Our Very Profitable 4 Hour Chart Trend Following Strategy

This strategy rests on trend behavior and without one it basically can not be used. To determine if there is a trend or not we are going to use a set of two moving averages, out of which one is a 34 period and the other a 55 period MA. You may notice that these numbers are part of the Fibonacci sequence. We can judge 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.

Basically, the moving averages are a support zone during uptrends and a resistance zone in downtrends.

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It is around and inside 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 trend. So, for this reason, we want to join the trend on the retracements. So, in total the stop loss, in this case, would be 32 pips.

Daily Chart vs 1 Hour Chart Which One Should You Trade?

Here is how this strategy works:. Because this is a trend trading strategy we will use a trailing stop for exiting the trade. However, keep in mind that the market can act very unpredictable on shorter time-frames, and create a lot of false signals. New traders to forex usually rush to make profits and choose very short time-frames, which leads to overtrading and accumulation of losses.

You should always practice first on a demo account and choose which time-frame suits you best before moving to a real account. Which time-frame to choose depends again on you. Long-term and fundamental traders tend to stick to longer time-frames, such as the daily or weekly.

This gives them enough room to analyze the market from a fundamental aspect, but the larger price swings on those charts also require a larger trading account and wider stop-losses. Swing traders usually use anything between a minutes to a 4-hour time-frame. They hold trades for several hours to a few days, and have more trading opportunities compared to long-term traders.

As a drawback, the transaction cost also raises with more positions. Intraday traders use short time-frames, such as the 1-minute, 5-minute or minute time-frame. Trades are held during the day and exited by market close. This gives a lot of trading opportunities, but also increases the transaction costs that need to be paid.

The unpredictable market behavior on short TFs makes intraday trading also more difficult and risky than swing and longer-term trading.

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Using multiple time-frames when analyzing the market is a powerful technique in forex. Price tends to act different on shorter and longer time-frames, and trends that are established on longer time-frames may not be recognized on shorter ones. Furthermore, support and resistance levels are stronger on longer TFs, but you can get better entry and exit points on shorter TFs. This is why you want to have the bigger picture of the market by analyzing multiple time-frames simultaneously. This way, you get more information from the market than just looking at the 4-hour chart.

What is The Best Time Frame for Swing Trading?

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