Support And Resistance Forex Trading Strategy

A simple strategy that is based on two trading indicators - MACD with standard settings (12,26,2) and the support and resistance indicator for Metatrader 4 (click here to download).

Strategy Features:

• Easy to trade and manage.
• Tight stop loss.
• Positive risk-to-reward ratio's
• No lag. Trade price action.
• Trade any currency pair.

Trading Rules To Go Long

• Entry: MACD trades above 0 and price breaks and closes above the support/resistance indicator red dots (resistance).
• Stop Loss: Place your stop 5 pips below broken resistance.
• Take Profit: I recommend to take profit at risk-to-reward 1.5 (total risk *1.5) or better.

Trading Rules To Go Short

• Entry: MACD trades below 0 and price breaks and closes below the support/resistance indicator blue dots (support).
• Stop Loss: Place your stop 5 pips above broken support.
• Take Profit: I recommend to take profit at risk-to-reward 1.5 (total risk *1.5) or better.

Example

As seen on the EUR/USD 1 hour chart above, price breaks and closes below support while the MACD indicator trades in negative territory (below 0). We open a short trade at the close of the candle at 1.2803 with stop loss placed 5 pips above the blue dots at 1.2845. Total risk on this short trade: (Stop loss level - trade entry level (42 pips). Take profit level: total risk *1.5 = 63 pips (1.2740)

Another Example

As shown in the chart above, we had 3 valid short trade entries. Entry 1 at 1.2845 with stop loss placed at 1.2865 and 30 pips profit target, Entry 2 at 1.2803 with stop loss at 1.2803 and 63 pips profit target, and finally Entry 3 at 1.2712 with stop loss placed at 1.2726 and 21 pips profit target. All trades were profitable for a total of 114 pips in only 3 trading days.