The 1-hour chart timeframe is one of my favourite timeframes for day trading forex. I find that it does a great job of filtering out some of the noise from the lower chart timeframes whilst there are still ample opportunities to catch some good moves. If you were swing trading on the 4-hour chart timeframe and above, you could potentially miss some important price action. The 1-hour trading strategy can be ideal for those who are just getting into trading and want to immerse themselves in the forex markets.
How to trade the 1-hour forex strategy?
There are so many ways in which you can trade forex on the 1-hour charts, from trend trading to reversal trading. I personally like to trade with the trend as you can get into some big moves early and ride them until the very end. On the other hand, catching the top or bottom of the market for a reversal trade can be difficult. I have even heard it referred to as “catching a falling knife”.
Yes, if price reverses immediately and goes onto form a long-term trend that would be great. However, if the trend continues you can get taken out of the market again and again. If you wait for the trend to form and a pullback before a continuation, I find this is a better-timed entry. That being said, reversal trading in a range bound market when there is less volatility can be a good time to pick of market tops and bottoms.
1-hour forex trend strategy
This 1-hour forex strategy is using a combination of technical indicators to identify the trend direction and then enter on a pullback. It also takes into account price action analysis which I like to use to confirm all of my trades. I think this is often overlooked especially by beginners.
1-hour forex trend strategy buy signal
- 50 SMA is above 200 SMA
- Price is above the 50/100 SMA
- CCI (14) is below -100
- Bullish candlestick patterns
You can see from the EUR/USD 1-hour chart below that there is a golden cross with the 50-period moving average above the 200-period moving average. Price is above both moving averages and the CCI is in the oversold area showing a pullback. The entry is confirmed with bullish candlestick patterns including an engulfing bar and hammer candle. We could have placed the stop loss just below the 50 SMA which would have been around 15 pips. The position could have been exited when price closed back on the other side of the 50 SMA which was over 180 pips. This trade had a very good risk to reward ratio. The 50 SMA could even have been used as a trailing stop point.
1-hour forex trend strategy sell signal
- 50 SMA is below 200 SMA
- Price is below the 50/100 SMA
- CCI (14) is above 100
- Bearish candlestick patterns
In the EUR/USD 1-hour chart below, all of the conditions have been met but this time for a sell trade. There is a death cross with the 50 SMA crossing below the 200 SMA. Price is below both moving averages and the CCI is in an overbought area above 100. This was a chance to enter this trend on a pullback. Stop loss around the 50 SMA level would have been 30 pips which is relatively tight when you consider this trade went on to make around 280 pips if we exited when price closed back above the 50 SMA. The 50-period moving average could have been used as a trailing stop. I have marked a more aggressive earlier entry on the chart, which would have been taking the sell trade as soon as price broke the support level. It works this time but does not always which is why I prefer to wait for a pullback.
1-hour forex reversal strategy
This 1-hour forex strategy can be used alongside the 1-hour trend strategy, choosing the most suitable option depending on the market conditions. When trading reversals, we are looking for a range bound market so we can enter buy and sell trades in the overbought and oversold areas.
1-hour forex reversal strategy buy signal
- Price is below lower Bollinger band (20, 2)
- CCI (14) is below -100
- Bullish candlestick patterns
In the EUR/USD 1-hour chart below, you can see price is ranging between the upper and lower Bollinger bands using the default settings of 20-period and 2 deviations. We could have taken a few good buy signals when price fell below the lower band and the CCI was also oversold. There are also some bullish spinning top candlestick patterns to confirm entry. We could have exited the trade at the middle or upper bands. You can even take the opposite sell signal on the upper band as we will look at next.
1-hour forex reversal strategy sell signal
- Price is above upper Bollinger band (20, 2)
- CCI (14) is above 100
- Bearish candlestick patterns
The EUR/USD 1-hour chart below is the same as the chart above, this time with the sell signals being shown. The entry is when price breaches the upper Bollinger bands whereas the exit can be at the middle or lower band. The sell signals are confirmed with the CCI being in an overbought area and bearish price action including evening star candlestick patterns.
1-hour forex strategy Pros & Cons
Pros
- Lots of buying and selling opportunities
- Can be used on any currency pairs
- Lots of indicators to choose from
- Catch some big market moves
- Requires less time chart watching
- Can be used at any time of day
Cons
- Need a wider stop loss
- Less trades compare to scalping
- Requires timing the entry and exit
- Good money management needed
Conclusion: is trading the 1-hour chart timeframe good?
Yes, the 1-hour charts are one of my favourites for buying and selling currency pairs. They have plenty of action and are used by many forex day traders. You also won’t need as much time to study charts looking for opportunities when compared to a 1-minute forex strategy and 5-minute forex strategy.
However, any forex strategy on any timeframe is only going to be as good as the person using it. The 1-hour charts can provide lots good signals without the noise of the lower timeframes but you will need to know how to time your entry and exit into the market. You can use any combination of technical indicators and price action analysis to help give yourself an edge.
The success is likely to depend significantly on how good your forex money management is. I have seen forex traders using the same trading strategies get completely different results simply because of the stop loss and take profit levels they were using. A trader who cuts losing trades short and lets winning trades run, could have a lower win rate and still make more pips than a trader who uses a high stop loss and take profit.
If you want to start trading with a 1-hour forex strategy, you can always open a free forex demo account. You can get one from most forex brokers including IC Markets who have some of the best day trading conditions in my experience, including tight spreads and fast execution speeds. They also have user-friendly platforms and plenty of tools to help with your market analysis.
Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Read more about me.
