If you are looking for a simple Forex trading method which will make money, is free, comes from one of the most famous traders of all time, can be learned quickly and takes around half an hour a day to apply, you should take a closer look at the system enclosed – Richard Donchian's 4 Week Rule applied to Forex trading.
Simplicity and Profits for Over 30 Years
The system we are going to look at is so simple, most traders simply believe it can't make money but it does. The system has been making money since the late seventies, when it was first used on commodity markets and its still making big profits over 30 years later! If a market trends ( and currency pairs trend very well) then this system will make big gains over the longer term. In fact, you will NEVER miss any of the big trends which last for weeks or months again, if you learn this trading system.
A Single Rule System
Its got a simple rule which generates trading signals in the market and it's simply this:
Wait until a currency pair reaches a new 4 week high and execute a buy signal. Simply hold the position open in the market until a 4 week low is hit and then reverse the position from long to short. You then simply keep doing this and always hold a position in the market – that's the rule. It;s a simple objective trading signal and very easy to apply. It's only one rule, based on price action and traders I show it to are always saying – its far to simple to work but it does work and can help you achieve Forex trading success. Furthermore, I have NEVER seen a commercially sold trading robot or Forex Expert Advisor which has been able to out perform it, in my 25 years of trading experience. So let's look at this simple Forex trading system which I consider the best I ever seen.
Why the 4 Week Rule Works
The 4 week rule is a simple price action trading system which is based on breakout methodology and the logic of a price action breakout trading simple is very easy to understand and also have confidence in. If you look at price charts of currency pairs, you will see long trends which last for weeks months or in some instances, a year or longer but look more closely at a chart and you will see, how these trends start and continue – they continually break to new market highs (in a bull market) or new market lows (in a bear market) so the methodology is soundly based.
By focusing on trading 4 week highs and lows, the system is only interested in catching and holding long term trends. In terms of making money, its the long term trends which make the big profits and Forex trend following with the 4 Week Rule is very profitable over the long term if applied to a basket of uncorrelated currency pairs. So what are the disadvatages of trading with this simple Forex trading strategy?
The 4 Week Rule – Losing Periods
We all know that if you are following longer term trends, you will have periods of losses where trading signals lose in currency pairs which are moving sideways or consolidating and when these trading conditions are present, the 4 Week Rule will lose money But if you trade a number of uncorrelated markets, the trending ones will make up for the non trending ones and help to smooth your equity curve.
The 4 Week Rule is not at all bothered about pinpoint market timing with its trading signals – it uses no candlestick formations or any technical indicators to enter the market – it simply enters its trading signal on its 1 set rule. This makes the trading system a hard one for many traders to follow because they always feel, it can get a better price if they wait but the system is not about getting in on EXACT tops and bottoms – No trading system can do this, so traders should see it for what it is – a system that will get you a major percentage of every big currency trend. The rule also generates trades when the majority expect the opposite to occur but this is not bad – its good! Keep in mind, 95% of Forex traders lose trading currencies so not being in agreement with them is probably, a great indication the trade being taken is a good one.
Reflections on the 4 Week Rule
It maybe a simple price action trading system but it will always make money and this is because you will always get big trends in any currency pair. The system suits patient traders who just want a mechanical system which they can simply trade in their spare time. Sure it has short term losses but over the longer term, it will make big profits and there are very few professional fund managers who can beat it. It's a simple system which has worked for over 30 years and if you are still not convinced it works – test it backwards and you will see how much money it makes. Also, because it has only one rule, the results you see on the back test will be very accurate, in terms of it's profit potential going forward.
The pro traders love this mechanical trading system, the novice or new trader, thinks it's just to simple to work but the facts show, its one of the best trading systems to help you make great profits in the market. Check the system out and think about the logic and you will see, why the system is so highly regarded by professional traders.