Simple Forex System Trading

Monthly chart, huh?  This would require mid to long term commitment, strict money management, and patience.  However, the reward can be huge and the method is very simple.  It does not require any complicated indicators or hours and hours of analysis or drawing lines and lines on the chart.  So here are a few questions one must answer before taking a position based on a monthly chart.

1. Buy or Sell?
2. How many pips can possibly go against the trade?
3. Based on the answer from #2, what is the dollar amount that can be put at risk?
4. Based on the answers from #2 and #3, calculate the trading lot or unit size.
5. What is the take-profit target?
6. What is the estimated time frame to hold this position?
7. What is the swap?  Meaning by taking this position, how much interest can be earned or should be paid per day?
8. Based on the answer from #7, if paying interest daily, what is the cost per month?
9. Based on the answers from # 6 and #8, what are the total estimated costs by holding this position?

I am thinking to sell AUD/USD in the near future because the pair has been hanging around the 0.91 level for some time.  So here are my answers to the above questions.

1. Sell
2. 1000 pips (Assuming I sell at 0.93, and I think the pair can possibly go beyond parity with the dollar due to unpredicted political reasons or the possibility that the U.S. economy continues to worsen.)
3. My risk tolerance is $500
4. The lot size is 0.05, or 5000 units.  I trade with Oanda.  It uses units.  I used this tool to calculate the lot size.
5. 0.80
6. 3 months
7. Paying 56 cents per day
8. I’ll be paying approximately $17 a month of interest.  I used this tool on Oanda to calculate the interest.
9. The estimated cost will be 17 x 3 = $51.

I recently started to look into the Alligator indicator and found that it could be a fairly simple indicator to use to trade Forex.  First, if you are not familiar with the indicator, here is a good introduction.  I applied the indicator on different currency pairs.  After some observation, I think EUR/JPY and GBP/JPY can yield more profitable trades from this indicator.

I prefer to trade more conservatively meaning that we wait for a trend is set up and the price retraces back to the support or resistance level before we open a position.  Perhaps, it is easier to illustrate the idea on a chart.

So above is an hourly chart between 5/18 and 6/3.  7 trades could take place.  5 of them could be profitable.  2 of them were losses.  Not a bad indicator to use after all.

Found another breakout system that based on one bar in a 4 hour chart.  The author uses this method to trade GBP/JPY.  Looks like the result is not bad at all.

So basically, in a 4 hour chart:

• Take the high and low of the second bar of the day. (GMT)
• Calculate number of pips between the high and the low.  (High - Low = Channel; e.g. 160.00 - 158.50 = 1.50 –> 150 pips)
• If channel is more than 200 pips, no trade for the day.
• If channel is less than 200 pips, place buy 10 pips above the high & sell 10 pips below the low.
• Take Profit = buy order + channel (e.g. Buy @ 160.10, channel = 150 pips, Take Profit = 160.10 + 1.5 = 161.60)
• Stop Loss = buy order - channel (e.g. Buy @ 160.10, channel = 150 pips, Stop Loss = 160.10 - 1.5 = 158.60  )

Read more about this strategy @ forexfactory

Found this very nice article on how to use MACD in the daily Forex trading.  Particularly, I love the MACD divergence & convergence strategies sections.  Personally, I like to use Awesome Oscillator divergence on the one-hour chart to trade Forex but many traders prefer MACD.

Read the MACD trading strategy article @ forexoma

Found this simple strategy on forexta, so I thought I’d share here.

Why does someone else’s system not work so well for others?  Because a system suits its developer’s personality, style, and skill set.  There is no one size fits all trading system.

Read more on babypips.com.  The article is absolutely well written.  

This is not a breakout system but looks fairly easy to set up.  It does not require you to glue to the screen.

Here is a system I have been testing since the beginning of the month. I am 3000+ pips and still running strong. I like this system because you only need to trade once a day (I trade w/IBFX so @ 00:00GMT). I trade most of the pairs (all majors & crosses) offered through them.  Here are the details.

Originally appeared on babypips.com

I came across this discussion on the Oanda board today about someone’s margin call experience.  Somewhere in the thread, someone mentioned that always use a stop loss and never use the margin call as the stop loss.  I couldn’t agree more.  Don’t let each trade lose more than 2% or 3% of your total investment capital.  Strict money management is king to the successful Forex trading.