Forex Strategy

I am happy to say that after much trial and success, I've settled down on my CFD trading strategy. As of this week, I've already met and exceeded my OTE for the February with 12 more trading days to go. I did a total of 42 trades yesterday; of which 40 of them made money.

During the early days of my trial with CFD, I applied my strategy for trading equities and it was a terrible idea. I ran up to thousands in paper losses, could not trade for a good number of days and was nearly forced to close my trades. 

I learned that for Forex, you lose more money if the market moves against you than you would make, had you made the same bet and the market moves with you. Just look at my trades below; it took me 780 pips to win $3,000 but took only 340 pips to lose $4,800.



Trading Forex is stressful. I am literally glued to the screen more than 16 hours a day (a friend corrected me that Forex trading is not stressful, it is not having a regular income and depending fully on Forex that is).

So for the benefit of others, I am sharing what I do in a simple 3-steps process below. Do note that there is no guarantee and my strategy may not suit you. You should always make your own judgement and understand the tremendous amount of risk in trading Forex.

Step 1: Know Your Trading Band

The first step is to research what is the band in which Forex will move. This is to ensure that I do not trade, and God help me that I will never hold (again), any positions outside of the band.

Some traders will use the monthly, weekly, daily and hourly support and resistance levels as a guide. I tend to take a less stringent approach and go with the very general longforecast.com's monthly forecast (which is updated daily).

Once I have that, I set my general direction for trade and trading limits within the band.

Step 2: The Bollinger Bands

Green arrows represent buy positions and orange represent sell

In the screen shot above, you can see that the trades always move within the Bollinger Bands and it "bounces" off the top and bottom of the wall. 

I have marked the positions that I entered a buy or sell position using green and orange arrows respectively. It is important to note that I did not open the positions when the trade touches the wall immediately. Instead, I relied on two additional checks below

1. That the direction of trade is changing
• Indicated by the lines showing that it is about to turn. One must be extremely lucky to catch the tip of each change and I tend to play it safe by entering only after it turned.
• Referring to the 5 mins technical analysis on Investing.com
2. That the Relative Strength Indicator (RSI) is less than 40 for buy positions and more than 60 for sell positions.

Step 3: Trading Limits

The next and final step is to know when to cut your losses and when to take profit. For all my trades, I target to earn no more than 15 pips per trade.

Using 15 pips as the limit, I then go back to the Bollinger Bands and use the bands as reference to further limit my exposure. One can play it safe and use the average (purple line) or be bold and use the upper or lower wall as limits. Always remember set targets for both especially if you are going to be away from keyboard (AFK).

SimpleFX allows you to enter the position for profit taking and stop loss

I'm going to be writing less. Need to make more money 😁 I've set a new (and lofty) target for myself.