Here is a brief explanation of one of my top 3 favorite forex trading strategies. I call it the “4 hour Sterling Strategy”.
This is what you do:
1. Open up a basic 1 Hour bar chart for the GBP/USD.
2. Monitor the GBP/USD and watch for at least 4 consecutive hours of very tight consolidation. You don’t have to be by the computer the whole time. You are looking for 4 consecutive hours of tight consolidation on the chart, so checking in every few hours is fine.
By “tight consolidation” I mean that the range over the 4 hours is very well defined, usually with no more than 50 to 70 pips in the range (short bars).
3. After you identify 4 consecutive hours of tight consolidation, you will need to monitor more regularly because you will trade the breakout of that range. You will go LONG or SHORT depending on the price action; and you won’t know for sure which direction you will be going until the break happens.
4. If the price goes 7 pips + spread above the upper range, then go LONG. If price moves 7 pips+ spread below the lowest value of the range, then go SHORT.
5. Set your stop loss at 30 and your take profit at 70 pips.
Usually if the 4 hours of tight consolidation is going to occur, it will be during the US afternoon or during the Asian session.
This forex trading strategy is simple and VERY effective.
January 20th, 2010 at 3:22 pm
great post and nice site.
April 16th, 2010 at 12:58 am
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