Looking for a simple trading strategy? Traders and investors often make things way too difficult for themselves. This simple trading strategy is based on the KISS principle. Keep It Stupid Simple.
This strategy does not use complicated indicators and as you read, you will no doubt wonder if it really works. I say this often; no system is 100% bulletproof and that also applies to this strategy.
But if you use the correct risk to reward ratio and follow the rules, then this simple trading strategy is simply profitable.
What you need for this simple trading strategy
First of all you need an account with a broker. My advice is to create a demo account with the broker below. This way you can practice this strategy with play money first.
Once you have logged in to your account, put the following indicators on your chart:
- Simple moving average: 200 (for the direction)
- Simple moving average: 10 (for trade entries)
How you put these indicators on your chart differs per broker. Give the indicators a different color so that you can easily tell them apart.
This strategy works on all time frames. So on the 5 minutes, but also on the daily charts. I personally like to trade this strategy on the 5 minute chart.
This simple trading strategy works in every market. Shares, commodities, Forex or crypto. Doesn’t really matter much. As long as the market is moving (volatile). If there is no movement, there are no trades. 😉
Buy signal (go long)
When a candlestick closes above the 200 moving average or if the price is already moving above, you wait for a price correction (pullback). You then buy when a candle closes above the 10 moving average.
Stop loss for buy signal
Take profit for buy signal
Close your trade with a profit just below the last high or move your stop loss up. Try to go for a risk to reward ratio of at least 1:1.5. Preferably 1:2.
Sell signal (go short)
When a candlestick closes below the 200 moving average or if the price is already moving below, you wait for a price correction (pullback). You then sell if a candle closes below the 10 moving average.
Stop loss for sell signal
Place your stop loss above the last high or close your trade manually if a candle closes above the 10 moving average.
Take profit for sell signal
Close your trade with a profit just above the last low or move your stop loss down. Try to go for a risk to reward ratio of at least 1: 1.5. Preferably 1:2.
Extra rules for this simple trading strategy
- Follow the rules above exactly
- Do not take trades if the candle is not closed above or below 10 MA.
- Be patient!
- Close your trade immediately if a candle closes in the wrong direction below or above 10 MA
- Watch out for small candles and sideways movement (ranges). Look for clear trends
- Never trade in the opposite direction of the 200 MA. So do not buy if the price is below 200 MA or sell if the price is above 200 MA.
- Don’t be greedy and take regular profits
- Do not trade if important news comes out
- Pay close attention to levels that form obstacles, such as large round numbers or support and resistance
- Risk no more than 5% of your account per trade in the beginning
- Maintain a healthy risk to reward ratio of 1:1.5 / 1:2
- Practice on a demo account first
Share this post and let me know in the comments what your results are with this simple trading strategy.