Simple Strategies Make Better Results in FX! This Is True

The idea that “simple methods tend to yield results in FX” is a common belief among traders in my circle.

During times when I was struggle with FX, I used to think, “To win in FX, I need complex methods.”

When I was losing badly in FX, I believed it was because of my strategy, so I kept adding various indicators and making my strategy more complex.

But in the end, it didn’t have any effect.

So, why is it that FX tends to yield results with simple methods?

Simple methods have higher reproducibility.

In FX, since simple methods are higher reproducibility, it tends to yield better results.
In other words, simpler methods provide more consistency in trading and result in greater stability.

Conversely, when you incorporate multiple technical indicators, it causes a confusion for your entries, and the numerous filters can significantly reduce trading opportunities.

Even with these filters in place, achieving a 100% win rate is unrealistic.
Thus, making your strategy more complex can actually make it more challenging to achieve positive results.

Complex strategy leads to over-optimization.

In FX, the basic approach to creating a strategy is to base it on past chart movements.

However, if you incorporate too many technical indicators and align your strategy too closely with past price movements, it can lead to over-optimization, and your strategy may actually become ineffective.

The reason for this is that while FX charts make repetitive patterns, they never replicate the exact same movements as in the past.

Therefore, if you tailor your strategy too closely to historical price movements, even a slight deviation from the past can quickly undermine its effectiveness.

In FX, you can create as many strategies as you want, depending on the number of technical indicators available.

Moreover, by combining these indicators, you can generate an infinite number of strategies. This might lead you to think, “I can create an amazing strategy by combining multiple indicators!”

However, in reality, it can have the opposite effect and be counterproductive.

Related Post: Why Using Multiple Technical Indicators in FX Doesn’t Guarantee Success

My strategy is actually simple.

The strategy I’m currently using is extremely simple as well.

For the finer entry points, I employ techniques based on crowd psychology, but the foundation remains straightforward, focusing on buying on dips and selling on pullbacks.

I mostly enter trades in a manner similar to the image below.

“You might be thinking, ‘No way, it can’t be that simple!'”, but it really is such a simple strategy.

Because, as you can see, my actual chart screen looks like the following.

I draw lines only based on the recent high and low points, as well as the neckline, while looking at both the 1-hour and 4-hour charts.

I don’t use any technical indicators.
That’s why I find my chart easy to read and it’s a personal favorite.

In this state, I observe the overall market direction and, when the price approaches the lines I’ve drawn, I closely analyze the price action in that area to make decisions about buying on dips or selling on pullbacks.
So, my strategy is really that simple.

By the way, as evidence of the effectiveness of a simple strategy, if you were to aim for a buying opportunity on the dip in the image below, where would you consider entering?

Most likely, the majority of people looking at this chart would draw lines and aim for a buying opportunity as follows:

In practice, I also draw lines as shown above and aim for buying opportunities on the dip.

And then, what kind of movement followed this?

It’s a movement that perfectly follows the scenario, isn’t it?

It reverses at the upper support line and experiences a significant upward trend.

In FX, even such a simple strategy is more than sufficient. In fact, because it’s clear to anyone that this is a prime spot for buying on the dip, it often results in a high win rate and the potential for substantial gains.
There’s no need to overcomplicate things.

Of course, there can be moves that go against this strategy at times, but overall, it tends to be profitable.

If you want to see more practical examples, I explain them in the article below, so feel free to read it if you’re interested.
Can Simple Methods Really Win in FX? Show You Real Results.

It’s okay to deliberately try complex strategies.

So far, I’ve conveyed that simple strategies are the strongest for achieving consistent results in FX.

This belief is an unshakable fact in my mind. However, I do think that deliberately trying complex strategies can be a valid approach.

The reason for this is that no matter how much it’s said that simple strategies are the best, it’s still important to gain personal experience and see for oneself whether that is truly the case.

Therefore, while focusing on creating simple strategies will likely lead to quicker results, trying out complex strategies can also be a valuable exercise.

In the past, even I, despite what I’ve said,

– Moving Averages (MA)
– Ichimoku Cloud
– Bollinger Bands
– Relative Strength Index (RSI)

played around with various technical indicators like the ones mentioned.
My charts during that time looked somewhat like the example below.

Looking back now, I can’t help but think, “What on earth was I trying to decipher with such a messy chart?”.

But this action told me that it didn’t work at all and I came to understand that complex strategies weren’t the way to go.

So, I gradually removed one technical indicator at a time and conducted tests, and over time, I started to see results. That’s when I first realized, “Oh, simple strategies yield more stable results.”

Therefore, if you’re not satisfied with the idea that simple strategies can yield results, trying out complex strategies deliberately can be a good approach. However, keep in mind that it’s likely to take longer time to succeed in FX.

Because of this, it took me more than 5 years to achieve consistent results in FX.

Over a year in FX? You’ve got enough experience.

In the above, I’ve emphasized that even with a simple strategy, you can achieve satisfactory results in FX.

This kind of straightforward strategy is something that individuals with over a year of FX experience can easily create.

So, those with more than a year of FX experience often already possess the capability to produce success in FX.

However, the reason results might not be showing up could be due to minor factors like insufficient testing or the inability to understand crowd psychology, preventing your skills from effectively translating into their strategies.

In any case, let’s conduct thorough testing.

If you’ve been in FX for over a year and are still struggling with your strategy, start by thoroughly testing a simple strategy that focuses on buying on dips or selling on pullbacks. The specific strategy itself can be as simple as you like.

For example, in an uptrend, you can consider a strategy with the following parameters:

– Stop Loss: -20 pips
– Take Profit: +40 pips

Then, gather data for at least 100 trades using this strategy.
Typically, you should achieve a win rate of around 50% or slightly better, resulting in an overall profit.

Afterward, analyze the collected data, including:

– Win rate
– Profit and loss by currency pair
– Profit and loss by time of day
– Profit and loss by day of the week

By doing this, you’ll identify when the strategy performs well and when it struggles. You can then make adjustments to tailor the strategy to your strong points and weaknesses.

If you’re still searching for a base to create a strategy that suits you, consider referring to the article below for guidance.
How to Create Rules for a Strategy that Suits You in FX

Alternatively, if you’re unsure about how to go about validating a strategy, consider referring to the article below for guidance on testing methods.
Effective Validation Methods for Profitable FX Strategies

How to improve the accuracy of existing strategy

If you want to improve the accuracy of your current strategy, incorporating crowd psychology can significantly increase the chances of enhancement in addition to rigorous testing.

Crowd psychology involves considering the psychological aspects of market participants based on the chart and utilizing this insight in your trading.

For example, by thinking about questions like, “What kind of psychology leads to a bounce at a particular line?” and then trading accordingly.

Incorporating this approach allows you to anticipate, “How is the market likely to move next?” and, as a result, can enhance the precision of your trades.

This concept is particularly effective with simpler strategies.

If you’d like to learn more about crowd psychology, you can refer to the article below.
Considering the emotions of others is important in FX.

Summary

When results in FX are not going as expected, it’s common to think, “I need to improve my strategy,” and then start adding various technical indicators, making the strategy more complex.

However, in reality, this can be counterproductive, and the more complex the strategy becomes, the more likely it is to get caught in a rut and not work as intended.

So, if you’re currently struggling with the FX strategy you’re using, or if you feel like, “Simple strategies won’t lead to success,” consider conducting testing with a straightforward strategy for once.