The PROVEN 4-Hour Trading Strategy 85% Win Rate You Can Start Today

Summary

Kathy Lean shares a simple yet powerful 4-Hour chart trading strategy for forex and indices, emphasizing the effectiveness of moving averages. She explains how the 5 SMA and 50 SMA can identify short-term momentum and overall trends, respectively. The strategy involves waiting for a retrace to the 5 SMA after a crossover for more reliable entry points. Lean also discusses trade management for day and swing traders, including risk-reward ratios and trailing stops. She suggests combining this strategy with fundamental analysis and her ZIP trading strategy for enhanced success.

Takeaways

• 😀 Kathy Lean shares a 4-Hour chart trading strategy that utilizes moving averages for forex and indices.
• 📈 The strategy focuses on the 5-SMA and 50-SMA to identify trend changes and momentum shifts, suitable for both day traders and swing traders.
• 🔄 When the 5-SMA crosses above the 50-SMA, it signals a positive short-term trend, suggesting a long position; conversely, a cross below indicates a negative trend, suggesting a short position.
• 🔍 A 'wrinkle' in the strategy is to wait for a retrace to the 5-SMA after the 4-hour candle shows the 5-SMA crossing below the 20-SMA before taking a trade.
• 🎯 The strategy is particularly effective for currency pairs like EUR/USD, GBP/USD, and USD/JPY.
• 🚫 Kathy emphasizes avoiding trades during weekends, holidays, and before major events like FOMC meetings to prevent false signals.
• 📊 For day traders, a 30 pip stop loss and target are recommended for a 1:1 risk-reward ratio, while swing traders can adjust their trade management for bigger gains.
• 📉 Kathy provides examples of the strategy's application on the EUR/USD and NASDAQ charts, highlighting winning trades and explaining the importance of trade management.
• ⚖️ Incorporating fundamental analysis can enhance the quality of trades by ensuring they align with the market's fundamental story.
• 🔄 Kathy suggests combining the 4-Hour chart strategy with her 'zip' trading strategy for increased effectiveness, using the indicator line and background color to determine buy or sell zones.
• 👍 The video encourages viewers to subscribe and turn on notifications for more trading tips and strategies, emphasizing the importance of high accuracy and win rates in trading.

Q & A

What is the main focus of Kathy Lean's trading strategy shared in the video?

The main focus of Kathy Lean's trading strategy is the 4-Hour chart strategy using the 5 SMA (Simple Moving Average) and the 50 SMA for trading forex and indices.

Why does Kathy Lean prefer moving averages for her trading strategy?

Kathy Lean prefers moving averages because of their versatility, effectiveness, reliability, and clarity in identifying support and resistance as well as measuring momentum in the market.

How does the 4-Hour chart benefit both day traders and swing traders according to the video?

The 4-Hour chart benefits day traders by capturing small, accurate moves without the noise of shorter time frames, while swing traders benefit from identifying bigger trends without the need to monitor the market constantly.

What is the significance of the 5 SMA crossing above the 50 SMA in the trading strategy?

When the 5 SMA crosses above the 50 SMA, it indicates that the short-term trend has turned positive, signaling an opportunity to go long.

What is the 'wrinkle' Kathy Lean mentions about the 5 SMA crossing below the 50 SMA?

The 'wrinkle' is that after the 4-Hour candle shows the 5 SMA crossing below the 50 SMA, traders should wait for a retrace back to the 5 SMA before taking the trade.

What are the stop loss and target settings for day traders according to the strategy?

For day traders, the strategy suggests using a 30 pip stop loss and a 30 pip target for a 1:1 risk-reward ratio.

How do swing traders manage their trades differently from day traders in this strategy?

Swing traders use the same initial entry as day traders but manage their trades by taking profit on half of the position at 30 pips, moving the stop to break even, and then trailing the stop loss by 30 pips to capture bigger moves while protecting profits.

What is Kathy Lean's view on the effectiveness of combining this 4-Hour chart strategy with her ZIP trading strategy?

Kathy Lean believes that combining the 4-Hour chart strategy with her ZIP trading strategy enhances the quality of trades by ensuring they are in line with the fundamental story and active market hours, leading to higher accuracy and more wins.

How does Kathy Lean define a valid trade setup in the 4-Hour chart strategy?

A valid trade setup is defined by the 5 SMA crossing the 50 SMA and then waiting for a retrace to the 5 SMA, ensuring the trade is aligned with the fundamental story and active market hours.

What is the importance of avoiding weekends, holidays, and non-active market hours when using this trading strategy?

Avoiding weekends, holidays, and non-active market hours is important because these times can produce false signals and are less liquid, which can lead to less accurate trades and increased risk.

How does Kathy Lean suggest traders incorporate fundamental analysis into their trading?

Kathy Lean suggests traders incorporate fundamental analysis by ensuring that trades are taken only when they are in line with the fundamental story, which can significantly enhance the quality of trades and increase the chance of success.

Outlines

00:00

📈 Introduction to the 4-Hour Chart Trading Strategy

Kathy introduces a 4-Hour chart strategy for Forex and indices trading, emphasizing simplicity and effectiveness. She highlights the use of moving averages, particularly the 5 and 50 SMA, as key indicators for identifying trends and momentum. The strategy is suitable for both day traders and swing traders, aiming to reduce screen time and increase trade quality. Kathy encourages viewers to subscribe for more trading tips and strategies, and she explains the benefits of the 4-Hour chart for capturing accurate moves and identifying broader trends.

05:02

📊 Moving Averages: Key Indicators for Trading

The paragraph delves into the importance of moving averages in trading, discussing their role in identifying support and resistance levels, as well as measuring momentum. Kathy explains the function of the 5 SMA as a short-term indicator of market momentum and the 50 SMA as a long-term trend reflector. She illustrates how crossovers of these moving averages signal potential trend changes and momentum shifts, providing examples from currency charts. Additionally, Kathy introduces a 'wrinkle' to the strategy, suggesting traders wait for a retrace to the 5 SMA after a crossover before entering a trade.

10:02

🎯 Trade Management: Strategies for Day Traders and Swing Traders

Kathy outlines specific trade management techniques for day traders and swing traders. For day traders, she recommends a straightforward approach with a 30 pip stop loss and target for a 1:1 risk-reward ratio. Swing traders, on the other hand, are advised to take profit on half of their position at 30 pips and then move their stop to breakeven, trailing the stop by 30 pips to capture larger moves while protecting profits. Kathy also provides examples of successful trades, emphasizing the strategy's effectiveness in various currency pairs and the importance of avoiding false signals during inactive market hours.

🌐 Applying the Strategy to NASDAQ and Enhancing with Fundamental Analysis

The final paragraph extends the discussion to the application of the 4-Hour chart strategy in trading NASDAQ indices. Kathy demonstrates how the strategy can be adapted to different markets, with the importance of adjusting risk-reward parameters accordingly. She also stresses the significance of incorporating fundamental analysis to enhance trade quality, ensuring trades align with the market's fundamental story. Kathy introduces her 'zip trading strategy' as a complementary approach to the 4-Hour chart setup, explaining how it can be used in conjunction to improve trading success. The paragraph concludes with a reminder of the importance of past performance not guaranteeing future results and an invitation to learn more about the zip strategy through provided links.

Keywords

💡Trading Strategy

A trading strategy refers to a specific approach or plan for buying and selling financial instruments such as forex, stocks, or indices. In the video, the presenter, Kathy Lean, introduces a 4-Hour chart strategy that utilizes moving averages for forex and indices trading. This strategy is designed to help traders identify potential trend changes and momentum shifts, which are crucial for making informed trading decisions.

💡Forex

Forex, short for foreign exchange, is the global market where currencies are traded. The video script discusses a trading strategy that is particularly useful for forex trading, emphasizing the importance of identifying support and resistance levels, as well as measuring momentum, which are key aspects of successful forex trading.

💡Indices

Indices are statistical measures of the changes in a portfolio of stocks representing a portion of the overall market. In the context of the video, Kathy Lean shares a trading strategy that is not only applicable to forex but also to indices, indicating the versatility of the strategy in different financial markets.

💡Moving Averages

Moving averages are technical indicators used in trading to smooth out price data and highlight trends by filtering out the 'noise' from random short-term fluctuations. The video emphasizes the use of two types of moving averages, the 5 SMA and the 50 SMA, to identify market momentum and overall trend direction.

💡4-Hour Chart

A 4-Hour chart is a type of price chart used in technical analysis that displays four hours' worth of price action for a given financial instrument. The video script explains that this chart is ideal for both day traders and swing traders, as it provides a balance between capturing short-term moves and identifying longer-term trends without the noise of shorter time frames.

💡Day Trader

A day trader is an individual who engages in trading with the intention of closing all positions within the same trading day. The video script mentions that the 4-Hour chart strategy is suitable for day traders who aim for high accuracy in small moves, providing an example of how to manage trades with a 30 pip stop loss and target.

💡Swing Trader

Swing trading is a type of trading strategy where positions are held for several days to weeks, aiming to capture gains from price swings. The video script explains that the 4-Hour chart strategy is also beneficial for swing traders who are targeting bigger gains and can benefit from identifying larger trends without constant market monitoring.

💡Crossover

A crossover in trading refers to the point where a shorter-term moving average crosses over a longer-term moving average. In the video, the presenter discusses how a crossover of the 5 SMA above the 50 SMA indicates a positive short-term trend, while a crossover below signals a negative short-term trend, providing opportunities for traders to enter long or short positions.

💡Retrace

A retrace in trading is a partial reversal in the price of a financial instrument after a significant price movement. The video script mentions that after a crossover, traders should wait for a retrace to the 5 SMA before entering a trade, which can provide a more favorable entry point and reduce the risk of a false signal.

💡Risk Management

Risk management in trading involves the identification, evaluation, and prioritization of risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. The video script provides examples of risk management strategies, such as setting a 30 pip stop loss and target for day trades, and trailing stops for swing trades to maximize gains while minimizing risk.

💡Fundamental Analysis

Fundamental analysis involves evaluating a security's intrinsic value by examining related economic, financial, and other qualitative and quantitative factors. The video script suggests that incorporating fundamental analysis can significantly enhance the quality of trades by ensuring that trades are in line with the fundamental story of the market, thus increasing the chances of success.

💡ZIP Trading Strategy

The ZIP trading strategy, as mentioned in the video, is a method used by the presenter to determine buy or sell zones based on whether a currency pair is trading above or below an indicator line. The strategy is used in conjunction with the 4-Hour chart strategy to confirm trade signals and is part of the presenter's 'tried and true' approach to trading.

Highlights

Introduction to a simple yet powerful trading strategy for forex and indices using the 4-Hour chart.

Emphasis on the effectiveness of moving averages as a versatile and reliable indicator in trading strategies.

Explanation of the 4-Hour chart's suitability for both day traders and swing traders.

The significance of the 5 SMA as a short-term momentum indicator and the 50 SMA as a long-term trend reflector.

How a crossover of the 5 SMA above the 50 SMA signals a positive short-term trend for long positions.

Conversely, a crossover of the 5 SMA below the 50 SMA indicates a negative short-term trend for short positions.

The importance of waiting for a retrace to the 5 SMA after a crossover for more reliable entry points.

Trade management strategies for day traders with a focus on 30 pip stop loss and target for a 1:1 risk-reward ratio.

Swing traders can use a modified approach with profit-taking and trailing stop losses to maximize gains while minimizing risk.

Demonstration of the strategy's effectiveness with examples from the euro dollar and NASDAQ charts.

Highlighting the strategy's success with a 7 out of 7 win rate in the provided examples.

The necessity of avoiding trades during weekends, holidays, and before significant market events like FOMC meetings.

Incorporating fundamental analysis to enhance the quality of trades and increase the chance of success.

Combining the 4-Hour strategy with the presenter's 'zip' trading strategy for increased effectiveness.

The presenter's personal success with the combined strategy, achieving positive results over 12 months.

A reminder that past performance is not indicative of future results, emphasizing the importance of strategy adaptability.

Encouragement for viewers to like, subscribe, and turn on notifications for more trading tips and strategies.

Closing remarks with an invitation to learn more about the 'zip' strategy through links in the video description.

Transcripts

hey Traders welcome back to the channnel

I'm Kathy lean and I'm here to share

some insights for my 20 years of trading

that will hopefully make you a better

Trader now if you're searching for a

simple yet powerful trading strategy for

forx and indices you're in the right

place today I'll share our 4-Hour chart

strategy that I use every day this

strategy employs one of my favorite

indicators moving averages I know moving

averages sounds simple but trading

really doesn't need to be complicated I

love moving averages for the versatility

and their effectiveness and

Effectiveness is key because if you want

to be successful Trader focus on finding

the highest quality trades and I hope

the strategy will help you select the

best ones so whether you're day trader

aiming for high accuracy small moves or

a swig Trader targeting bigger gains

this strategy has you covered before we

dive in make sure that you hit the

Subscribe button and turn on the

notifications so you don't miss any of

our trading tips and strategies now

let's get started first let's talk about

why the 4-Hour chart is excellent for

both day Traders and swing Traders for

day Traders helps capture small accurate

moves without the constant noise of

shorter time frames swing Traders on the

other hand benefit from identifying

bigger Trends without having to monitor

the market constantly it's a perfect

sweet spot for those looking to trade

effectively with less screen time now

why moving averages they're not just

great for identifying support and

resistance but also for measuring

momentum which is crucial in trading

moving averages which basically measure

the average price over a designated

period of time are a key component in

many successful trading strategies and I

particularly love using them for their

reliability and their Clarity this

4-Hour chart strategy that we go to talk

about involves two moving averages the 5

SMA simple moving average and the 50 SMA

now the 5 SMA moving average basically

is a short-term moving average that

dictates the Market's short-term

momentum while the 50 SMA is a longer

term moving average that reflects the

overall trend so when the 5 SMA crosses

above the 50 SMA like you see in this

dollar yed chart it means that the

short-term trend has turned positive and

you should be looking for opportunities

to go long but there's a little wrinkle

that I will share later meanwhile when

the 5 SMA crosses below the 50 SMA as

you can see in this euro dollar chart it

means that the shortterm trend has

turned negative and it's time to look

for opportunities to go short in this

euro dollar chart you can see that the

entry of the short was around 108 and

the currency pair hit a low of

10733 a nearly 70 pip profit on this

short trade as you can see this is a

simple yet effective crossover method

that helps you identify potential Trend

changes and momentum shifts this

strategy Works particularly well for

euro dollar pound dollar and dollar Yen

but there is one wrinkle which is that

after the 4-Hour candle shows the five

simple moving average crossing the below

the 20 simple moving average you don't

just want to take the trade you want to

wait for a retrace back to the 5 SMA

sometimes this retrace could be a big

retrace but often times it's a shallow

one

before we look at the charts let's talk

about the stops and targets the entry

for day trades and swing trades would be

the same but the trade management would

be different for day Traders the setup

is straightforward use a 30 pip stock

loss and a 30 pip Target for a one to1

risk reward that's what I suggest this

approach keeps your trade simple and

easy to manage allowing you to

capitalize on the precisely small moves

efficiently swing Traders on the other

hand can use the same initial prors with

with the twist when the trade moves in

your favor take profit on half of the

position at 30 Pips then move your stop

to break even to neutralize the risk on

the remainder of the position then Trail

your stop lost by 30 Pips to see if you

can capture bigger moves while also

protecting your profits this method

allows you to maximize gains while

minimizing risk now back to the euro

dollar chart here you never got the

opportunity to sell on a retrace to the

moving average so it wasn't a valid

trade however taking a look at the same

chart seven out of the last seven trades

were winners here's the examples okay

let's start by adding the moving

averages onto the charts so we start by

adding the two SMA simple moving average

we're going to add two of them the first

one will be the five simple moving

average which we will leave as blue and

then the second one we're going to

change to the 50 simple moving average

and we will change that color to Black

just for um ease of contrast this is the

first ID Dollar Tree that we mentioned

earlier and this is not a a valid trade

because it dropped significantly before

it retraced and it's just you know this

is far too long on a 4-Hour time frame

basis here however we do have a valid

trade the setup where for the five

crosses above 50 happens here and then

we go along the next candle pretty much

at 10845 plus 30 Pips is 108 108 um 705

so we're exiting first half the position

here and the second half somewhere over

there here is the next trade here we

have on this candle the um the moving

average the 5 Crossing below the 50 and

then we're going short at

10839 which is where the 5 SMA is the

next candle and you can see this low is

1788 so 30 Pips easily hit as well here

we have the cross right over here so

we're going long at

10856 and this one is another winning

trade so three out of three so far here

is when we get the cross and we don't

actually enter the trade till over here

but unfortunately I believe that this

one is going to be stopped out it's 108

um 10830 entry and it just stops us out

pretty much by a pip um but it never

really went to Target anyway so three

out of four winners um here in your

dollar we get the cross at this candle

over here let's move this upwards we we

acrossed this candle over here we wait

for the retrace to the moving average at

1073 so our stop is at

10673 that is nowhere near there um and

then it it Powers higher this one you

can see becomes a very very powerful

move more than 100 Pips some of them are

one to one trades some of them can be

much more generous trades so that's

basically four out of five and here's

another example uh where we get the

crossover right here we go long here at

10 671 and this also becomes another

powerful move five out of six and let's

see and this one we had to wait a little

while but not too long we get the

retrace over here at

10749 and this becomes another really

nice smooth swing trade so basically six

out of seven winning trades in the euro

dollar using this 4-Hour chart setup and

you know those are the kind of odds that

I like to see no one is going to um be

able to share a strategy that's a 100%

accurate if they show you that and tell

you that is 100% guaranteed then you

know they're lying to you every strategy

will win and it will fail um it's a

matter of finding strategies that had

the high accuracy high wind rate as much

as possible and um these are the odds

that I like so now let's take a look at

it in the NASDAQ in the NASDAQ U let's

go back to current you can see here is a

really beautiful setup we get the

crossover right over here you're going

along right over here probably um at

this moving average um when it touches

back and boom really solid move you know

you would have gotten the first Target

and definitely some really nice trailing

stops there over here we get the cross

down um right over here and we get the

retrace right over here and once again

very beautiful move lower obviously with

NASDAQ you have to use different risk

reward it's not going to be 30 points um

you're going have to figure out your own

risk management but you can see this is

becomes a very nice move

lower and then over here we have also um

across above over here and then your

entry when it retraces is going to be

over here and another very very strong

up move but there will be losers just

like you see here here you would have

gone short and this was a losing trade

but that's why it's so important to

squeeze more out of the NASDAQ trades

because when you catch a nice strong

momentum move it can be a very very

powerful one and then over here we're

going long right here and this also

becomes a nice but shallow move so we

got four out of five winners here and

then here you know it's hard to tell

depending upon how conservative

aggressive you are maybe you would have

gotten some Pips maybe not here we have

a very you enter probably over here very

very nice strong Trend move over there

and then um You probably would have lost

money here but as you can see it kind of

flames out quite early so you're going

long over here the losses are small

compared to the big move over here and

so that's basically the type of odds

that we want to see and it works quite

effectively in the NASDAQ as well as in

um the euro dollar but of course you

know avoid weekends avoid holidays and

um you know stick to the active you know

Market hours and not before like fomc

for example where some of the signals

could be really false signals here's

another tip incorporating fundamental

anal is can significantly enhance the

quality of your trades by making sure

you only take the trades that are in

line with the fundamental story you

increase your chance of success I

personally love to use this strategy in

conjunction with my tried and true zip

trading strategy if you're not familiar

with my zip strategy here's how it works

if the currency pair is trading above

the indicator line and this is a trading

view chart as you can see here and the

background is green it is in the buy

Zone if the currency pair is training

below the indicator line in the

background is red it is in the sound

zone so you want to buy in the buy Zone

sell in the sell Zone and if the candle

turns white that's a buy or sell signal

of course you don't want to tr take

these trades blindly I only take the

trades that are in the active Market

hours and the ones that are aligned with

fundamentals now with the 4-Hour trading

setup if I see the 5 SMA and the 50 SMA

Crossing while the currency pair is in

the zip buy or sell zip that is

consistent with the cross it makes this

trade even more attractive alternatively

if a zip buy or sell signal triggers and

the cross happens later it is still a

powerful trade signal so combining my

zip strategy with this 4-Hour training

setup has helped me bang Pips 12 out of

the last 12 months of course past

performance is not indicative of future

results if you want to learn more about

my zip strategy please see the links in

the description below so there you have

it a simple yet effective 4-Hour chart

trading strategy using the 5 SMA and the

50 estimate for trading euro dollar

pound dollar dollan and Q whether you're

day trading or swing trading this

approach can help you capture Market

moves with higher accuracy now if you

found this video helpful don't forget to

like subscribe and hit the notification

Bell for more trading strategy and tips

happy trading thanks for watching and

I'll see you in the next video