure they will not be pulled out of
the trade early and will continue pursuing profit targets at Fibonacci
extension levels.
RSI and Stochastic indicators can be found on almost any trading
platform. The red highlighting we've added to our illustration is not a
part of those indicators but rather a visual aid for readers.
So, you would open your charts and:
1. Add study - RSI with settings 3, 80, 20.
2. Add study - Full Stochastic with settings 6, 3, 3.
Horizontal lines can be added afterwards.
   
Enjoy your new strategy
have a pleasant trading experience
|
