Believe or not, any indicators are based on price. So, they will be always late and formed after the price. Personally, I don't like fancy indicators. MT4 application already equipped with many powerful indicators such as Bollinger Bands, CCI and Stochastic. I think with those indi, you can be successfully in trading. The key is risk management.
Here I want to show you how to trade without many confusing indicators. We will try to trade based on price action only with trendline. As long as I learn Forex, trendline breakout give me better result than any other strategy. Indicators such as Stochastic, CCI and MACD are helpful when there is divergence.
BUY/LONG position
On BUY position, we connect lower high on the price. For some aggressive traders, they will open position once candle break the trendline. But I highly recommend you to wait the price break the trend line and break previous high. The following picture describe this idea better than my writing.
When price break the 2nd high, we can open BUY and put the stop loss below the trendline.
SELL/SHORT Position
On Short position, we connect lows. When price break the 2nd low (higher low) we open SELL and put the stop loss on the previous high. Do not enter SELL when price break the trendline.
If you like the aggressive way, enter SELL when price break the trendline, but its more risky since sometimes price break the trendline few pips and then reverse. See example below.
When you enter SELL immediately after trendline break, after few pips the price move up and make new higher high. Its not a confirmed or not a good SELL position since the price does not break 2nd low (2).
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