Introduction
FX_4_Thought aims to teach a simple and effective strategy to trade the Forex market.
The strategy is based on exponential moving averages crossovers and it's explained here in details using images, text and videos.
How to setup your charts
Make a template with two EMAs, CCI and Stochastic.
15 min chart: 20 ema
80 ema
15 CCI (with levels -100 and 100)
9, 3, 3 (with levels 20 and 80)
1 hour chart: 20 ema
80 ema
15 CCI (with levels -100 and 100)
9, 3, 3 (with levels 20 and 80)
4 hour chart: 20 ema
120 ema
15 CCI (with levels -100 and 100)
9, 3, 3 (with levels 20 and 80)
A valid LONG ENTRY (buy) is confirmed by:
20 ema (purple) > 80 ema (thick red)
CCI is below -100 but about to cross above -100 towards 100
Stochastic is below 20 but about to cross above 20 towards 80
Stop loss: below previous low or below the red ema
A valid SHORT ENTRY (sell) is confirmed by:
20 ema (purple) < 80 ema (thick red)
CCI is above 100 but about to cross below 100 towards -100
Stochastic is above 80 but about to cross below 80 towards 20
Stop loss: above previous high or above the red ema
The risk ratio should be at least 2:1. This means that your take profit (target profit) should be double of your stop loss.
I use pivot points and support/resistance as my TP.
My Money Management rule is to only risk 2% of my capital per trade.
Example:
Capital: £5000
2% of Capital = £100
Stop Loss = 40 pips
100 ÷ 40 = 2.5
With a capital of £5000 available to trade and risking 2% per trade you would bet £2.5 per point with a SL of 40 pips.
This calculation should be done for every trade if your capital or SL change.
Entry Signal and Stop Loss
A valid LONG ENTRY (buy) is confirmed by:
20 ema (purple) > 80 ema (thick red)
CCI is below -100 but about to cross above -100 towards 100
Stochastic is below 20 but about to cross above 20 towards 80
Stop loss: below previous low or below the red ema
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| Click to enlarge |
A valid SHORT ENTRY (sell) is confirmed by:
20 ema (purple) < 80 ema (thick red)
CCI is above 100 but about to cross below 100 towards -100
Stochastic is above 80 but about to cross below 80 towards 20
Stop loss: above previous high or above the red ema
 | |
| Click to enlarge |
Take Profit, Risk Ratio and Money Management
The risk ratio should be at least 2:1. This means that your take profit (target profit) should be double of your stop loss.
I use pivot points and support/resistance as my TP.
My Money Management rule is to only risk 2% of my capital per trade.
Example:
Capital: £5000
2% of Capital = £100
Stop Loss = 40 pips
100 ÷ 40 = 2.5
With a capital of £5000 available to trade and risking 2% per trade you would bet £2.5 per point with a SL of 40 pips.
This calculation should be done for every trade if your capital or SL change.
Daily/Weekly Targets (pips)
Trading on 15min charts I aim at 30 pips per day or 150 per week. On 1h charts that goes to 50 pips per day or 250 per week.
Tools of the trade
All tools of the trade are free. This means that you can learn and practice without spending a penny.
Download Metatrader 4 - charting software
Open a demo account to practice. They are free and last anything between 30 days to a lifetime.
I'm currently using Gekko Global Markets free trial.
If you want my template for Metatrader 4, just post a comment with your e-mail.
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DISCLAIMER: All information available in this website is intended for educational purposes only. This is neither a solicitation nor an offer to Buy/Sell any investment. Please consult your Financial Adviser and make sure you are aware of the risks before start trading Forex. Past performance of this trading strategy is not necessarily indicative of future results.
