If you’re looking for an easy forex strategy, you’ve come to the right place. Many traders – particularly beginners – search far and wide to find the best trading system. They dip in and out of different strategies, and end up trying to learn everything from everyone. The end result is likely to be a chart that’s swamped with indicators, and an account that’s in heavy drawdown. Ouch.
Here’s a really simple forex trading strategy that’s easy to understand and won’t take much of your time. Plus, you won’t need to be glued to a screen all day. Let’s take a look.
Easy Forex Strategy
All of the 4 indicators which this strategy uses are free, and you should be able to add them to your MT4 or MT5 without any issues. They are also free on Trading View, however, the free version of TV only allows a maximum of 3 on a chart. So unless you have a subscription, you may be better off sticking with MetaTrader or signing up for Trading View.
- To begin with, this strategy is a swing strategy. This means that we expect to be holding our positions over days rather than hours or minutes.
- And as for the timeframe, we will use the daily chart. The body of each candle represents price at the open and the close of each day, and the wick represents the highest and lowest price ever reached in that period. (Click here for our full guide on how trading candlesticks work.)
The moving averages
This is a moving average crossover strategy, meaning that the crossover of two moving averages is our trigger to check if we should enter the market. There is an expression in forex trading that the “trend is your friend”, and that’s basically how this strategy works. We want to be moving with the market.
You will need to add two simple moving averages to your chart.
- The first one must have a length of 5.
- The second one must have a length of 10.
RSI & Stochastic indicator
A moving average crossover is not enough by itself for us to open a trade. We definitely don’t want to enter the market if it is oversold or overbought, as we may end up joining the trend just as it’s changing direction. So, to see if the trend is worth joining, we’ll add a Stochastic indicator and a Relative Strength Index indicator (RSI).
- The Stochastic indicator must be set to 14, 3, 3.
- The RSI must be set to 14.
This strategy should be OK with any currency pair. However, we would recommend sticking to the major and minor currency pairs such as GBP/USD, USD/CHF etc, which have movement.
As for the risk, there are several schools of thought when it comes to determining the size of your stop loss, for example, an ATR, or the open or close of the previous candle. However, as this is an easy forex strategy, we’ll keep things simple and stick to 100 pips.
Easy forex strategy rules
Buy / long setup
We can enter the market and go long if:
- The 5 moving average rises above the 10 moving average.
- The Stochastic indicator must show upward momentum but must not be in the “overbought” territory (above 80).
- The RSI must be greater than 50.
Sell / short setup
We can take a short position if:
- The 5 moving average drops below the 10 moving average.
- The Stochastic indicator shows downward momentum but is not in the “oversold” territory (below 20).
- The RSI is lower than 50.
And that is pretty much all there is to it. Check out our list of forex calculators to help you work out your position size. And as always, test this strategy on a demo account to see if it’s profitable before running it on a live account.