Forex daily chart strategy

Forex daily chart strategy DEFAULT

The Truth About Trading Daily Timeframe Nobody Tells You 

Trading daily timeframe is not exciting to most traders.

It is slow.

It requires a ton of patience.

It has fewer trading opportunities.

Still…

Trading daily timeframe is the answer for most traders (with many “hidden” benefits) — especially if you have a full-time job.

Here’s why…

The truth about trading daily timeframe

You might not know this but, trading daily timeframe offers many benefits not found on the lower timeframe.

I’ll explain…

1. You’re more relaxed and make better trading decisions

Let me ask you:

Have you ever traded on the 5mins timeframe?

Then you’ll agree it can be stressful because a new candle is formed every 5minutes.

You’ve got to make a decision to buy, sell, hold, or stay out in a short period of time.

This means you have less time to think which cause you to make wrong trading decisions (like chasing the markets).

On the other hand…

If you trade the daily timeframe, a new candle is formed every 24 hours.

You have more time to think, plan and execute your trades — so you’re less prone to making the wrong trading decision.

The end result?

You make better decisions, your results improve — and trading becomes more relaxed.

2. News events don’t matter

Here’s the thing:

When you trade on the lower timeframe, news events (like FOMC, NFP, etc.) is a big thing.

You’ll notice the price goes “crazy” and flies up and down on your charts.

Here’s an example: NFP on EURUSD 5mins timeframe:

trading daily timeframe, d, t

This means if you trade the lower timeframe you must be aware of the news or, you’ll get stopped out for nothing.

But…

If you trade the daily timeframe, then news event hardly matter.

Here’s an example: NFP on EURUSD daily timeframe:

trading daily timeframe, d, t

Notice there’s only a small blip on the chart?

You’re unlikely to get stopped out of your trades as your stop loss is wider (and can accommodate the “crazy” swings on the lower timeframe).

So the bottom line is this:

If you trade the higher timeframes, the less impact news has on your trading.

3. You have freedom

Here’s the thing:

The daily timeframe only paints a candle once per day.

So there’s no need to constantly watch the markets because there’s “nothing” to do till the market closes (and a new candle is formed).

Imagine, how much more freedom you’ll have when you’re no longer a slave to the markets?

4. You can compound your returns and grow massive wealth (even with a small trading account)

Now as a daily timeframe trader, you don’t need to spend all day watching the charts.

This means you can get a full-time job and combine with trading to grow massive wealth.

Let me prove it to you…

Let’s say you make an average of 20% a year with an initial sum of $5,000 and you contribute $5000 to your account each year.

Do you know how much it’ll be worth after 20 years?

trading daily timeframe, d, t

After 20 years, it will be worth… $1,311,816.

BOOMZ!

5. You can focus on the process and become a consistently profitable trader, fast

I’ve seen many traders who go all in to trade full-time, and fail.

Now it doesn’t matter if their trading strategy works or not because the odds are against them.

Why?

Because they encounter the “need to make money” syndrome.

This is where you break your trading rules (like widening your stop loss) to avoid a loss.

The reason you do it is because you rely on your trading profits to pay the bills — and you’ll do whatever it takes to prevent a loss.

But if you’re trading the daily timeframe, then you can have a full-time job.

And now the odds are in your favour because you don’t have to rely on your trading profits.

Even if you have losing months, it’s not the end because your job will provide your living needs.

This means you can focus on learning how to trade and not worry about whether you can pay the bills.

Won’t this help you become a profitable trader in the fastest possible time?

6. You put the odds in your favour

Now…

One of the biggest reasons why traders fail is because they don’t pay attention to the transaction cost.

And that can be a difference between a winning and losing trader.

Let me explain…

Imagine…

  • You have a $10,000 account
  • Transaction cost is $10 per trade (buy and sell)
  • You place 500 trades per year (from day trading)

If you do the math, you need a return of 50% just to break even!

But what about trading daily timeframe?

Again…

  • You have a $10,000 account
  • Transaction cost is $10 per trade
  • You place 50 trades per year (longer-term trading)

Now, you just need 5% to breakeven — a big difference.

Can you see how transaction cost is a killer?

So if you want to put the odds in your favour, trade smarter and trade lesser.

So, is trading daily timeframe for you?

Now I’ll be honest.

Trading daily timeframe is not for everyone because different traders have different goals.

So, if you fall into any of the categories below, then trading daily timeframe (or higher) isn’t for you.

Trading daily timeframe is NOT for you if…

  • You want to generate a consistent income
  • You want “fast action”
  • You’re into proprietary trading

Here’s why…

Why trading daily timeframe don’t offer you a consistent income

When you the higher timeframe, you have a lower trading frequency.

This means you need time for your edge to play out (possibly over a few months).

So, if you’re looking for a consistent income from trading, this approach is not for you.

Why trading daily timeframe is not for “fast action” traders

Here’s the deal:

Every candle on the daily timeframe is painted once per day.

It’s a slow trading approach for traders who don’t want to be glued to the screen all day.

Why trading daily timeframe is a proprietary trader’s nightmare

The goal of a proprietary trader is to generate a consistent income from trading (by trading frequently).

But as you’ve learned, trading the daily timeframe doesn’t allow your edge to play out fast enough to generate a consistent income

Does it make sense?

Great!

So decide now whether trading daily timeframe is for you.

Because if it isn’t, then you can stop reading and find something else that suits you.

But if you know it’s for you, then read on…

Trading strategy for the daily timeframe

The 2 most common ways to trade the daily timeframe are…

  • Swing trading
  • Position trading

I’ll explain…

Swing trading

Swing trading is an approach which seeks to capture “one move” in the market.

The idea is to endure as “little pain” as possible by exiting your trades before the opposing pressure comes in.

This means you’ll book your profits before the market reverse and wipe out your gains.

Here’s what I mean…

trading daily timeframe, d, t

Pros:

  • You don’t need to spend hours in front of your monitor because your trades last for days or even weeks
  • It’s suitable for those with a full-time job
  • Less stress compared to day trading

Cons:

  • You won’t be able to ride trends
  • You have overnight risk

If you want to learn more, then go read…

The NO BS Guide to Swing Trading

Swing trading strategies that work

Next…

Position trading

Position trading is an approach which seeks to ride trends in the market.

The idea is to capture “the meat” of the move and exit your trades only when the trend shows signs of reversal.

Here’s what I mean…

trading daily timeframe, d, t

Pros:

  • It requires less than 30 minutes a day
  • It’s suitable for those with a full-time job
  • Less stress compared to swing and day trading

Cons:

  • You’ll watch your winning trades turn into losing trades, often
  • Your winning rate is low (around 30 – 40%)

If you want to learn more, then go read…

The NO BS guide to Position trading

5 Powerful Ways to Trail Your Stop Loss

Now, once you’ve developed your trading strategy, the next step is to develop a routine to ensure your trading success.

Continue reading…

The secret to daily timeframe trading success

(This is important so don’t skip this section.)

Now…

A trading strategy is only one part of the equation.

Because you still need a trading routine or you won’t find trading success. If you ask me, this is the secret between winning and losing traders.

You’re probably wondering:

“So, how do I develop a trading routine?”

Well, there are 3 parts to it…

  1. Create and update your watch list
  2. Commit to your schedule (execute and record)
  3. Review your results

Let me explain…

1. You create and update your watch list of markets

(This can be done on the weekends when the markets are closed.)

After you’ve developed a trading strategy, create a watch list of markets to trade (whether it’s Forex, Stocks, Futures, etc.).

Next, scan through your watch list and identify the markets which offer a potential trading setup (this should be according to your trading strategy).

You want to “mark” these markets so you can focus on them in the coming week.

You can do it on excel like this…

trading daily timeframe, d, t

Or if you’re using TradingView, you can highlight it like this…

trading daily timeframe, d, t

Next…

2. You commit to your trading schedule

Since you’re trading the daily timeframe, then it makes sense to make your trading decision after the close of the daily candle.

This could be morning, afternoon, or night (depending on where you are) — so create a schedule where you can commit to it no matter what.

For example:

If you’re in Asia, then the daily close would be in the morning for you.

So, every morning you’ll check the markets from your watch list and see if there’s a potential trading setup.

If there is, then you move onto the next step…

3. You execute and record your trades

Now if there’s a valid trading setup, you execute the trade with proper risk management.

Then, you’ll record the metrics like…

Date – Date you entered your trade

Time Frame – Time frame you entered on

Setup – Trading setup that triggers your entry

Market – Markets you’re trading

Price in – Price you entered

Price out – Price you exited

Stop loss – Price where you’ll exit when you’re wrong

Initial risk in $ – Nominal amount you’re risking

R multiple – Your P&L on the trade in terms of R. If you made two times your risk, you made 2R.

An example below:

trading daily timeframe, d, t

For the full breakdown, check out this post below…

How to be a consistently profitable trader within the next 180 days

4. You review your trades and find your edge

Once you’ve executed 100 trades consistently, you’ll know whether your trading strategy has an edge in the markets.

Here’s how…

Expectancy = (Winning % * Average win) – (Losing % * Average loss) – (Commission + Slippage)

If you have a positive expectancy, congratulations!

It’s likely your trading strategy has an edge in the markets.

But what if it’s negative?

Then you apply my AFTER technique…

  1. Identify the patterns that lead to your losses — and avoid trading these setups
  2. Identify the patterns that lead to your winners — and focus on these setups
  3. Tweak your trading plan according to your findings
  4. Execute the next 100 trades with your updated trading plan and record the trades
  5. Review your trades

If you do what I just shared, you’ll improve your trading results and eventually, find your edge in the markets.

Now…

Whether you’re a winning or losing trader, the AFTER technique can be applied to you.

If you’re a winning trader, then it’ll take your trading to the next level.

If you’re a losing trader, then you have a method to get yourself into the green.

Conclusion

So, here’s what you’ve learned:

  • The benefits of trading daily timeframe — you’re more relaxed, the news doesn’t matter, you have freedom, you can grow massive wealth, and you put the odds in your favour
  • Trading daily timeframe is not for you if you want a consistent income or you want a career in proprietary trading
  • You can adopt a swing trading or position trading strategy on the daily timeframe
  • Your trading routine consists of creating your watch list, committing to your trading schedule, executing your trades, and reviewing your trades

And there you have it!

The truth about trading daily timeframe that nobody tells you.

Now here’s what I’d like to know…

Do you trade on the daily timeframe? Why or why not?

Leave a comment below and share your thoughts with me.

Sours: https://www.tradingwithrayner.com/trading-daily-timeframe/

The “So Easy It’s Ridiculous” Trading System

As you can see, we have all the components of a good forex trading system.

First, we’ve decided that this is a swing trading system and that we will trade on a daily chart.

Next, we use simple moving averages to help us identify a new trend as early as possible.

The Stochastichelps us determine if it’s still ok for us to enter a trade after a moving average crossover, and it also helps us avoid oversold and overbought areas.

The RSI is an extra confirmation tool that helps us determine the strength of our trend.

After figuring out our trade setup, we then determined our risk for each trade.

For this system, we are willing to risk 100 pips on each trade.

Usually, the higher the time frame, the more pips you should be willing to risk because your gains will typically be larger than if you were to trade on a smaller time frame.

Next, we clearly define our entry and exit rules.

At this point, we would begin the testing phase by starting with manual backtests.

Trade Example: Buy EUR/USD

Here’s an example of a long trade setup:

Long Entry Signal

If we went back in time and looked at this chart, we would see that according to our system rules, this would be a good time to go long.

To backtest, you would write down at what price you would’ve entered, your stop loss, and your exit strategy.

Then you would move the chart one candle at a time to see how the trade unfolds.

Long Exit Signal

In this particular case, you would’ve made some decent pips! You could’ve bought yourself something nice after this trade!

You can see that when the moving averages cross in the opposite direction, it was a good time for us to exit.

Of course, not all your trades will look this sexy. Some will look like ugly heifers, but you should always remember to stay disciplined and stick to your trading system rules.

Trade Example: Sell EUR/USD

Here’s an example of a short entry order for the “So Easy It’s Ridiculous” system.

So Easy It's Ridiculous System Short Entry Signal

We can see that our criteria are met, as there was a moving average crossover, the Stochastic was showing downward momentum and not yet in oversold territory, and RSI was less than 50.

At this point, we would enter short.

Now we would record our entry price, our stop loss, and exit strategy, and then move the chart forward one candle at a time to see what happens.

So Easy It's Ridiculous Forex System Short Exit Signal

Boo yeah baby! As it turns out, the trend was pretty strong and the pair dropped almost 800 pips before another crossover was made!

Now isn’t that ridiculously easy?

The

We know you’re probably thinking that this system is too simple to be profitable. Well, the truth is that it is simple. You shouldn’t be scared of something that’s simple.

In fact, there is an acronym that you will often see in the trading world called KISS.

It stands for Keep It Simple Stupid!

It basically means that forex trading systems don’t have to be complicated.

You don’t have to have a zillion indicators on your chart. In fact, keeping it simple will give you less of a headache.

The most important thing is discipline. We can’t stress it enough. Well, yes we can.

YOU MUST ALWAYS STICK TO YOUR TRADING SYSTEM RULES!

If you have tested your forex system thoroughly through backtesting and by trading it live on a DEMO account for at least a month (or two).

Then you should feel confident enough to know that as long as you follow your rules, you will end up profitable in the long run.

Trust your system and trust yourself!

If you want to see some examples of some slightly more complicated forex trading systems, take a look at Huck’s HLHB system or Pip Surfer’s Cowabunga system.

Sours: https://www.babypips.com/learn/forex/the_so_easy-its-ridiculous-system
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The daily timeframe gives an opportunity for longer-term traders to profit from the Forex market. The following strategy is to be used on the daily chart only, on which it can generate great trading opportunities and profits.

Since it is based on a relatively large timeframe, patience will be needed when trading this strategy as not many trades will be generated compared to trading strategies based on smaller timeframes. The advantage is that the strategy is very simple and almost anyone can use it to take trades and profit with it.

It consists of several simple rules which when followed will provide good trades and offer the potential for profit. It’s recommended to use it on the major pairs only because chart patterns work better due to the good liquidity and volume on these currency pairs. The strategy can be enhanced by combining it with other tools and indicators as we shall see later in this article.

Four trades that were generated by this strategy are shown on the chart below.

Forex Daily Chart Trading Strategy

The vertical lines indicate the generated trades with this strategy from entry to exit (marked as “LONG” and “SHORT” on the chart) – EURUSD Daily Timeframe

Indicators to be used:

  • Bollinger Bands with standard settings (Blue lines on the chart) –Period – 20, Standard Deviation – 2

The Stochastic oscillator can also be used to get an additional perspective on the momentum in the market but is not necessary for this strategy. A “nice” bullish or bearish crossover from inside the oversold or overbought area on the Stochastic can be additional confirmation that a trade setup is a good opportunity to buy or sell.
Trading conditions of the strategy:

Long trade entry:

  • Wait for FxTR overbought/oversold indicator to fall in the oversold area and the line to turn green – this is an indication that buying opportunities will probably exist
  • Wait for price to be at the lower band of the Bollinger Bands indicator

Long trade stop loss:
  • Place the stop below the bullish reversal pattern

Long trade exit and targets:
  • 1st target - the middle line of the Bollinger Bands indicator
  • 2nd target – the opposite end of the Bollinger Bands indicator (upper line)

The chart below shows an example of a long trade taken with this Forex strategy
Forex strategy daily timeframe

The two sections indicated by the vertical lines on the chart show two buy trades that were generated with this Forex strategy – GBPUSD Daily timeframe

Short trade entry:

  • Wait for FxTR overbought/oversold indicator to enter the overbought area and the line to turn red – indicating that we should look for bearish trading opportunities
  • Wait for price to be at the upper band of the Bollinger Bands indicator
  • Enter when a bearish candlestick pattern forms on the chart

Short trade stop loss:
  • Place the stop above the bearish reversal pattern

Short trade exit:
  • 1st target - the middle line of the Bollinger Bands indicator

  • 2nd target – the opposite end of the Bollinger Bands indicator (lower line)

Here’s an example of a short trade:
Picture

The section between the two vertical lines show a sell trade generated by this strategy – USDJPY Daily Timeframe

Things to keep in mind when trading with this Forex strategy:
  • Since this strategy is based on the daily timeframe it will need relatively larger capital due to the usual size of the stops. This has to be taken into consideration from a risk management perspective.

  • During strong trends in the market, the price can take a path of “walking the bands”. This can occur either with the upper or lower Bollinger Band and essentially, the price doesn’t reverse even though it stays at the Bollinger Bands for several trading sessions in a row. Such situations can be the cause for unprofitable trades with this strategy, however, even in such cases of “waling the bands”, the probability that a reversal candlestick pattern will form during a strong trend is very low, so essentially this is the advantage of the strategy. Thus, when a reversal pattern does actually form at one of the Bands, it will likely be followed by at least a few more candles of consolidation if not a full reversal.

  • The Bollinger Band is a dynamic indicator, so this is an aspect that must be taken into account. That is, the distance to the profit targets will change with every new bar, so that means that the profit targets should be updated accordingly. Sometimes this may result in trades with very small to near breakeven profit or no profit at all. What is important, however, is that the signals generated with this strategy accurately predict tops and bottoms, so in most cases, the trades will offer nice profits.


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Sours: https://www.fxtradingrevolution.com/strategies/overboughtoversold-forex-daily-trading-strategy

Moving Average Strategies for Forex Trading

A forex trader can create a simple trading strategy to take advantage of trading opportunities using just a few moving averages (MAs) or associated indicators. MAs are used primarily as trend indicators and also identify support and resistance levels. The two most common MAs are the simple moving average (SMA), which is the average price over a given number of time periods, and the exponential moving average (EMA), which gives more weight to recent prices. Both of these build the basic structure of the Forex trading strategies below.

Key Takeaways

  • Moving averages are a frequently used technical indicator in forex trading, especially over 10, 50, 100, and 200 day periods.
  • The below strategies aren't limited to a particular timeframe and could be applied to both day-trading and longer-term strategies.
  • Moving average trading indicators can be used on their own, or as envelopes, ribbons, or convergence-divergence strategies.
  • Moving averages are lagging indicators, which means they don't predict where price is going, they are only providing data on where price has been.
  • Moving averages, and the associated strategies, tend to work best in strongly trending markets.

Moving Average Trading Strategy

This moving average trading strategy uses the EMA, because this type of average is designed to respond quickly to price changes. Here are the strategy steps.

  • Plot three exponential moving averages—a five-period EMA, a 20-period EMA, and 50-period EMA—on a 15-minute chart.
  • Buy when the five-period EMA crosses from below to above the 20-period EMA, and the price, five, and 20-period EMAs are above the 50 EMA.
  • For a sell trade, sell when the five-period EMA crosses from above to below the 20-period EMA, and both EMAs and the price are below the 50-period EMA.
  • Place the initial stop-loss order below the 20-period EMA (for a buy trade), or alternatively about 10 pips from the entry price.
  • An optional step is to move the stop-loss to break even when the trade is 10 pips profitable.
  • Consider placing a profit target of 20 pips, or alternatively exit when the five-period falls below the 20-period if long, or when the five moves above the 20 when short.

Forex traders often use a short-term MA crossover of a long-term MA as the basis for a trading strategy. Play with different MA lengths or time frames to see which works best for you.

Moving Average Envelopes Trading Strategy

Moving average envelopes are percentage-based envelopes set above and below a moving average. The type of moving average that is set as the basis for the envelopes does not matter, so forex traders can use either a simple, exponential or weighted MA. 

Forex traders should test out different percentages, time intervals, and currency pairs to understand how they can best employ an envelope strategy. It is most common to see envelopes over 10- to 100-day periods and using "bands" that have a distance from the moving average of between 1-10% for daily charts.

If day trading, the envelopes will often be much less than 1%. On the one-minute chart below, the MA length is 20 and the envelopes are 0.05%. Settings, especially the percentage, may need to be changed from day to day depending on volatility. Use settings that align the strategy below to the price action of the day.

Ideally, trade only when there is a strong overall directional bias to the price. Then, most traders only trade in that direction. If the price is in an uptrend, consider buying once the price approaches the middle-band (MA) and then starts to rally off of it. In a strong downtrend, consider shorting when the price approaches the middle-band and then starts to drop away from it.

Once a short is taken, place a stop-loss one pip above the recent swing high that just formed. Once a long trade is taken, place a stop-loss one pip below the swing low that just formed. Consider exiting when the price reaches the lower band on a short trade or the upper band on a long trade. Alternatively, set a target that is at least two times the risk. For example, if risking five pips, set a target 10 pips away from the entry.

Moving Average Ribbon Trading Strategy

The moving average ribbon can be used to create a basic forex trading strategy based on a slow transition of trend change. It can be utilized with a trend change in either direction (up or down).

The creation of the moving average ribbon was founded on the belief that more is better when it comes to plotting moving averages on a chart. The ribbon is formed by a series of eight to 15 exponential moving averages (EMAs), varying from very short-term to long-term averages, all plotted on the same chart. The resulting ribbon of averages is intended to provide an indication of both the trend direction and strength of the trend. A steeper angle of the moving averages – and greater separation between them, causing the ribbon to fan out or widen – indicates a strong trend.

Traditional buy or sell signals for the moving average ribbon are the same type of crossover signals used with other moving average strategies. Numerous crossovers are involved, so a trader must choose how many crossovers constitute a good trading signal.

An alternate strategy can be used to provide low-risk trade entries with high-profit potential. The strategy outlined below aims to catch a decisive market breakout in either direction, which often occurs after a market has traded in a tight and narrow range for an extended period of time.

To use this strategy, consider the following steps:

  • Watch for a period when all of (or most of) the moving averages converge closely together when the price flattens out into sideways range. Ideally, the various moving averages are so close together that they form almost one thick line, showing very little separation between the individual moving average lines.
  • Bracket the narrow trading range with a buy order above the high of the range and a sell order below the low of the range. If the buy order is triggered, place an initial stop-loss order below the low of the trading range; if the sell order is triggered, place a stop just above the high of the range.

Moving Average Convergence Divergence Trading Strategy

The moving average convergence divergence (MACD) histogram shows the difference between two exponential moving averages (EMA), a 26-period EMA, and a 12-period EMA. Additionally, a nine-period EMA is plotted as an overlay on the histogram. The histogram shows positive or negative readings in relation to a zero line. While most often used in forex trading as a momentum indicator, the MACD can also be used to indicate market direction and trend.

There are various forex trading strategies that can be created using the MACD indicator. Here is an example.

  • Trade the MACD and signal line crossovers. Using the trend as the context, when the price is trending higher (MACD should be above zero line), buy when the MACD crosses above the signal line from below. In a downtrend (MACD should be below zero line), short sell when the MACD crosses below the signal line. 
  • If long, exit when the MACD falls back below the signal line.
  • If short, exit when the MACD rallies back above the signal line.
  • At the outset of the trade, place a stop-loss just below the most recent swing low if going long. When going short, place a stop-loss just above the most recent swing high.

Guppy Multiple Moving Average

The Guppy multiple moving average (GMMA) is composed of two separate sets of exponential moving averages (EMAs). The first set has EMAs for the prior three, five, eight, 10, 12 and 15 trading days. Daryl Guppy, the Australian trader and inventor of the GMMA, believed that this first set highlights the sentiment and direction of short-term traders. A second set is made up of EMAs for the prior 30, 35, 40, 45, 50 and 60 days; if adjustments need to be made to compensate for the nature of a particular currency pair, it is the long-term EMAs that are changed. This second set is supposed to show longer-term investor activity.

If a short-term trend does not appear to be gaining any support from the longer-term averages, it may be a sign the longer-term trend is tiring out. Refer back the ribbon strategy above for a visual image. With the Guppy system, you could make the short-term moving averages all one color, and all the longer-term moving averages another color. Watch the two sets for crossovers, like with the Ribbon. When the shorter averages start to cross below or above the longer-term MAs, the trend could be turning.

Sours: https://www.investopedia.com/ask/answers/122314/how-do-i-use-moving-average-ma-create-forex-trading-strategy.asp

Chart strategy daily forex

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TRADING SECRETS : WHY TRADING THE DAILY CHART PAYS OFF

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