50 SMA with Trend Line

50 SMA with Trendline is a day trading system basd on two simple moving averages and discretionary trend line.
The 50 SMA is commonly used by traders and works as a best indicator of intraday trend direction. Discretionary trendlines indicating when breakout direction changes.
Time Frame 15 min.
Currency pairs: EUR/USD, USD/CHF, GBP/USD, USD/JPY, GBP/JPY, AUD/USD.
Forex Indicators:
12 SMA, close,
50 SMA, close,
Trendline - draw across two or more points in an upward or downward trend.
When to take the trade (Entry Points):
Now you’re ready for the next trading opportunity that comes along. This will most likely happen very shortly after an economic announcement.
What you are watching for are three key rules:
1. The trade is taken on the opposite side of the 50 SMA – meaning that you enter sells below and buys above.
2. Only enter a trade in the direction of breaking both the 50 SMA and your trendline.
3. Only enter a trade if there is a clear break of the trendline – meaning that a candle should close outside the line and the next candle should not touch the line at all.
This example scenario is the perfect set-up for a sell trade. The next candle determines whether you place a sell market order right here. As always, what works going down works equally going up. The reverse pattern would set up a buy trade.
Stop-Loss:
In this type of trading, stop-losses can be set very small. It is rare that the trendline is broken in the reverse direction if candles have started forming on the opposite side. And, when it does come back over the line it is almost always a false breakout and it is best to be out of the trade at a small loss. So a stop placed about 10 pips inside the trendline is usually best. Taking into consideration your entry point will likely be about 15 pips outside the trendline. This means a target of 20 to 25 pips total for a stop-loss is suitable.
Note that the stop-loss is set at 10 pips inside the trendline and not above the 50
SMA.
When to Exit:
One of the most difficult aspects of trading is choosing an exit point when in profit. Psychology always plays a role in either prompting us to exit too soon or in exiting too late trying to pick up 100% of the move. So a very solid interpretation of your exit strategy has to be in place. Here are our recommended guidelines. You should exit when you see these three occurrences combined.
1. When you reach a greater profit than your stop-loss risk (when beyond a 1:1 ratio). So if your stop-loss was 25 pips then consider exiting once beyond 25 pips profit. 2. Use the 12 Moving Average (the green TPF line) as your primary indicator for exit. We recommend that you exit if a candle reverses over this line(s) by more than 50% (half) of its size (including wicks).
3. When the 12 Moving Average (The green TPF line) turns to point towards the 50 SMA or points to 3 o’clock.
Note that the blue candle did not cross the 12 MA (green line) by more than half its size so try to hold off on exiting here. As well, the currency had yet to move 20 pips below the trendline. You can almost always count on this as a minimum when the line is broken.
Tips and other info on using this system:
The system relies on good volume and some volatility. So look for breakouts to happen at peak times just following an economic announcement. The system works very well on all pairs trading with the USD and, although not tested, it is likely it would work equally well on cross-pairs. Of course the disadvantage to cross-pairs is the higher cost of each trade, so we recommend you stick to the USD ones. We also suggest that you add an additional indicator of your choice such
as MACD, RSI, Awesome Oscillator, Slow Stochastic, etc. This is to help confirm the breakout.
We recommend you set-up a specific tab in your Desktop/Pro-Charts just for 15 min. charts for several of the pairs. This way you can easily see which ones are setting up and you are ready to go when a breakout occurs. Limit yourself to two or three pairs. As always, practice this in your demo account, and then with just one lot at a time when moving to live trading. As far as using this system on different time frames, it works there too. However you would need to adjust stop-loss and profit ratios based on the type of trade being either swing or position. We do not have guidelines for this at this time.

Related

Scalping Strategies 1434244569593189908

Post a Comment

emo-but-icon

item