Stress Free Trading Strategy, Simple as 1-2-3 (Stress Free Trading Strategy, Simple as )
Hello everyone, this is my first post on FF since I joined this forum. Today I'm going to share my very simple trading strategy. This strategy is stress-free if you follow all the rules and have the patience to wait for all rules to be met. If you can do this, you will have an advantage in the Forex market. First of all, I'm sorry if my English is not good because English is my second language, but I hope you can understand all the explanations I teach you here.
The strategy works on any time frame, any currency pair, any market, Forex, CFDs, indices, commodities, stocks.
Main strategies
buy
1. Wait for the random main line and signal line to enter the 0-20 area
2. Wait for the MACD histogram to be above the signal line. There must be an angle between the histogram and the signal line. Further explanation follows.
3. If the price is above the 50 EMA, place the trade.
4. Set your stop loss at the last swing low (leave about 50 pips away from the swing)
1. Wait for the random main line and signal line to enter the 80-100 area
2. Wait for the MACD histogram to be below the signal line and the histogram bar must form an angle with the signal line. See further explanation of angles.
3. If the price is below the 50 EMA, place a trade.
4. Set the stop loss at the last swing high (also give room for a swing of about 50 pips)
MACD angle explanation
MACD is used for our second confirmation to filter from,Random. I can say that Stochastic is a complete rubbish indicator because Stochastic is mostly generated if you accept all signals and then wait for confirmation from other indicators and price action.
The MACD indicator helps us confirm before making any trade. When the stochastic indicator gives you a signal, either a buy signal or a sell signal. You have to wait for confirmation from MACD. It is important that we pay attention to the angle between the MACD line (histogram) and the signal line, because the angle determines whether the price is currently in a trend.
A valid MACD buy signal confirmation is when there is an angle between the histogram and the signal line, as shown in the image below.
So does the MACD sell signal confirmation, see chart below.
When the MACD becomes flat and there is no angle between the histogram and the signal line, we do not place any trades.
You can use the traditional MACD or the Histogram MACD default indicator in MT4. All the same, MT4's default MACD histogram represents the MACD line in traditional MACD, which can be found in TradingView or the custom indicator traditional MACD. MACD can be used as a second filter. The first major filter is the baseline, remember, do not go short when price is above the baseline (50 EMA) and do not go short when the MACD is currently above the zero line. Do not go long when price is currently below the baseline and MACD is currently below the zero line.
Stochastic explained <br>The stochastic indicator is the basic indicator that we use to generate buy signals or sell signals. The best signal is when 2 lines (main line and signal line) are at 0-20 for a buy signal and 80-100 for a sell signal. What is aggressive is when the other lines are not between these areas, when the main stochastic line enters the 0-20 area but the signal line but the signal line does not enter that area, this is also a buy signal, but not good because one of the stochastic lines is not within the area. The same goes for sell signals, when one of the stochastic lines is not in the area between 80-100, it is not a good sell signal, but you can take this signal as a basic signal and wait for confirmation from the MACD and price action. %K lines entering the 0-20 and 80-100 zones or the 0-30 and 70-100 zones are also considered signals.
buy signal
sell signal
Divergence using Stochastic <br> According to George C. Lane, the stochastic indicator was created to trade divergences, not to blindly accept any signal when oversold or overbought, because we know that overbought and oversold conditions do not exist in the Forex market. The truth is, Forex is purely about supply and demand . Prices are never too high and never too low. Divergences are early momentum changes that we can expect to reverse or continue.
Divergence can occur in oscillator-based indicators such as Stochastic. Regular divergences are usually early trend reversals, while hidden divergences are usually trend confirmations.
When a regular divergence occurs, we must wait for confirmation from lagging indicators such as MACD or EMA 50 before placing any trades. When there is a hidden divergence, we can add another position and we expect the trend to still continue.
Baseline <br> Finally, after all indicators confirm the signal, our final decision is to look for price action above or below our baseline. Our baseline is. When we want to get a buy signal or a sell signal, the baseline is an important factor in the final decision. When the underlying indicator (Stochastic) signals, MACD is confirming, we have to see if the price is above or below the baseline. A buy signal is issued when the price is above the baseline, and a sell signal is issued when the price is below the baseline.
The current price is below the baseline
Prices are currently above baseline
Measuring volatility with standard deviation <br> This is optional but may be another factor that gives us the confidence to place an order. Volatility is important in trading, low volatility markets are almost dead with no movement or only movement within a small range, this is also known as a thin market due to lack of liquidity. When a market begins to trend, measuring volatility is also important in helping us predict the next big move. To measure volatility, I use the standard deviation indicator. This indicator is the default indicator for MT4. A low standard deviation reading means low volatility, and a high standard deviation reading means high volatility. When volatility is high, we expect the trend to end quickly and change or consolidate.
Large candle, long wick <br> This is also an important thing to note before making a trade. When prices are too far apart or the previous candle is a large candle, do not place any trades as your stop loss will be very wide. Big candles can be caused by: news, big banks stopping their hunt, or the market simply wanting to move in that direction.
Where to place stop loss?
I believe there is no holy grail in trading, but how can we not lose money and minimize the risk of losing money in Forex trading. Setting a stop loss is very important because we don't know when a peak will occur or when the market will go against our trade. I recommend looking for the last move to set your stop loss, but be sure to leave some room about 30-50 pips away from the move. You can also refer to Davitt's pivot levels for weekly support and resistance to set your stop loss.
This space is important because we know that the market does not move in a straight line, and when price reaches a swing that goes against our trade, there is still some room before it actually moves back in the direction of our trade. But when your stop loss is hit, no problem, your risk limit is there because we are all doing analysis or analysis of future market movements. So when the market moves against us, we already know our risk limits.
2% Money Management Rule <br> Maybe some of you are wondering that this is just a myth, but it is important to only risk 2% on each trade so that you don't overtrade, leading to margin calls if you overtrade. When our trade fails, we only lose 2% of our equity because we only risk 2%. Therefore, when you decide where to place your stop loss, you must calculate the maximum risk of gaining 2%.
The formula is:
Lot size = 2% * Equity / Stop loss (points) * Point value
***USD tick value for all currencies is 10 USD.
If you use pips as stop loss calculation, the tick value is 1 USD for all ***USD currency pairs.
For the USD*** currency pair, the tick value is not exactly $10, the tick value is approximately $9.8, please be sure to check the tick value for each cross currency pair.
When to quit?
Exiting is another important thing. because. The best time to exit is when a contrary signal appears. So, let's say our buy trade is in a winning position and then a sell signal comes out, then I will close my buy trade. If you don't exit when another signal appears, there is a higher chance that your winning trade will turn into a losing trade.
Do I have to use a trailing stop?
Yes, you can use a trailing stop, moving your stop to the nearest move to lock in your trade so that your trade is ready when you win on the trade. When the market goes against you, you can still break even or get some spread if you have trailed your stop loss. I do not recommend setting a trailing stop based on the EMA, because the price may be near the EMA, so a better option is to trail the stop to the last new wave and exit immediately when the opposite signal appears, do not wait until the price hits the stop, because the trailing stop is just an option to make our trade risk-free in a profitable state.
Patience is important <br> This strategy can be used on any time frame. You can scalp and trade on the M15 chart, and if you day trade, use the M30 or 1 hour chart. If you are a swing trader, use the 4-hour chart. But the important thing is patience. You have to wait for all rules to be met, all indicators to be confirmed before placing any trade, patience is waiting for all 3 indicators to be confirmed before placing a trade.
Indicators <br> Here are all the indicators used in this strategy.
1. Stochastic () is the main indicator that generates buy and sell signals.
2.MACD() is the second indicator and serves as a confirmation indicator. You can use traditional MACD or histogram MACD on MT4's default indicator.
3. The exponential moving average period is the baseline , the final validation of our algorithm.
4. Weekly pivot indicators to identify possible support and resistance (see Davit's topic Pivot Trading).
5. The ADR indicator is used to identify the average daily range of the market.
I will post some of my trading charts in my next post to give examples of how we enter and exit markets algorithmically.
Finally there are all indicators and templates.
The strategy works on any time frame, any currency pair, any market, Forex, CFDs, indices, commodities, stocks.
Main strategies
buy
1. Wait for the random main line and signal line to enter the 0-20 area
2. Wait for the MACD histogram to be above the signal line. There must be an angle between the histogram and the signal line. Further explanation follows.
3. If the price is above the 50 EMA, place the trade.
4. Set your stop loss at the last swing low (leave about 50 pips away from the swing)
1. Wait for the random main line and signal line to enter the 80-100 area
2. Wait for the MACD histogram to be below the signal line and the histogram bar must form an angle with the signal line. See further explanation of angles.
3. If the price is below the 50 EMA, place a trade.
4. Set the stop loss at the last swing high (also give room for a swing of about 50 pips)
MACD angle explanation
MACD is used for our second confirmation to filter from,Random. I can say that Stochastic is a complete rubbish indicator because Stochastic is mostly generated if you accept all signals and then wait for confirmation from other indicators and price action.
The MACD indicator helps us confirm before making any trade. When the stochastic indicator gives you a signal, either a buy signal or a sell signal. You have to wait for confirmation from MACD. It is important that we pay attention to the angle between the MACD line (histogram) and the signal line, because the angle determines whether the price is currently in a trend.
A valid MACD buy signal confirmation is when there is an angle between the histogram and the signal line, as shown in the image below.
So does the MACD sell signal confirmation, see chart below.
When the MACD becomes flat and there is no angle between the histogram and the signal line, we do not place any trades.
You can use the traditional MACD or the Histogram MACD default indicator in MT4. All the same, MT4's default MACD histogram represents the MACD line in traditional MACD, which can be found in TradingView or the custom indicator traditional MACD. MACD can be used as a second filter. The first major filter is the baseline, remember, do not go short when price is above the baseline (50 EMA) and do not go short when the MACD is currently above the zero line. Do not go long when price is currently below the baseline and MACD is currently below the zero line.
Stochastic explained <br>The stochastic indicator is the basic indicator that we use to generate buy signals or sell signals. The best signal is when 2 lines (main line and signal line) are at 0-20 for a buy signal and 80-100 for a sell signal. What is aggressive is when the other lines are not between these areas, when the main stochastic line enters the 0-20 area but the signal line but the signal line does not enter that area, this is also a buy signal, but not good because one of the stochastic lines is not within the area. The same goes for sell signals, when one of the stochastic lines is not in the area between 80-100, it is not a good sell signal, but you can take this signal as a basic signal and wait for confirmation from the MACD and price action. %K lines entering the 0-20 and 80-100 zones or the 0-30 and 70-100 zones are also considered signals.
buy signal
sell signal
Divergence using Stochastic <br> According to George C. Lane, the stochastic indicator was created to trade divergences, not to blindly accept any signal when oversold or overbought, because we know that overbought and oversold conditions do not exist in the Forex market. The truth is, Forex is purely about supply and demand . Prices are never too high and never too low. Divergences are early momentum changes that we can expect to reverse or continue.
Divergence can occur in oscillator-based indicators such as Stochastic. Regular divergences are usually early trend reversals, while hidden divergences are usually trend confirmations.
When a regular divergence occurs, we must wait for confirmation from lagging indicators such as MACD or EMA 50 before placing any trades. When there is a hidden divergence, we can add another position and we expect the trend to still continue.
Baseline <br> Finally, after all indicators confirm the signal, our final decision is to look for price action above or below our baseline. Our baseline is. When we want to get a buy signal or a sell signal, the baseline is an important factor in the final decision. When the underlying indicator (Stochastic) signals, MACD is confirming, we have to see if the price is above or below the baseline. A buy signal is issued when the price is above the baseline, and a sell signal is issued when the price is below the baseline.
The current price is below the baseline
Prices are currently above baseline
Measuring volatility with standard deviation <br> This is optional but may be another factor that gives us the confidence to place an order. Volatility is important in trading, low volatility markets are almost dead with no movement or only movement within a small range, this is also known as a thin market due to lack of liquidity. When a market begins to trend, measuring volatility is also important in helping us predict the next big move. To measure volatility, I use the standard deviation indicator. This indicator is the default indicator for MT4. A low standard deviation reading means low volatility, and a high standard deviation reading means high volatility. When volatility is high, we expect the trend to end quickly and change or consolidate.
Large candle, long wick <br> This is also an important thing to note before making a trade. When prices are too far apart or the previous candle is a large candle, do not place any trades as your stop loss will be very wide. Big candles can be caused by: news, big banks stopping their hunt, or the market simply wanting to move in that direction.
Where to place stop loss?
I believe there is no holy grail in trading, but how can we not lose money and minimize the risk of losing money in Forex trading. Setting a stop loss is very important because we don't know when a peak will occur or when the market will go against our trade. I recommend looking for the last move to set your stop loss, but be sure to leave some room about 30-50 pips away from the move. You can also refer to Davitt's pivot levels for weekly support and resistance to set your stop loss.
This space is important because we know that the market does not move in a straight line, and when price reaches a swing that goes against our trade, there is still some room before it actually moves back in the direction of our trade. But when your stop loss is hit, no problem, your risk limit is there because we are all doing analysis or analysis of future market movements. So when the market moves against us, we already know our risk limits.
2% Money Management Rule <br> Maybe some of you are wondering that this is just a myth, but it is important to only risk 2% on each trade so that you don't overtrade, leading to margin calls if you overtrade. When our trade fails, we only lose 2% of our equity because we only risk 2%. Therefore, when you decide where to place your stop loss, you must calculate the maximum risk of gaining 2%.
The formula is:
Lot size = 2% * Equity / Stop loss (points) * Point value
***USD tick value for all currencies is 10 USD.
If you use pips as stop loss calculation, the tick value is 1 USD for all ***USD currency pairs.
For the USD*** currency pair, the tick value is not exactly $10, the tick value is approximately $9.8, please be sure to check the tick value for each cross currency pair.
When to quit?
Exiting is another important thing. because. The best time to exit is when a contrary signal appears. So, let's say our buy trade is in a winning position and then a sell signal comes out, then I will close my buy trade. If you don't exit when another signal appears, there is a higher chance that your winning trade will turn into a losing trade.
Do I have to use a trailing stop?
Yes, you can use a trailing stop, moving your stop to the nearest move to lock in your trade so that your trade is ready when you win on the trade. When the market goes against you, you can still break even or get some spread if you have trailed your stop loss. I do not recommend setting a trailing stop based on the EMA, because the price may be near the EMA, so a better option is to trail the stop to the last new wave and exit immediately when the opposite signal appears, do not wait until the price hits the stop, because the trailing stop is just an option to make our trade risk-free in a profitable state.
Patience is important <br> This strategy can be used on any time frame. You can scalp and trade on the M15 chart, and if you day trade, use the M30 or 1 hour chart. If you are a swing trader, use the 4-hour chart. But the important thing is patience. You have to wait for all rules to be met, all indicators to be confirmed before placing any trade, patience is waiting for all 3 indicators to be confirmed before placing a trade.
Indicators <br> Here are all the indicators used in this strategy.
1. Stochastic () is the main indicator that generates buy and sell signals.
2.MACD() is the second indicator and serves as a confirmation indicator. You can use traditional MACD or histogram MACD on MT4's default indicator.
3. The exponential moving average period is the baseline , the final validation of our algorithm.
4. Weekly pivot indicators to identify possible support and resistance (see Davit's topic Pivot Trading).
5. The ADR indicator is used to identify the average daily range of the market.
I will post some of my trading charts in my next post to give examples of how we enter and exit markets algorithmically.
Finally there are all indicators and templates.
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