Simple Trading Strategy
I run an fairly large introducing brokerage company. By observing the successes and failures of my clients and interacting with them, I am able to pick up on what successful traders use to make money and the mistakes that unsuccessful traders make to lose money. This is all backed up by hard numbers, since I am able to view the performance of my clients.
After talking to a lot of my forex clients, it became evident to me that they use pivot points quite a bit in their trading. Two particular areas that traders like to focus on is the previous day’s high and low.
A crowd usually has the psychology that if the previous day’s high is crossed up the general price move is up and they are more likely to buy than sell. The opposite is true for when the previous day’s low is crossed down.
To add to that many traders use the previous day’s highs and lows as their stops. So if the price crosses below the low traders will be stopped out and the price will drop. The opposite is true for the previous day’s high.
Taking this information into consideration, I feel that I will have an edge in the market by going long if the previous day’s high is crossed up and going short if the previous day’s low is crossed down. I feel that the price move will continue to go in the direction of the cross for at least a little bit.
Many traders however play this trade completely the opposite way. They look at these price points as support and resistance and they dollar cost down into their trades. In other words if the price crosses below the low of the previous day they will go long and add to their positions until their average entry price is lowered. It is for this reason that I give these trades a little wiggle room by placing my stops around 30 pips away.
By using this edge and back-testing it I have developed some simple rules.
Basic Rules for trading EUR/USD:
Price Action Strategy
To us a trading day is from 5pm EST to 5pm EST in forex.
1. Enter long on a stop order if the previous day’s high was crossed.
2. Exit on a limit if the trade gains approximately 10 pips. Exit on stop if the trade looses approximately 30 pips.
3. Enter short on a stop order if the previous day’s low is crossed down.
4. Cover your short position if the trade gains approximately10 pips using a limit order. Exit on a stop if the trade goes approximately 30 pips against you.
5. Only take the first high/low cross of the day.
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