Becoming a Forex trader in your free time isn’t as hard as it seems. Read our simple guide to get started.
Choosing a strategy is not as important as if often seems to new traders – with precise execution and effective money management, a strategy with only a 40% success rate can still make a profit. Excellent money management will keep you in the markets long enough to make money. Sticking to one strategy and executing it with precision, instead of jumping between strategies, will start showing profits soon enough. The easy MACD strategy discussed in this article is only one of thousands but it is easy enough for beginners to follow and can be greatly rewarding when accuracy is applied.
The simple MACD cross-over strategy discussed here only requires adding a MACD indicator to your charts on your trading platform. However, it’s advisable to add a volume indicator too, as unusual volumes can indicate when trades should be entered with caution. A trader should also have a basic understanding of candlestick patterns, which is used as a confirmation to trading signals.
When trading part-time, it’s a good idea to work with daily charts – this allows traders to visit their charts only once a day after market closing time. Supporting timeframes, in this case, a four-hour chart and a weekly chart can offer valuable insight into shorter- and longer-term price direction.
A simple MACD cross-over strategy for part-time forex traders
The MACD (Moving Average Convergence Divergence) indicates market direction and when the two signal lines cross, a change in the direction of the trend can be expected. Crossovers should ideally be confirmed with candlestick signals.
As soon as a cross is made on the MACD and confirmed by a candlestick, a trade can be taken in the opposite direction of the current trend. Set a stoploss a few pips below the tail of the lowest/highest recent candlestick, risking no more than 1% of your trading account.
For exiting the simple MACD crossover strategy, traders have two options – first is to set a limit order, which gives a higher probability for profits and allows the trader to leave the trade to run unsupervised. A limit order should be set at twice as many pips as the stoploss. The second option is to stay in the trade until the MACD crosses over again when the initial position will be closed and a new position in the opposite direction will be opened.
Read also Part 1, Part 2 and Part 3 of the “How to become a part-time Forex Trader” guide.