When you are watching your forex broker provided charts and looking for a set up, one should always keep an eye open for more than one reason to enter the trade. The more viable reasons you have to enter a trade in any trading system, the higher your probability of success will be.

A lot of new traders will look to one indicator and base their buying decisions off of that. For instance, a trader might only enter trades once price has closed on the opposite side of a moving average. Sometimes a trading strategy can be that simple. However, it is not that simple all the time as the market is always rotating between trending and ranging markets. So while simply entering a trade at the cross of a moving average might be profitable in a trending market, it will eat your bankroll alive in a ranging market.

So let’s for a moment develop a simple trading method, being mindful of how to confirm a trade. In this example we will use a 9 Exponential Moving Average.

Looking at the picture above, you can see that if you only wait for price to cross the 9EMA you can sometimes win, however, you can also lose. Exiting and entering with this one indicator only will only lead to disaster in the long run.

It’s clear that we are on to something, however we need to improve upon it. So let us add another indicator. We need to somehow filter out these losses a bit more. The 100 EMA might provide for us a more smooth indication on whether price is moving up or down.

Now that we have added the 100 EMA, we can see at which point price is now showing a bearish trend. Now it is just a matter of analyzing the chart and taking note of how price reacts around our indicators.

Price seems to like to bounce off the 100 EMA. If we decided to only look at 100 EMA bounces we can see three opportunities to take a trade. I know it looks like four; however there was one that came within pips of the 100 EMA yet never touched it. We then could use the 9 EMA to enter our trades. So when price closes past the 9 EMA we will make our entry.

Now to finish off our trading system we need to be mindful of money management. By using a 1:2 risk/reward ratio and having a stop loss 10 pips from the high of the low of the candle that touched the 100 EMA, we now have a winner strategy.

Developing a winning trading strategy can be challenging, yet extremely rewarding if you can create a successful one. Have no worries if you are not up for the challenge. The Forex Trading Network has recommended trading systems that have already proven themselves to be successful.

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