Here in this section, we will discuss a simple day trading strategy. This is a simple and effective trading strategy to start the day trading.

Indicators used:

Bollinger bands (period = 20 and deviations = 2) and MACD (12, 26, 9) indicators used in this strategy.

Currency pairs:

This strategy can be used in any currency pair. It is better to trading in the major currencies only.

Time frame:

15 minute

Trading session:

A trader should choose the major sessions and overlapping sessions to use the liquidity in his/her advantage. Overlapping session of London and New York holds the highest liquidity.

Entry signal:

For long position entry conditions are,

• MACD histograms turn positive from negative.
• Candlesticks thrust or hit the upper band of Bollinger bands.

For short position entry conditions are,

• MACD histograms turn negative from positive.
• Candlesticks thrust or hit the lower Bollinger band .

Stop loss:

• 15 pips below the entry price (for long positions)
• 15 pips above the entry price (for short positions)

Exit strategy:

• 30 pips above the entry price (for long positions)
• 30 pips below the entry price (for short positions)

In the 15 minute chart of USD/CHF (given below), entry signal generated when MACD histogram turned positive from negative and at the same time a candlestick hits the upper Bollinger band. This is an ideal entry setup for long positions.

In the 15 minute chart of USD/CHF (given below), entry signal generated when MACD histogram has turned negative from positive and at the same time a candlestick hit the lower Bollinger band. This is an entry signal for short position.

Summary:

Every trading strategy is effective if used in a disciplined way with proper money management strategy. Without disciplined approach and proper money management, no trading strategy will be effective over the long run. A trader should trade a strategy in a disciplined way without violating any rules of trading strategy and money management. It is better checking out the long term trends before making a trade. This technique will help you to eliminate lots of false signals.