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A 4H trading strategy includes a trend trading system made up of three moving averages and candlestick patterns on the 4-hour timeframe.
This is a winning trading system if you will trade with proper risk management. Due to the large four-hour timeframe, it is very easy to follow this trading system. An intermediate trader will be able to understand this 4h forex trading strategy easily.
In this article, we will explain a simple but the best forex trading strategy
This trend trading system is made up of two components. Each component has been used for a particular purpose to make a winning system.
Exponential moving averages are used in this trading strategy with different periods.
Two major candlestick patterns are used in this strategy to confirm the trade entry.
Moving averages are used to identify the trend and dynamic support/resistance zones on the price chart.
200-period moving average acts as a trend filter of a specific currency pair/stock.
23 & 38-period moving average acts as dynamic support or resistance zone.
Dynamic S&R zones work in the same way as horizontal S&R zones. Price mostly bounces from these zones. That’s why we will use this action of price in our trading strategy with the confluence of the candlestick pattern.
Candlestick patterns are used to confirm a trend reversal of an asset in trading.
For example, the price will bounce from a support zone, but it will not happen each time because sometimes the price will break the support zone. So, to confirm a price bounce/trend reversal from a support zone, we will wait for a bullish candlestick pattern at the support zone. This addition of a candlestick with a support zone will increase the probability of trend reversal.
A trading strategy consists of specific rules you need to follow to become a successful trader.
To open a buy order, follow the following conditions on the 4-hour timeframe.
To open sell order, follow the following conditions on the 4-hour timeframe
Pro Tip: The risk-reward ratio should always be greater than 1 in this 4H trading strategy. You should skip a trade setup with a risk-reward ratio below 1.
You must follow and remember the following simple rules.
Here is the table for candlestick closing price on the 4-hour timeframe for different regions.
|New York||5:00 PM||9:00 PM||1:00 AM||5:00 AM||9:00 AM||1:00 PM|
|Central Time||4:00 PM||8:00 PM||12:00 AM||4:00 AM||8:00 AM||12:00 PM|
|Pacific Time||2:00 PM||6:00 PM||10:00 PM||2:00 AM||6:00 AM||10:00 AM|
The 4-hour trading strategy is a simple trading system, but you will get a few signals in a month. If you manage to profit 5% to 10% in a month consistently then you are a successful trader. Because after applying compounding strategies, you will be able to generate passive income after 6 to 8 months.
Don’t forget to backtest this trading strategy before trading on a live account.
If you don’t know the method to backtest then visit here.
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