Hi fellow swing traders, here is a swing trading system which you can use to trade the GBPUSD currency pair.
This swing trading strategy has the potential to average more than 100 pips a month.
You just have to manage your risks and it can be a real killer forex swing trading system for you.
Ok, enough of trash talk, lets get started with a bit more detail into the GBPUSD forex swing trading strategy.
OVERVIEW OF THE 4HR GBPUSD FOREX TRADING STRATEGY
(1)With this forex swing trading system, you need to use the 4hr chart as well as the daily chart to make a trading decision. Your trade entries are made in the 4hrs but you need to check the daily timeframe for what the main trend is before you enter a trade on the 4hr timeframe.
(2) You also need to have these forex indicators,:
- slow stochastic with the settings(13,5,5) applied to both charts,
- EMA 4, EMA14, and EMA 50 on the 4hr chart.
(1) On the 4hr chart, open a trade at market order or with a pending stop order on the new opening candlestick when 4ema first crosses 50Ema followed by 14Ema
(2)Your stop loss should be 50 pips.
(3)Exit the trade when 4EMA reverses and crossed 14EMA on the next open candle.
(5)Last but not the least, you need a good filter to filter out potential bad trade setups with this swing trading system. Here’s what you need:the stochastic indicator on the daily chart:
For Valid Long Entry: Slow %K above Slow %D on the Daily Chart
For Valid Short Entry: Slow %D above Slow %K on the Daily Chart
Note: the %K&%D on the stochastics are the two line on the stochastic indicator chat that cross each other based on where price is going.
The reason why you need to use the stochastic on the daily chart is pretty simple:follow the trend. The daily chart has more importance than the 4hr chart.
(6) Take profit: there is not take profit option here(dummy!) because you need to refer to rule (3)!
Now if you are still confused, these two charts below will make things a bit more easier for you to understand. Click on the charts if you need to see it more clearly.
Now as trade filter, swith to daily chart to see if the two stochastics lines have crossed to the downside to confirm the overall direction of the trend(in this case, its a downtrend):
ADVANTAGES OF THE 4HR GBPUSD FOREX TRADING STRATEGY
- allows you to actually get into a trade just after the moving average crossovers happens, which means you are potentially entering a trade just after the trend has started…which is better than entering a trade at the halfway point of a trendy market move.
- which means if its going to be a nice trending market, you stand to make a lot of profitable pips and the fact that you are only supposed to close the trade when 4ema crosses the 14 and if that’s in a nice trending market on a 4hr chart, that could mean hundreds of pips of profit you can make.
- the use of daily timeframe withe the stochastic line crossover allows you to enter trade based only in the current prevailing trend direction thus increasing your odds of success.
DISADVANTAGES OF THE 4HR GBPUSD FOREX TRADING STRATEGY
- The biggest problem I see with this trading system is the entry because moving averages are lagging indicators therefore the ideal entry point would have been anywhere from 2-7 candles back.
- this also means that at the entry where you got into a trade, price may be due for a temporary pullback and if your stop loss is not wide enough, you will get stopped out.
- This forex strategy is definitely not good for ranging market, expect your stop losses to get hit frequently.
CAN YOU USE THIS FOREX TRADING STRATEGY WITH OTHER CURRENCY PAIRS?
The short answer is yes. Better for you to stay with currency pairs that have good trending characteristics.
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