Place envelopes of 100 period simple applied to close on a chart with standard deviation set to the following depending on the time frame of your choosing:
- 0.1% on 1 hour chart
- 0.3% on 4 hour chart
- 2.0% on daily chart
Enter long any time price crosses the channel from below and has a close above it. Enter short whenever price crosses from above and has a close below the channel. Exit and reenter in other direction on a reversal signal. The idea is to catch a trend and benefit from it. There will be times when price ranges and gives you consecutive losses. However a good run will make back the losses and some. Patience and consistency is a must in order for this strategy to be profitable. Money management is also very important. I recommend risking no more than 1% per 100 pips (on major currency pairs). Below is a 1 hour USD/CHF chart with entries and exits illustrated.
*Tip: Keep an eye on spread. Do not enter if it is unusually high. If high spreads are often preventing you from entering then you may want to look into switching brokers.
Backtest(s): Envelopes Backtest (May/2012)