Forex Trading Strategies - The Simple 4 Hour Sterling Strategy

February 17th, 2010

This article will give a brief explanation of one of my favorite forex trading strategies. It is simple and extremely effective.  All it involves is a 1 hour bar chart and observing price action on the GBP/USD.  I refer to it as  the "4 hour Sterling Strategy".

Here are the steps:

1. Open up a  1 Hour bar chart for the GBP/USD.

2. Wait the GBP/USD  has demonstrated "tight-range consolidation" for at least 4 consecutive hours.  By "tight-range consolidation" I mean that the range is very well defined, usually with no more than 50 (preferable) to 70  pips in the range (they will be very short bars on the hourly chart).You do not have to wait and watch by the computer the entire time. You can check in every few hours to see if a set up may be coming. 

3. When you identify 4 back-to-back hours of tight consolidation, you will continue to monitor the GBP/USD more closely as you will watch for a breakout from the consolidation range.   

4. If the price goes 7 pips above the upper range price, then go LONG.  Alternatively, if price moves 7 pips below the lowest value of the range, then go SHORT.  Don't forget to adjust for the spread. So if your spread is 2 pips, for example, you would then use 9 pips above or below the range value to place your entry.

5. Set the stop loss at 30 pips. Set the take profit to 70 pips.

The GBP/USD is notorious for being a very active currency pair. The set up does not happen every day, but does happen on many days. The best time to find 4 hours of tight consolidation is during the US afternoon or during the Asian session.

I recommend that you demo trade this strategy for awhile. Back test it on your charts if you wish. You will likely agree that this easy strategy really works!

 

 

About the Author:

Have you discovered the forex strategies that are best for you? The "4 Hour Sterling" strategy is a variation of one of Avi Frister's price action based forex strategies. Get more information on this strategy at Ann Pevey's site FX Strategy Hub. You will also find more simple forex strategies and Ann's actual "real-time" trading results!

Author: Ann Pevey

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