- your trades are less frequent which means you don’t over trade
- and the second thing is that there is less market noise involved in the daily timeframe compared to the 1hr or the 30min and much more lower timeframes.
- the trading signals tend to be much more reliable as well.
- big profit potential.
The stop loss would tend to have a large distance because it is based off the daily chart. Does that mean you risk is huge? Yes, if you don’t use prudent risk management system like risking a certain percentage of your account in each trade, like 2% risk for example.
BACKGROUND OF TRADING OFF THE DAILY CHART FOREX TRADING STRATEGY
- We know that when the market trends nicely in a daily chart, sooner or later, if its in a downtrend, it will rally up or if it was in an uptrend, it will retrace or pullback down.
- So when that happens you wait to get in at a Fibonacci level with confirmation from a stochastic indicator.
WHAT YOU NEED
- stochastic forex indicator with default setting(5,3,3)
- know how to use the fibonacci retracement tool.
- Know about reversal candlestick patterns and use as signals for trade entries.
RULES OF THE DAILY CHART FOREX TRADING STRATEGY
- On the daily chart, if an downtrend or uptrend has begun, you wait until a rally on a downtrend begins or pullback on an uptrend begins.
- Now you wait until price pulls back to a fibonnaci levels- Like 38.2, 50, 61.8.
- When price hits those fibonnaci levels, check with the stochastic indicator to make sure it is either in the oversold or overbought levels.
- Place Your entry based on confirmation of a reversal candlestick patterns
- Stop Loss should be place 4-10 pips under the low/or high of that reversal candlestick.
- For take profit target levels, you can use 3 times what your risked in pips as your take profit target level or another option would be to place your take profit target on the previous swing high point.
ADVANTAGES OF THE DAILY CHART FOREX TRADING SYSTEM
- This is one of those forex trading strategies that has the potential to give you hundreds of pips easily for each trade that goes right, because its based on the daily timeframe.
- you avoid the market noise that are so prevalent in the smaller timeframes.
- the daily trend is more reliable than the trends in the smaller timeframes so I think your chance of success is greatly enhance one you trade in the direction of that trend.
DISADVANTAGES OF THE DAILY CHART FOREX TRADING SYSTEM
- I wish I can tell you that this is a holy grail forex trading strategy but I can’t…all trading strategies will suffer due to inherent weaknesses and for this system is a non trending market.
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