4 Hour Chart Forex Strategy

Our Very Profitable 4 60 minutes Chart Trend Following Strategy

With this strategy, the master goal is to exploit the popular maxim in the trading globe "the trend is your friend". This swing trading strategy uses a combination of moving averages, support and resistance, volatility and a few other tools to maximize profits from the trends in the Forex market. At the same, the strategy aims to keep stop losses and drawdowns to a minimum.

Although this strategy tin piece of work well on all timeframes, it is all-time to be used on the 4h timeframe, which makes it highly suitable for swing traders.

In this strategy, the 4h chart is used as the base of operations chart (this is where we screen for potential places on the chart where trading signals may occur) and the 1h timeframe as the signal chart, or the merchandise chart (where we execute orders co-ordinate to this strategy).

If yous cull to use a different timeframe equally the base of operations chart remember that you lot go one timeframe lower for the bespeak chart (and then if 1h is the base chart then the 30m timeframe is the signal chart).

The main cornerstones of this strategy are as follows:

Nosotros need to take a tendency. This strategy rests on tendency behavior and without ane it basically tin can not exist used.

To make up one's mind if at that place is a tendency or not we are going to use a set of two moving averages, out of which one is a 34 menstruation and the other a 55 flow MA. Yous may find that these numbers are office of the Fibonacci sequence.

We can estimate if a trend is worth trading or not by observing how the moving averages relate to price action.

Note: For this strategy feel free to experiment with different types of moving averages (like simple, exponential and weighted).

• For an uptrend, the trend should meet the following weather condition: Price activeness is above the 2 moving averages
• Price stays to a higher place the moving averages
• The 34 MA is above the 55 MA and stays above the 55 MA
• The MAs are sloping upwards for most of the time every bit they follow the trend
• For a downtrend, the aforementioned applies just in the opposite direction: Price activity is below the two moving averages
• Cost stays below the moving averages
• The 34 MA is below the 55 MA and stays below the 55 MA
• The MAs are sloping downwards for almost of the time as they trail behind the tendency

An example of a downtrend with the moving averages is shown on the following chart.

EURAUD 4h – A strong downtrend in 2016 provided several keen opportunities for this strategy.

Equally tin be seen from this EURAUD chart, the toll tends to bounce off the two moving averages. Basically, the moving averages are a support zone during uptrends and a resistance zone in downtrends.

Information technology is around and within of this moving average zone that the best trading opportunities for this trend trading strategy are to be found.

We are trying to profit on the swings in the direction of the tendency. So, for this reason, we desire to join the trend on the retracements.

1. Entry rules: There needs to be a trend on the 4h with the moving averages lined upward as described earlier.
2. Nosotros need to wait for a retracement to start and for the price to move towards the two moving averages.
3. Once the retracement reaches the surface area effectually and between the moving averages nosotros switch to the 1h timeframe to expect for entries.
4. There needs to be a retracement trendline (counter the direction of the trend) that has been touched at least 3 times (as shown in the example below). This will unremarkably be a continuation chart pattern at the aforementioned time (on the 4h chart) like a triangle or a channel.
5. On the 1h chart, wait for a breakout with a close of the retracement trendline in the direction of the larger tendency (on the 4h timeframe). Enter on the breakout one time price closes by the trendline (on 1h chart).

An instance of how an entry with this strategy would look like is shown below.

AUDUSD 1h chart - Example of an entry with using this tendency trading strategy.

For this item case, we would identify the stop at xxx% of the daily average true range below the entry point. On that day, the ATR was 72 pips for the AUDUSD pair, so 30% of 72 is 21.six which means we would place the initial finish for this trade at 22 pips + the spread.

End loss rules are explained below.

1. Initial stop loss placement: Identify the ATR (boilerplate true range) indicator on the D1 chart.
2. Set the finish loss to 30% of the daily ATR behind your entry level (which is the break of the trendline).
3. Add the spread to the end loss (for some more exotic currency pairs the spread can often be 15 or more pips which can make a big deviation on the 1-hour timeframe in terms of when your stop loss will be triggered).

For example:

Take the EURUSD pair which has about 100 pips usual daily range. If you lot entered a merchandise with this strategy on EURUSD, then your cease loss would be thirty% of 100 which equals 30 pips plus the spread, which is ordinarily effectually 1 - two pips for EURUSD. So, in total the stop loss, in this instance, would be 32 pips. Risk management:

After you've entered the trade you need to manage that stop loss and trail it in order to be able to capture the maximum turn a profit from the trend. Here is how this strategy works:

• In one case the price has moved 30% of the daily ATR in profit, move the stop loss to intermission even.
• If at whatever point in fourth dimension during the trade a counter-tendency retracement trendline starts to form on the 1-hour nautical chart so exit the trade.
• A counter-trend retracement trendline would exist a trendline that is touched three times. Once this happens there is a higher probability that a new retracement or even a reversal has started. Hence it's improve to leave the merchandise and look for a new opportunity.

Have profit rules:

Considering this is a trend trading strategy we will apply a abaft stop for exiting the trade. This allows usa to profit on a bigger office of the movement.

There are some specific rules for this trailing end social club:

In an uptrend:

1. Equally the price makes new college highs, discover the well-nigh recent highest high.
2. Accept the candle of that highest loftier.
3. Observe the low of this candle.
4. Count backwards for five previous lows from the low of that candle.
5. Note: Only lower lows count. Lows that are the aforementioned as or college than the previous lows are to be omitted.
6. Place the cease a few pips lower than the low of the 5th candle.

In a downtrend:

1. Equally the price makes new lower lows, find the most recent lowest depression.
2. Take the candle of that lowest low.
3. Observe the high of this candle.
4. Count backwards for 5 previous highs from the loftier of that candle.
5. Note: Only higher highs count. Highs that are the aforementioned as or lower than the previous highs are to exist omitted.
6. Identify the finish a few pips college than the loftier of the fifth candle.

Here'south how this trailing stop looks on a chart.

The blue arrows are the starting betoken of the count and the line is the stop loss placement for that point in time. The numbers are an instance of how to count the candles to determine the terminate. You lot tin can see here how lower highs are left out until the next higher high backwards is institute.

As the downtrend progresses with each new lower depression, the counting for the trailing stop should re-done again and the stop moved lower.

EURUSD 1h nautical chart. Notice how the manual trailing stop allowed the trader to capture almost the unabridged move on this chart. Trades are exited simply when the price moves above the blueish line which happened once on this chart in the commencement example on the left side.

Decision

Finally, keep and do this strategy on a demo account first so you can fully grasp everything before going live. If you lot find it helpful some backtesting on by price data is a skilful way to larn and main this trend following strategy besides.

Source: https://www.fxtradingrevolution.com/forex-blog/4-hour-chart-trend-following-strategy

Posted by: kennythesocand85.blogspot.com

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