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Monday, November 26, 2012
Simple And Profitable Trend Following Strategy
Here is one very simple, but very powerful and profitable trend following strategy.
It was backtested and if you trade one currency pair (for example EUR/USD) it will give you average 200 pips profit monthly.
Profitable Trend Following Strategy:
1) Choose your market: eur/usd, gbp/usd, gold.... Use 4 hour charts.
2) Look at the chart and decide which way the main trend goes. If the trend is going down, there will be lower highs of candles and lower lows. Like yellow line shows on the image below.
3) Let´s assume that the trend is going down, so you will be selling. But you have to wait for the best time.
4) Entry points. In our example you will sell. Even though the trend is downward, there are some retracements back up and then it will turn down again. So you wait for these retracements. When they hit a resistance level (red line on the image below), there is a strong possibility it will bounce and go down again.
That is the point of your entry, where you place your sell order.
5) Always place a stop loss. For this strategy 25-35 pips is ok.
6) If the market is going your way, let your profits run and move your stoploss above previous candle.
Sometimes, you will have losing streaks, 3,5 or even 7 trades in a row in loss, but that is normal for trendfollowing strategy. You have to keep placing your trades exactly according to this strategy. When you catch your trend, you will ge profit of 100-300 pips and all your losses will be covered and you will have additional profit above that.
So put this simple and profitable trend following strategy in work and make money.
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