Many traders believe that in order to be profitable, traders should be running complex strategies that have so many different parameters, indicators and rules. This could be true to some, but it is not a rule of thumb. Traders could be profitable running a simple strategy or a complex strategy. There are traders who profit trading on multiple time frames with a bunch of indicators for a single entry and there are traders who profit trading a single pattern on a single time frame with no indicators.
Sometimes, simple is even better. It allows traders to make decisions a bit quicker, observe price movements with less noise coming from unnecessary clutter, and focus on looking for viable trade setups.
Simple strategies are often very minimal, using just a few indicators that complement each other. The Simple ATZ Momentum Forex Trading Strategy is an example of a simple strategy that works well. It uses only three indicators which are easy to use and a trade setup that is very easy to understand. New traders could easily follow this strategy. If you are looking for a simple strategy that works, then this could be for you.
50-Period Simple Moving Average
Moving Averages are a staple among many traders. Traders often use it to determine trend direction. Some traders would identify trend direction based on the location of price in relation to a moving average. Others would use the slope of a moving average in order to determine the direction of the trend.
One of the commonly used moving average is the 50-period Simple Moving Average (SMA). The 50 SMA is often used to determine the direction of the mid-term trend. This is a fair middle ground between the dependability of a long-term trend and the responsiveness of a short-term trend. It allows traders to properly filter trades based on the current trend which is relevant to the current price action.
BS Trend
The BS Trend indicator is a custom indicator which is very useful in identifying trend direction.
It allows traders to identify the current trend using bars. The indicator prints positive bars which are colored sky blue whenever it detects the trend to be bullish. On the other hand, during bearish trends, the indicator would print negative bars colored violet.
This indicator is an excellent trend direction filter. Traders could filter out trades that do not conform to the current trend direction using this indicator.
Bill Williams ATZ
The Bill Williams ATZ indicator is a custom indicator which provides trade entry signals. These trade signals are based on momentum shifts based on the short-term.
The indicator simply indicates a viable trade entry by placing an arrow pointing toward the direction of the momentum. These entries are very reliable and would often result in profitable trades.
Trading Strategy
The Simple ATZ Momentum indicator is a strategy based on the confluence of the mid-term trend and the short-term momentum movements.
The mid-term trend is based on the 50 SMA and the BS Trend indicator.
On the 50 SMA, trades will be filtered based on the location of price in relation to the moving average.
The BS Trend indicator will be used as a trend filter. Trades will be considered only when the trade direction agrees with the trend indication of the BS Trend indicator.
The Bill Williams ATZ indicator will be used as the entry signal. Entry signals generated by this indicator will be taken only when it conforms with the trend direction indicated by the 50 SMA and the BS Trend indicator.
Indicators:
- 50 SMA (green)
- BSTrend
- Period: 24
- BillWilliams_ATZ (default setting)
Preferred Time Frames: 15-minute, 30-minute, 1-hour, 4-hour and daily charts
Currency Pairs: major and minor pairs
Trading Session: Tokyo, London and New York
Buy Trade Setup
Entry
- Price should cross above the 50 SMA line.
- The BS Trend filter should be printing positive sky-blue bars indicating a bullish trend.
- The Bill Williams ATZ indicator should print an arrow pointing up indicating a bullish entry signal.
- These bullish indications should be closely aligned.
- Enter a buy order on the confluence of the conditions above.
Stop Loss
- Set the stop loss on the fractal below the entry candle.
Exit
- Close the trade as soon as the BS Trend indicator prints a negative violet bar.
- Close the trade as soon as the Bill Williams ATZ indicator prints an arrow pointing down.
Sell Trade Setup
Entry
- Price should cross below the 50 SMA line.
- The BS Trend filter should be printing negative violet bars indicating a bearish trend.
- The Bill Williams ATZ indicator should print an arrow pointing down indicating a bearish entry signal.
- These bearish indications should be closely aligned.
- Enter a sell order on the confluence of the conditions above.
Stop Loss
- Set the stop loss on the fractal above the entry candle.
Exit
- Close the trade as soon as the BS Trend indicator prints a positive sky-blue bar.
- Close the trade as soon as the Bill Williams ATZ indicator prints an arrow pointing up.
Conclusion
This trading strategy is one which works well and could produce huge gains on the right market condition.
This strategy allows traders to earn profits by providing a high reward-risk ratio. Often, gains will be much bigger than losses.
Trade setups produced by this strategy would usually have price movements going the direction of the trade. This would often result in a profitable trade.
However, the market could always reverse without warning. For this reason, it is best to move the stop loss to breakeven whenever possible. It would also be a good idea to trail the stop loss after every momentum candle going the direction of the trade.
Trade wisely.
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