Forex Trading: Keeping it Simple

Filed under: Learn Forex Trading |

It seems to be an innate human trait that we always try to complicate things. However, the most beautiful things in life, from mathematical equations, to an idea, or even a melody, are often very simple. So why do we persist in trying to make things complicated? I supposed it’s to show how clever we are – even if it is only to show ourselves. In the world of forex trading, this is no different and people continue to overlay their charts with technical indicator after technical indicator until their charts look like a complete mess. It is better to keep things simple. Try having a plain black and white chart with a couple of moving averages on it – and see how much clearer your mind thinks.

 

One of the simplest setups possible in forex trading is to use an inside bar setup in a strong trend. As mentioned in today’s trade example, an inside bar occurs when a candle has a lower high and a higher low than the previous candle. When it happens in a strong trend with a couple of relatively short candles, these are high probability setups. This is because price is momentarily squeezed and the market is taking a breather before inevitably continuing the trend. If you can hop onto the trend by entering at the break of the mother candle of the inside bar, then you are in a very good position.

 

However, when I say ‘high probability’ setups, I am still only taking about a fifty-fifty scenario. But what makes these setups profitable is our risk-reward scenario. By taking a risk-reward ratio of at least 1:2, a 50-50-win rate will make us very profitable. It is not rocket science by any means. But if you can find these very simple bread and butter setups, then you will be well on your way to becoming a successful forex trader.

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