April 29, 2019 | AtoZ Markets – As a technical forex trader, you all have heard about keeping a trading system simple and effective, and it is not a surprise to see most of the successful traders often use clean charts with price action on the forefront rather than complicated colorful indicators. In this article, we are discuss the Kiss trading strategy and how it can be used in forex trading.
What is Kiss trading strategy?
The acronym KISS stands for Keep It Simple Stupid. Other variations are often used like Keep It Short & Simple, Keep It Stupid Simple and Keep It Simple Silly. Keep it simple strategy makes the minimum use of the FX resources. Yet, it provides the most useful insights into the market. If a trader has been using many complicated strategies in the market, you will notice that they are always preferring to use the simplest form of strategy. Whether you are a novice trader or a professional forex master, you should consider using an easy and simple trading strategy. This is the KISS trading strategy.
A step-by-step guide to Kiss trading strategy in Forex
Kiss trading strategy is built upon an understanding that the best way to navigate the forex market is by learning to interpret and trade the raw price action signals that form naturally in the market. By trying to force a set of strict indicator based trading rules around the unbounded area of the markets, many traders unknowingly make trading infinitely more complicated and difficult than it ever needs to be.
As the trading strategy name itself implies to keep it simple, thus it uses a simple setup based on price action, moving averages and MACD histogram. Traders should consider the following points for chart set up before using the strategy in the MT4 trading system.
- Use the 4-hour chart, which is more reliable trading the higher timeframe, while still giving a few good setups each week.
- Plot a 20 LWMA in any color of your choice.
- Use a MACD indicator with a histogram with standard settings and double them i.e MACD(24,52,18).
# STEP1: Follow the current market trend (higher highs & higher lows = uptrend while lower lows & lower highs = downtrend). If the short term trend matches up with the pairs overall trend, they you are following the trend! Moreover, price action is just for looking simple candle patterns which are engulfing, pinbar, tweezers patterns, etc. This happens at prior support & resistance areas. Lastly, just drawing in some simple trendlines and/or channels
# STEP2: The 20 moving average is the best setup when you get a price action setup and the moving average is heading in the same direction (up for longs, down for shorts).
# STEP3: The MACD histogram should be in synery and head in the same direction as your PA and MA. This helps you to see where momentum is going along with the first two guidelines. The best setups are when the histogram is on the correct side of the zero lines. To be more precise, above the zero lines for longs and below the zero lines for shorts.
Example of Kiss trading strategy
Suppose a forex pair experienced a breakout to the upside, followed by a reversal bounce. The Kiss trader might deduce a low-risk entry point for the currency pair based on history. By following the pair’s hourly price levels, the FX trader can predict when it will rise and fall.
Kiss traders trade on belief, and they are trading against other traders with the opposite opinion. Thus, a Kiss trader is correct in his beliefs only on the condition that their investments are making money. They respond to activity in the market if the price is going up, and tend to go along with that and continue with the trend until it stops.
Sometimes highly complicated forex strategies are worthwhile to traders, and other times they complicate things without giving better results. Kiss traders might receive some disapproval from those investors who believe in accurate analysis at all times. But the most successful Kiss traders make profits without worrying about those details. Instead, they find the simplest, most common-sense trades, and make money out of it.
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