As you can see, this trading system has all the key components of a solid forex strategy.
First, we decided it’s a swing trading system that operates on the daily chart.
Next, we use simple moving averages to help us spot new trends as early as possible.
The Stochastic indicator helps confirm whether it’s still a good time to enter a trade after a moving average crossover, and it also helps us avoid entering trades in overbought or oversold conditions.
The RSI adds an extra layer of confirmation by showing us the strength of the trend.
Once the trade setup is clear, we define our risk per trade.
For this system, we are willing to risk 100 pips on each trade.
Generally, the higher the time frame, the larger the pip risk you should accept, since potential gains tend to be bigger compared to trading on shorter time frames.
After that, we clearly establish our entry and exit rules.
At this stage, it’s time to begin testing the system, starting with manual backtesting.
Trade Example: Buy EUR/USD
Here’s a long trade example:
Looking back at the chart, you’d see that the system’s rules signal a good time to go long.
During backtesting, you record your entry price, stop loss, and exit plan.
Then, move the chart forward one candle at a time to observe how the trade plays out.
In this case, you would’ve made a nice profit! Perfect for treating yourself.
When the moving averages cross again in the opposite direction, it signals a good time to exit.
Of course, not every trade will be this perfect. Some will look rough, but discipline and sticking to your system rules are crucial.
Trade Example: Sell EUR/USD
Here’s a short trade example from the “So Easy It’s Ridiculous” system:
All criteria are met—a moving average crossover occurred, the Stochastic indicates downward momentum (but is not yet oversold), and the RSI is below 50.
That’s your signal to enter short.
Record your entry, stop loss, and exit plan, then move the chart candle by candle to see what happens.
In this instance, the trend was strong and the pair dropped nearly 800 pips before the next crossover appeared.
Pretty easy, right?
The “So Easy It’s Ridiculous” Trading System
You might be thinking this system is too simple to work, but simplicity isn’t a weakness.
In trading, there’s a popular phrase: KISS — Keep It Simple, Stupid!
Forex systems don’t need to be complicated with dozens of indicators cluttering your chart.
In fact, keeping things simple often leads to fewer headaches.
The most critical factor is discipline. We can’t stress this enough: YOU MUST ALWAYS FOLLOW YOUR TRADING SYSTEM RULES!
If you’ve thoroughly backtested your system and traded it live on a DEMO account for a month or two, you should feel confident that following your rules will lead to long-term profitability.
Trust your system. Trust yourself.