One of the biggest mistakes that we as traders can make is to make successful Forex trading more complicated than it has to be. Simple Forex systems are more than sufficient enough to make a good long-term profit in Forex trading.
One example of a simple Forex system is a simple moving average system. You’ll hear many say that a simple moving average is an indicator that using indicators is bad for Forex trading. This simply is not true and billions and billions of dollars have been made using moving averages for many many years. In reality billions of dollars will be made in the future using moving averages. The way a simple moving average system works is very straightforward. We buy when the currency pair closes above its moving average and we sell when the currency pair closes below its moving average. In its most simplified form a moving average system functions as a “stop and reverse system”. In a stop or reverse system a buy trade is closed out and a sell trade is immediately entered. Conversely when the sell trade is closed out the buy trade is immediately entered. As such, a stop or reverse trading system is referred to as “always in the market”.
Another Forex simple system is known as a breakout system. In a breakout system a trader selects high and low points of the recent price action. When the price action “breaks out” to the upside the trader then buys the market. When price action breaks out to the downside the trader then sells the market. The theory behind a breakout trading system is very simple. The assumption is that when the price breaks out of a trading range that the current market momentum will cause it to continue in the direction of the breakout.
When correctly used breakout systems can be extremely effective. It typically takes a bit of experimentation to come up with parameters that suit you, but it is always very well worth it.
Another type of simple Forex system is a Forex correlation trade. Correlation trades are made based upon one currency pairs relationship to another currency pair. There is some currency pairs which are negatively correlated. This means that when one currency pair moves upward the other currency pair moves downward by certain amount. The relationships between currency pairs can easily be seen by looking at charts that are all the same timeframe. It is also a good idea to learn the correlation coefficient of the two currency pairs you are studying to give yourself an extra edge in using correlation to trade them.
As you can see there a number of simple Forex systems they can be used to trade effectively. Coupled with good risk control using one or two simple Forex systems can definitely help you trade successfully.
