Are you learning the Forex and looking for a Forex strategy that is simple yet effective?
Many newer traders face the challenge of trying to identify the trend on the intra-day level in order to make their Forex strategy work.
This problem can be alleviated by using the 200 EMA – (Exponential Moving Average).
In surveys it was found that Forex traders all around the world vote the 200 EMA as one of their top indicators. So that is reason enough to use it considering the psychological effect it can have once price starts getting within spitting distance of the 200 EMA.
The Simple 200 EMA Strategy
This Forex strategy requires you to set up 3 different time frame charts:
4 Hour Chart
A 1 hour chart
15 Minute Chart
Now add the 200 EMA indicator to each chart for the 3 time frames. You could color it red or whatever you prefer to make it stand out.
Some like to tile the 3 chart windows in a vertical style so it is easy to compare them side by side. It can distort the chart a little but for this strategy you don’t really need to see the chart in full screen mode.
Now scroll through the various currency pairs you like to trade.
If you prefer to trade only pairs with a smaller pip spread, they amount to about 9.
They are:
EUR/USD | GBP/USD | USD/CHF | USD/JPY | EUR/JPY | USD/CAD | AUD/USD | NZD/USD | EUR/CHF
Train your eyes to identify a currency pair that goes against the 200 EMA on the smaller time frame, the 15 minute chart.
Take as an example the EUR/USD pair. Make a note of where price is in relation to the 200 EMA on the three different times frames.
If price is BELOW the 200 EMA on the 15 minute chart while it is well ABOVE it on the 4 hour and 1 hour charts, then it is going against the trend!
The overall trend is up, price has temporarily gone against the trend and is currently in a retracement.
Using the fundamental trading principle of “buy the dips in an uptrend”, “sell the rallies in a downtrend”, look for a suitable entry point.
Using the EUR/USD example, you would look out for a distinctive candle that would indicate possible price exhaustion as it bucks the trend on the 15 minute chart. The probability is it would soon resume moving in the direction of the trend.
Taking only a few minutes, do this little exercise a couple of times and day and see if you can pick up some good setups.
Look Out For Price Going Against The Trend
Sit up, take note, when you see price going beyond the 200 EMA on the smaller time frame, the 15 minute chart, while on the larger time frames, 4 hour and 1 hour, it is well beyond the 200 EMA in the opposite direction. Seize the change to make a high probability trade and bank some profits.
Once you see how powerful this easy Forex strategy is, after a little practice in a demo account, you will no doubt be convinced it deserves a place in your trading tool kit.
Get a useful free tip on how to use the MACD indicator for safe trading here: Forex Trading Strategies Learn an important lesson from Mohammed Ali regarding Forex Training: Curency Online Forex Trading
