Tips to simplify your trading strategy
Are you losing control of your trading? Do you feel lost in your own analysis and despair in the markets because your trading isn't getting you anywhere? You're not alone. Many other traders suffer from "analysis paralysis" because they use overly complicated trading strategies.
One of our problems is that almost everything we learn in our lives shows us how to survive on the job and in the "real world". The forex market is a different world that you are not prepared for and, of course, we apply what we know about the world of work to the forex markets.
As you've probably already discovered: the two worlds don't go together very well. Forex requires a different approach - mental strength - which requires us to exercise total discipline. Sometimes "doing nothing" is the most profitable approach. Does this seem counter-intuitive to you? Most things in the forex market are like that. In my experience, most traders only find success when they simplify their trading strategy.
Below, I'll show you some simple steps you can follow to change and simplify your trading strategy.
Get rid of all the useless "extras" on your charts
It is normal for you to want to take advantage of all possible tools to have the odds of success on your side. For an experienced trader, this usually means tracking down the latest indicator, the newest charting tools, and anything else that looks exotic enough to give you an "exclusive view" of the financial market that nobody else has.
Those who use indicators are generally satisfied with their performance over the long term. The natural inner workings of most technical indicators react very slowly in relation to the market's movements. An indicator therefore offers a buy or sell sign only when most of the move is complete, leaving you at a very bad price to enter. Indicators also don't work very well in consolidating markets, and tend to generate bad trading signals.
Take the example of the stochastic oscillator - a popular forex indicator that comes with most trading platforms. Stochastic is simply designed to work in specific financial market conditions. Unfortunately, it doesn't work very well in trending markets.
What traders tend to do is look for another indicator that "fixes" the problem, an indicator that "filters out" bad signals and allows the original indicator to perform better. Despite this good intention, this only adds further problems to the chart. Instead of giving us an easier analysis, it makes it more frustrating because the two indicators will likely offer conflicting signals and never coincide to suggest a clear trading opportunity.
The trader will then look for other "chart aids" to remedy this, but the situation will get out of his or her control and the chart will end up looking something like a nuclear power plant control panel.
This is a very frustrating environment because you can't even see where the real price is, despite price being the most important element of your chart. When a trader reaches this point, they usually end up clearing the chart and starting over. Most traders will end up with a naked chart and there is nothing wrong with that. At this point, you should be inspired.
Trading with a chart without indicators is the most effective and widely used trading method in the industry today. If you feel that charts are becomingout of your control, then do yourself a favour and remove all unnecessary data from your chart and start learning price action trading.
Don't complicate things with support and resistance lines
Even with a bare chart, traders can still get carried away and end up in a frustrating mess and that is literally what happens most of the time. Marking support and resistance levels on a chart is one of the most fundamental and vital skills you need to succeed with any trading strategy.
Even basic traders, who follow and trade on the news, need to have a good understanding of how to draw support and resistance lines to "complete" their market analysis.
Surprisingly, many traders - both new and experienced - continually move their support and resistance lines and "shit in their own bed" by going crazy with the way they set these lines on their chart.
Levels observed in a chart
It's time to focus again on how to keep trading simple, which also applies to support and resistance lines. If you do this, your trading system will benefit greatly.
As you draw the markets within a price range, limit yourself to marking the upper and lower containment lines. You don't need the lines to coincide completely, where all the shadows and bodies line up perfectly, because that will very rarely happen.
Simply mark the general area where the price is turning. All you need is to focus on the most important inflection points, where the price will change direction and create a decent price move that you can take advantage of. Operating in the center of the price range is risky, as price can be very erratic, unpredictable and volatile, because it's like a high rotation area which can cost you a lot of money. But traders always try to trade within this zone: don't be one of those idiots.
The best place to enter a price band is probably at the edges of the price band, so just mark those boundaries. It's as simple as that, if you don't see a sign to buy or sell at these big turning points, then just keep waiting. Sometimes doing nothing is the most profitable strategy you can use and it's also one of the hardest decisions to make and follow.
Markets within a price range are easy to trade, all you need are two price levels. Moving markets, on the other hand, are a bit different. I tend to trade using reversal levels in such trending environments.
Even when we have good trends on the daily chart that seem to go on forever and offer clear buy/sell signals, many traders continue to lose money despite obvious signals. Honestly, I think the main issue comes down to time. Bad traders don't enter trends at the right time and are pushed out of the market by trend corrections.
Marking simple strength and support levels can protect your trading account from these errors. During trends, I frame and focus on reversal points, where old resistance lines becomes new support ones (Overlap) and vice versa. Time and time again, trend reversal points end in countertrend moves. This is where we will most often see the trend change and head back to new highs or new lows. Start looking for and marking these reversal levels and check for signs there to buy or sell that align with the trend.
These are the reversal levels you need to watch to catch buy or sell signals. In this case, we have upward rejection candles that tell you that the lowest prices have been rejected by the financial market at the support level. Keep in mind that with a trending financial market, you only have to worry about rebound levels.
Remember what I said before: these levels won't always line up perfectly, so just mark the overall area that you think will act as the main reversal point on the chart. Also, remember to mark major weekly reversal points, as they can stop strong trends and trigger big price reversals. You have to do the same thing: analyse the weekly chart and mark the strong and clear turning points.
I hope you're starting to understand the power of simple trading. You don't need complicated indicators or complex charting tools. It's just a matter of working with a price chart and being very minimalistic in marking support and resistance levels.
Once you simplify the way you mark levels, technical analysis will become much clearer, less frustrating, and you'll begin to understand how to anticipate future price shifts on a price chart without technical indicators.
A simple trading strategy
If you use a trading strategy with indicators or complex math that requires you to spend hours staring at your computer screen, you should probably just hang yourself.
There are many trading strategies that only allow us to use our head as an external observer. Most of us have busy lives and we can't really afford to spend hours in front of the charts scalping or day trading.
Swing trading can be a very good alternative for traders who want to be able to trade easily and adapt it to their lifestyle. For example, you may want to operate "full-time", while keeping your job or studying full-time. The best way to do this is to use "end of day trading strategies", where you only need to analyse the market once a day for around 20-30 minutes to make your trading decisions.
Keep in mind that with a trending market, you only need to worry about swing levels.
I use price action trading strategies combined with swing trading. This system only takes about 15 minutes to set up your trades and then just forget about them.
In fact, it's as easy as counting 1, 2, 3. You can place a sell order, complete it with stop loss and take profit levels and close your trading platform so that your emotions don't influence you. The best conclusion we can draw from all of this is that you don't have to sit in front of the screen for hours on end, because you're free to get on with your life while the financial markets take care of the rest.
Conclusion
We hope this guide helps you get rid of the complicated stuff on your charts and trading system, to lock in something simple. If your trading system is too "complicated" or takes up too much of your day, then you should consider switching to an end of day trading strategy that leverages the benefits of price action and swing trading.
Even if you like intraday trading, I firmly believe that you'll benefit if you remove indicators from your chart and learn to "read" a bare price chart to anticipate price movements directly from the candles. Once you eliminate all these complications and start working with simple price charts, your trading strategy will be less stressful, clearer and more profitable.
Simply trading the major currency pairs (EUR/USD, GBP/USD and USD/JPY) and following the long-term trends when the market is moving comfortably in the direction of these trends is a simple and profitable way to trade, and requires no indicators.
If you liked some of the charts we examined above and want to learn more about how to keep trading simple, minimalist and profitable, then please check out our forex trading strategies.
In my experience, forex traders are generally not successful until they learn to read the markets by analysing price action. Do things simply and logically and trade with logic you can understand. Don't be greedy and chase money, use your energy to become the best trader you can be and money will come naturally to you.
