Money Makes Money Forex Trading Strategy

0
1356
Money Makes Money Forex Trading Strategy

One of the best tools that rich people have in order to grow their wealth is money. While many people work to earn money, rich people make their money work for them. That is by investing their money. By investing, they mean investing in the stock market. Now, investing in the stock market means that you are in it for the long haul and that it is a slow and steady process of earning money. While it is possible for simple folks to invest in the stock market, it can also be a very slow process.

There are many people who would want to make their money work for them but would want it to be a little bit faster. This is where trading comes in. While investing is a slow and steady process, trading on the other hand is about getting in and out of the market and making money in the process. It means buying a certain tradeable instrument and selling it as price goes up or doing the opposite when shorting the market.

The forex market is probably one of the most lucrative trading markets available for retail traders. It has the largest volume being traded every day, which means more volatility and more opportunities. It also allows for high leveraging which lets small retail traders play with bigger volumes. With this comes also comes a lot of risk. Traders should know what they are doing if they would want to trade money to make money.

Two Pole Butterworth

Two Pole Butterworth is a custom trend following indicator which is based on moving averages.

In fact, it is a modified moving average which is geared towards the short-term trend. It plots a moving average line which changes color whenever the slope of the line changes. This help traders identify the direction of the trend based on the color of the moving average line. It also allows traders to identify potential trend reversal points which can be used as a signal to enter the market.

This indicator plots a blue line to indicate a bullish trend bias and a red line to indicate a bearish trend bias.

Stochastic Oscillator

The Stochastic Oscillator is momentum technical indicator used to help traders identify trend direction, momentum and overbought or oversold price conditions.

This indicator is one of the more classic oscillator types of indicator. It is used by thousands of professional traders to help them identify the direction of the market and trade accordingly.

The Stochastic Oscillator plots two oscillating lines based on historical price movements. These two lines oscillate within the range of 0 to 100. It also has markers at level 20 and 80, while some setups include a marker at level 50.

Generally, trend direction or bias can be identified based on how the two oscillator lines overlap. If the faster line is above the slower line, the market is bullish. If it overlaps inversely, then the market is bearish. Trend bias can also be identified based on the location of the two lines in relation to the level 50. If the lines are above then, the market is bullish. If the lines are below it, then the market is bearish. Oscillator lines piercing above level 80 could indicate an overbought market, while lines dropping below 20 could indicate an oversold market.

Trading Strategy

This trading strategy is a simple trend following strategy based on the Two Pole Butterworth indicator and its confluence with the momentum reversal signals produced by the Stochastic Oscillator.

First, we should identify the direction of the trend. This is based on how the 20-period Exponential Moving Average (EMA) and 100-period Exponential Moving Average (EMA) overlap. This could also be identified based on the general location of price action in relation to the two EMA lines.

Retracements would occur during a trending market. Price should retrace towards the area near the 20 EMA line. This should also cause the Two Pole Butterworth line to temporarily change color and the Stochastic Oscillator to temporarily crossover against the trend.

Price should then revert back to the direction of the trend right after the retracement. This should cause the Two Pole Butterworth line to change color and the Stochastic Oscillator to crossover both indicating the resumption of the trend. This would be our entry signal.

Indicators:

  • -wmmm-twoPoleButterworth
  • 20 EMA
  • 100 EMA
  • Stochastic Oscillator: 15-5-5

Preferred Time Frames: 30-minute, 1-hour and 4-hour charts

Currency Pairs: FX majors, minors and crosses

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • The 20 EMA line should be above the 100 EMA line.
  • Bothe EMA lines should be sloping up.
  • Price action should generally be above both EMA lines.
  • Price should retrace to the area near the 20 EMA line causing the Two Pole Butterworth line to change to red and the fast Stochastic Oscillator line to temporarily cross below the slow line.
  • The Two Pole Butterworth line should change to blue in confluence with the fast Stochastic Oscillator line crossing above the slow line.
  • Enter a buy order on the confirmation of these conditions.

Stop Loss

  • Set the stop loss on the support below the entry candle.

Exit

  • Set the take profit target at 2x the risk on the stop loss.

Money Makes Money Forex Trading Strategy

Money Makes Money Forex Trading Strategy 2

Sell Trade Setup

Entry

  • The 20 EMA line should be below the 100 EMA line.
  • Bothe EMA lines should be sloping down.
  • Price action should generally be below both EMA lines.
  • Price should retrace to the area near the 20 EMA line causing the Two Pole Butterworth line to change to blue and the fast Stochastic Oscillator line to temporarily cross above the slow line.
  • The Two Pole Butterworth line should change to red in confluence with the fast Stochastic Oscillator line crossing below the slow line.
  • Enter a sell order on the confirmation of these conditions.

Stop Loss

  • Set the stop loss on the resistance above the entry candle.

Exit

  • Set the take profit target at 2x the risk on the stop loss.

Money Makes Money Forex Trading Strategy 3

Money Makes Money Forex Trading Strategy 4

Conclusion

This simple trading strategy could help traders earn consistent profits over the long run. As long as it is used in the correct market condition, which is a trending market, traders should be able to find high probability trade setups with a good risk-reward ratio.

Although there are many instances wherein yields could go higher than twice the risk on the stop loss, this strategy has fixed the target at 2x the risk in order to have a good risk-reward ratio. However, risk taking traders can also opt to have an open-ended exit and manually close their trades as they see the market move. This can allow them to earn more profits but it could also mess up with a trader psyche having to decide when to close the trade.

Recommended MT4 Brokers

XM Broker

  • Free $50 To Start Trading Instantly! (Withdraw-able Profit)
  • Deposit Bonus up to $5,000
  • Unlimited Loyalty Program
  • Award Winning Forex Broker
  • Additional Exclusive Bonuses Throughout The Year

XM broker

>> Sign Up for XM Broker Account here <<

FBS Broker

  • Trade 100 Bonus: Free $100 to kickstart your trading journey!
  • 100% Deposit Bonus: Double your deposit up to $10,000 and trade with enhanced capital.
  • Leverage up to 1:3000: Maximizing potential profits with one of the highest leverage options available.
  • ‘Best Customer Service Broker Asia’ Award: Recognized excellence in customer support and service.
  • Seasonal Promotions: Enjoy a variety of exclusive bonuses and promotional offers all year round.

fbs broker

>> Sign Up for FBS Broker Account here <<

Click here below to download:

Save

Save



Get Download Access

Get Smarter About Forex Trading Using Indicators

Join 100,000+ subscribers and get our 5 min daily newsletter on what matters in forex.

We do not sell or share your information with anyone.

LEAVE A REPLY

Please enter your comment!
Please enter your name here