Simple Forex Trading Ways but Consistent Profits
If there is a simple way of trading forex, why should you use the complicated way of trading? That’s what many forex traders think. That view is actually not wrong, but it should only be carried out by experienced traders. Because consistent profits can only be obtained by carrying out a systematic and tested trading plan, not by guessing the price will go up or down.
Simple Forex Trading Ways but Consistent Profits
Develop a Systematic Forex Trading Plan
The question is, what is the forex trading plan like? A simple forex trading plan should cover at least seven aspects:
Choice of forex pairs to trade: Beginners should only choose the most popular major currencies, namely between EURUSD, USDJPY, GBPUSD, or AUDUSD only. These four pairs have very low spreads, so traders can profit more optimally.
Choice of trading time: The important thing to note here is the characteristics of each trading session. Market movements in the Asian session tend to be slower, while market movements in the European and American sessions are faster. The faster the market moves, the more profit opportunities and the faster it can be achieved, but the risk is also greater.
Timeframe choice: Adjust the timeframe to the trading technique that will be chosen. If you want scalping (target profit/loss in minutes), then use the M10, M15, or M30 timeframe. If you want day-trading (target profit/loss is achieved in one day), then use the M30, H1, or H4 timeframe. If you want to be more relaxed with a profit target within a period of several days, then use the H4, D1 or higher timeframe.
Choice of risk/reward ratio (RR): This ratio represents how much money you are ready to sacrifice to achieve a certain profit. For example, a 1:3 RR ratio, meaning that you are ready to lose 10 pips for a profit of 30 pips, or you are ready to lose 20 pips for a profit of 60 pips, and so on. The greater the RR ratio, the more difficult it is to profit. If you want scalping, you should only RR 1:1.5. Meanwhile, if you want day-trading, choose RR 1:2 or 1:3.
Amount of trading volume (lots) to be traded: If you are still in the stage of practicing trading and do not understand any strategy, it is best to always use 0.01 lots or 0.1 lots only. Do not use lot 1 or multiply lots at will, because you will lose faster.
Choice of technical indicators or trading system: After all the rules above are determined, the next step is to choose what technical indicators to use. You are free to use any built-in indicators in Metatrader. Each indicator has its own buy and sell terms which are easy to implement. We will discuss this system in the next section.
Trading entry and exit rules: All trading positions must be planned starting from how to open positions (entry) to close positions (exit). Many novice traders only focus on entry, so they are confused when to close a position. This can be easily avoided if you have determined from the start when to exit. The simple benchmark is the RR ratio. For example, you set a 1:2 RR with a profit target of 50 pips and a stop loss of 25 pips, then you will actually close the position immediately after reaching a profit of 50 pips or after a loss of 25 pips.
It’s so easy, isn’t it!? As long as it is planned from the start, any way of trading forex will be simple. Many novice traders are even too focused on finding the most powerful technical indicators or trading systems, without paying attention to this aspect of systematic planning, so that the way of trading becomes complicated. In fact, the matter of choosing technical indicators can be arranged later. Traders can even trade without indicators at all if they understand how to use candlestick charts optimally.
Tested Technical Indicators and Forex Trading Systems
There are many technical indicators or forex trading systems that have been tested and proven to be reliable. You can look at how to use certain technical indicators, then experiment with implementing them yourself in Metatrader until you find the most reliable settings for your trading plan. Examples are Moving Averages, Relative Strength Index (RSI), Stochastic, Bollinger Bands, and so on.
Alternatively, you can look for ready-made forex trading systems on the internet. In this way, you can get ready-to-use technical indicator settings without needing to experiment on your own. However, the ready-to-use settings must also be adjusted again with your trading plan. Note: Trading systems and technical indicators are not a universal fit for everyone in all situations.
There are technical indicators that are only suitable for trending market conditions, some are only suitable for sideways conditions. There is a suitable system for the Asian session, there is
which is only suitable for the European session. Trading systems that are proven to be reliable for others may not necessarily be suitable for you, because everyone’s level of patience in waiting for profit/loss is different. So, use the forex trading system findings from the internet as a reference for practice only. If you are already proficient at applying it on a demo account to produce multiple profits, then use it on a real account.
Two combinations of technical indicators and trading systems that are known to be effective include:
- RSI indicator with a setting of 20-80 and a period of 5 or 7 on the Daily (D1) timeframe.
- RSI indicator with a setting of 20-80 and a period of 5 or 7 on the Daily (D1) timeframe
The RSI indicator is generally used with a default setting of 30-70. However, its reliability proved to be better at 20-80 settings. The trading method is simple, that is, prepare to sell if the RSI has entered the overbought area above the 80 threshold and will reverse down again. Then be ready to buy if the RSI has approached the oversold area below the threshold of 20 and will turn up again. Realization of profit can be obtained within 2-3 days or a maximum of 1 week.
- Combination of two Moving Averages (MA): MA-100 and MA-50 on Weekly or Monthly timeframes.
- Combination of two Moving Averages (MA): MA-100 and MA-50 on Weekly or Monthly timeframes
Trading rules are very simple, you just pay attention to the intersection (crossing) between the two MA lines. If the MA-50 line (red) crosses the MA-100 line (blue) from the bottom up, it means that it is a buy signal. Meanwhile, if the MA-50 line (red) moves across the MA line (blue) from top to bottom, it means that it is a sell signal. Each MA line can also act as a dynamic support/resistance line to be used as a benchmark for breakouts/bounces.
Many professional traders from hedge funds monitor this combination of two Moving Averages. However, profits can only be realized in the long term. Trading signals are also very rarely appear. Therefore, this system is not popular among forex traders in general.
To use Moving Averages with short-term profit targets, you must be able to adjust the period and timeframe settings. For example MA-5, MA-8, and MA-13 on a 2-minute or 5-minute timeframe for scalping. You can also use a combination of EMA-12, EMA-26, and SMA-55 on the Daily timeframe.