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Saturday, April 25, 2009

The Easy Forex Strategy For Beginners That Really Works

By Michael Jones

Are you a relatively new trader looking for a solid forex strategy?

Many newer traders face the challenge of trying to identify the trend on the intra-day level in order to make their Forex strategy work.

This problem can be alleviated by using the 200 EMA - (Exponential Moving Average).

In surveys it was found that Forex traders all around the world vote the 200 EMA as one of their top indicators. So that is reason enough to use it considering the psychological effect it can have once price starts getting within spitting distance of the 200 EMA.

Using The 200 EMA Strategy

Start using this effective Forex strategy by setting up charts on three different time frames:

A 4 hour chart

1 Hour Chart

15 minute

Now plot a 200 EMA indicator on each chart and, as a suggestion, color it red, for easy visual impact.

Some like to tile the 3 chart windows in a vertical style so it is easy to compare them side by side. It can distort the chart a little but for this strategy you don't really need to see the chart in full screen mode.

Now scroll through the various currency pairs you like to trade.

Currency pairs with a smaller pip spread, i.e. less than 10 on most platforms, come to about 9 different pairs.

They are:

EUR/USD | GBP/USD | USD/CHF | USD/JPY | EUR/JPY | USD/CAD | AUD/USD | NZD/USD | EUR/CHF

Search through and see if price is going against the 200 EMA on the 15 minute chart on any of the currency pairs.

So for example, look at the EUR/USD pair and note the position of price relative to the 200 EMA on the 3 time frames.

Price is what we call 'bucking the trend' if it is well above the 200 EMA on the 4 hour and 1 hour charts but below it on the 15 minute chart.

The overall trend is up, price has temporarily gone against the trend and is currently in a retracement.

You now need to look for a good entry point to get into the market in line with the basic principle of buying the dips in an up trend while selling the rallies in a down trend.

Using the EUR/USD example, you would look out for a distinctive candle that would indicate possible price exhaustion as it bucks the trend on the 15 minute chart. The probability is it would soon resume moving in the direction of the trend.

This is an easy exercise and it can be done once or twice a day, taking just a few minutes.

Look Out For Price Going Against The Trend

As soon as you see price crossing the 200 EMA on the 15 minute chart whereas it is well beyond the 200 EMA in the opposite direction on the 4 and 1 hour charts, FOCUS! Snatch the opportunity to get into the market and make a profit.

See for yourself how effective this simple Forex strategy is. Practice it for a short time and then, once convinced, add it to your Forex trading tool kit. - 23208

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