This Daily Chart Forex Trading Strategy is a very simple Forex trading strategy that beginner Forex traders will find easy to use. If you think that trading the daily chart fits your lifestyle better than intra-day trading, take this trading strategy for a spin
Daily Chart Trading Setup
- Currency Pair: Any
- Timeframe: Daily
- Forex Indicators: stochastic indicator required with default setting(5,3,3)
- Fibonacci: Retracement tool
- Candlesticks : Knowledge of reversal candlesticks
- Trades are less frequent which means you don’t over trade
- Less market noise involved in the daily timeframe compared to the 1 hr or the 30 min and much more lower timeframes.
- The trading signals tend to be much more reliable as well.
- Much bigger 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?
Your risk should be set with an eye towards a percentage of your trading capital. In Forex, we have many variations of lot sizes we can trade so while the protective stop in pips may be large, it can still be a small percentage of your risk capital.
BACKGROUND OF TRADING OFF THE DAILY CHART FOREX TRADING STRATEGY
We all know that a market will trend and consolidate. It will repeat this over and over again. An uptrend will eventually turn into a downtrend and the opposite is also true.
In between a full blown trend change, we will get corrective moves and that is what this simple daily chart trading strategy wants to capitalize on. We want to see price meet up with one of our Fibonacci levels and confirm with our stochastic oscillator.
RULES OF THE DAILY CHART FOREX TRADING STRATEGY
The rules are quite simple and this is a pretty easy Forex strategy that you should be able to replicate. Just follow the trading instructions listed below.
- The Forex pair was in a downtrend and we used an objective trend measure – a break of a trend line
- We also had price take out a previous high which starts to set the stage for an uptrend
- Once a high is in place, we can draw our Fibonacci retracement levels
- Price pulls back to the 61.8% retracement level and puts in a beautiful price action reversal candlestick
- Stochastic was just in an oversold zone so this is a valid trade and we place a buy stop trading order at the high of the reversal
- Take profit was a main swing high in the opposing market trend. This gave a 4.56 reward to risk ratio.
ADVANTAGES OF THE DAILY CHART FOREX TRADING SYSTEM
- This is one of those Forex trading strategies that has the potential to give you over 100 pips a day due to it being a larger time frame trading system
- We don’t have to worry about random fluctuations in price or news releases that will affect day traders.
- The daily trend carries more weight than an intra-day trend so you have the benefit of having wrong footed day traders propelling your trade
- I think it is a pretty easy Forex trading system that you can learn pretty quickly.
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.
- This will not appeal to traders who need constant trading action.
- Some traders may not like stops that are in the 50-100 pip range.