Fxgump trading strategy sharing for our loyal readers only.

We know it is not easy to just follow our signals blindly without understand the basis of how we formulate our trades.

This week, I’m revealing a simple strategy that we use pretty often to create our signals.

We have no other intention other than trying to educate our readers as much as possible.

Lets start.

Trading Strategy #1 – Swing trading with H4 support and resistance zones

These are the 4 steps:

1. Mapping out the zones

2. Waiting for price to test the zone in preferably a 4 wave pattern(it does not happen all the time)

3. Mapping out fib extension targets

4. Contingency plan in case price do not hit extension targets

1. Mapping out the zone

Switch to the 4 hourly chart on any of the pair.

If you guys are charting with MetaTrader 4(Highly recommended), press ctrl+y to open the gridlines.

Every single grid line on the 4 hourly chart represents a week’s timeframe.

For my example. I’m using GBPUSD to illustrate this concept.



Step 1: Map out support and resistance zones
This is often the toughest part. I will try to explain it while keeping it short.

Take for example you are in Week 22. To determine your strong support and resistance zones, look back the last 2 weeks(21 and 20) and try to map out 2 highest points to form a zone.

These zones are what many swing traders will be looking out for coming to this week.

Important is also to note the trend. If the trend looks bullish and I’m interested to buy, the previous week’s resistance zones proves critical coming to this week.

These zones can potentially become a resistance turn support zone.

Vice versa for a bearish trend.

See my illustration for a clearer idea



Step 2: Count waves using the Zig Zag indicator
Counting waves. Insert a zig zag indicator to help you count waves.

Waves are merely obvious turning points in the charts (V or U shape).

The ideal situation is when price test strong support and resistance zones in a 4 wave movement.

What we usually do is to place a queue to buy at anywhere inside the zone(green). Buy low sell high, rings a bell?

Focus your eyes on the green zone and see how the zone was tested after a 4 wave movement by the market.



Step 3: Determine your profit targets and entry point
At this point of time, your order should already be triggered. Determine your profit target by drawing a fibonacci extension from swing low to swing high.

We usually take prominent turning points as our basis for drawing our swing low to swing high.

See chart for a clearer picture.

On stop loss targets, we usually use nothing more than 100 pips for our stop.



Step 4: Contigency plan, how to know whether your swings might fail
That is it, sit back and relax. For this example, profit target is at least 400 pips based on the fib 127.2 extension. With a stop loss target of 100 pips, it is a 4:1 reward to risk trade.

We keep on holding until our profit target is reached.

In many cases, we will lock in our profits as price move in our favor.

We are likely to close our positions when we see potential reversal chart patterns. (Double top, head and shoulders)

Final Comments

Trading the 4 hourly chart requires alot of patience and time. On the bright side, it frees you up to do many other more important things in life like spending time with your family and friends.

We love the 4 hourly swing trades but note that it works best only in a strong trending market.