With so many indicators and forms of analysis, taking trades may seem overwhelming – there’s always conflicting information and varying viewpoints. But there is a simple trading strategy.
Break every trade down into four parts, and only focus on one part at a time. Here are the four steps that form the anatomy of every trade. Keep your focus on these for simple trading.
1. The Setup:
This setup is what’s needed for a trade to potentially occur. There are thousands of trade setups, ideally you should only trade one or two if you want to keep your trading simple. Assume for a moment you use Bollinger Bands Breakout. You buy or sell when the candle break the upper or lower band and close above or below the band (this is not an endorsement of this method, just an example).
Figure 1. AUD/USD Daily Bollinger Bands Strategy
When the candle in the middle of Bollinger Bands, there is no possible trade setup. You do nothing. When the candle break the bands and close you now have a potential trade setup you’ll want to watch for.
Having a setup lets you know when you should be trading and when you shouldn’t. No setup, no trading. If a setup is forming, proceed to next step.