i recently received this strategy from
ashraf who is one of our subscribers
it's a simple forex trading strategy
that requires three free technical
indicators and can be used to trade
forex crypto and stocks
as usual i'm going to share it with you
go over a couple of buy and sell setups
and finally back test it 100 times to
find out if this simple forex trading
strategy is profitable or not and
whether you should use it to trade your
hard earned money
if the strategy is profitable i'll be
sharing with you more examples from the
chart at the end of the video so you can
practice it
this was one of the suggestions we
received from our subscribers
anyway let's get into it
the first indicator we'll be adding to
the chart is called extreme trend
it's a free technical indicator
developed by jyoti prasad
i hope i'm pronouncing his name properly
this indicator is only available on
tradingview
it's also available on the metatrader4
platform but i'm not sure if it comes
from the same author or not so let's
stick to the trading view version as per
the request of ashraf
it took me some time to understand how
it functions i won't bore you with all
the details i mean let's find out first
if the simple forex trading strategy is
profitable or not
so basically this indicator prints the
buy and sell signals directly on the
chart
no need to waste time monitoring
different price structures we just keep
an eye on the chart and go long or short
as soon as the entry conditions are met
we can keep the default settings for now
let's add in the two remaining
indicators before we begin back testing
this strategy
the second technical indicator needed
today is the average directional
indicator adx
we've used this indicator multiple times
in the past
it's one of my favorite ones
it's used to measure the overall
strength of a trend
it fluctuates between 0 and 100 with
readings below 25 indicating a weak
trend and readings above 50 signaling a
very strong trend
the calculation of this indicator can be
complicated but in a nutshell the
stronger the trend the higher adx goes
we're going to rely on the 25 as our
baseline level if the price is above it
that means we're looking at a strong
trend so we just need to avoid trading
when the adx value is below 25 percent
the last indicator is the regular 200
periods exponential moving average
we can only go long if the price is
above the 200 ema
on the other side short positions can
only be executed if the price is
underneath
now we have our chart ready to go
let me share with you the entry rules
before we begin back testing this
strategy 100 times
for the buy setup
in this case the price has to be above
the 200 ema which signifies that the
market is on an uptrend
the 200 ema alone is not enough to trade
forex or any other financial market so
we'll use the adx to filter out false
breakouts
the adx value has to be above 25
i added this blue vertical line to mark
the 25 baseline
if the two criteria are met we'll now
monitor the extreme trend indicator and
wait for a buy signal
the indicator prints a blue up pointing
triangle when it's time to go long
we should go up as soon as the bar
closes
let's look at this example from the
chart
we can see that the price is above the
200 ema which means that the market is
on an uptrend and the adx value is above
25
allowing us to enter the market
it's time to look for a buy entry
we should enter as soon as the x trend
indicator gives us a buy signal
we can see that all the conditions are
met now so let's go long
by the way we can use the last swing low
or the 200 ema line as the stop loss
level and aim for a 1 to 1.4 risk to
reward ratio
this is the setup suggested by ashraf
i'll make sure to follow exactly his
strategy
that was a successful trade
based on the developer of this indicator
we don't have to exit when our fixed
take profit is hit
the indicator gives us an idea about the
trend continuation so as long as the x
trend line is blue the market is
supposed to remain bullish and we can
continue writing the trend until the
color of the line changes to red alright
before we begin back testing let's look
at a sales setup
it's simple the price needs to be below
the 200 exponential moving average and
the adx line above 25 percent
once these two conditions are met we
should wait for the x trend indicator to
give us an entry signal that's all
this is another example from the chart
the price is below the 200 ema and based
on the adx value the bearish momentum is
strong enough to look for short
positions
we can go short as soon as the sales
signal is printed on the chart
the 200 ema will serve as a key level
that protects us from hitting the stop
loss
we can also rely on the last swing high
to position it
that's another successful trade
these trades were hand picked by the way
it's now time to run the 100 time back
testing process
i'm going to start with a one thousand
dollar initial balance and to make
things easy we'll stick to a fixed
volume size of two micro lot
all right let's begin back testing
while waiting for the results don't
forget to hit the thumbs up button if
you enjoy this type of content
it helps us a lot with the youtube
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you can also share with us your trading
strategy if you want us to back test it
at www.tstlife.com
submit
by the way i'm using this trading
journal to assess the profitability of
this strategy
you can use it for free on our website
i'll leave a link in the video
description
make sure to keep the page open until
you're done with our back test
otherwise you can also download our free
forex calculator as an excel document if
you want to keep a copy of your trading
journal
awesome we have just completed back
testing this strategy
it took me one hour 34 minutes to
complete the process and the 100 trades
were executed over six months
by the way don't forget the thumbs up if
you enjoy this content it encourages us
to make more videos and helps us with
the youtube algorithm
so these are the results
the success rate is forty seven percent
we started with a one thousand dollar
balance and we ended up with nine
hundred fifty three dollars and fifty
six cents
that's a forty seven dollar loss
so numbers speak for themselves here the
setup doesn't provide many entries even
though it's a five minute trading
strategy
at one point we had seven consecutive
losing trades
i believe our choice of two micro lot
fixed volumes allowed us to remain in
the market long enough to complete this
test
you deserve a better strategy ashraf
well there are certainly many ways to
improve this trading setup
the tendency to hit the take profit
level increases when we have a strong up
or downtrend
the adx alone is not enough to evaluate
the trend momentum
based on our results today i can say
that this forex trading strategy doesn't
take into consideration the times when
the forex market is in high volatility
the five minutes time frame is not the
best choice for this kind of strategy
if we switch to the one hour time frame
there will be lesser entries for sure
but they seem to be more reliable
we can see for instance the number of
trades we could have taken if we use the
one hour time frame
and finally the exit strategy we tested
in this video prevented us from writing
some very profitable trades
so if you choose to use this strategy
it's recommended to use the x trend line
to maximize your profit
let us know in the comments section if
you have any ideas on how to optimize
this setup and don't forget to subscribe
to our channel and press the bell icon
to get new video updates
happy trading
you