40 MA Channel Trading System is
a trend-following strategy.
The purpose of this strategy is to keep
us on the correct side of the market at all times, through the 40 MA
channel. when the price are in the channel we do not trade,If the
prices are above the channel, is a buy signal, if the prices are
below the channel , is a sell signal.
Time Frame 15 min or higher.
Currency pairs: any.
Forex Indicators:
40 Moving Average Smoothed, high;
40 Moving Average Smoothed, Low;
15 EMA, close.
Trading Rules
When prices are above the 40 bar moving
average of the Highs,
we go long on a violation of the high
of the bar making the local low.
• When prices are below the 40 bar
moving average of the Lows, we sell short on a violation of the low
of the bar making the local high.
• We do not enter on a gap opening
violation of either the high or low.
• We do not enter a trade if the 15
bar moving average is flat or has turned away from the direction of
the trade we want to take.
At 'A' prices are inside the channel.
Price bars must be entirely out of the channel before we can use the
Camelback. When prices are above the channel, we attempt to purchase
a breakout of the high of the bar that makes the local low. 'B' is a
local low. An entry 1 tick above 'B' would have enabled the covering
of costs and possibly a small profit. A trailing stop beneath the low
of each bar would have seen profits maximized 4 bars after 'B'. 'C'
was the next local low. An entry 1 tick above the high of 'C' would
have done little more than allow cost covering and a breakeven exit
some time in the next two time intervals. The next local low was 'D'.
Entry 1 tick above the high of 'D' would have resulted a profitable
trade. Entry above the next local low, 'E', might have only covered
costs and broken even. Entry above local low 'F' would have given
some nice profits, as would entry above local low 'G'.
H' was a local low whose high was never
violated, so there could not have been an entry. At 'I', the
exponential moving average is turning and is flat. In addition, there
was no possible entry on a violation of 'I.'
Subsequently prices move to the other
side of the channel. We are then looking to be short.
Once we are operating on price bars
that are entirely out of the channel, we then try to sell a breakout
(violation) of the low of the bar that makes the local high.
'J' is a local high. It is the top of a
minor correction to the recent medium term downtrend. Shorting the
breakout of the low of 'J' would have resulted in a profitable move.
'K' was a local high. Shorting a breakout of the low of 'K', when it
happened 3 days later, also resulted in a profitable trade.
At 'a', 'b', 'd', and 'e' we sell short
a breakout of the low of a local high. At 'c' and 'f,' we buy a
breakout of the high of a local low.
Once prices broke below the channel,
the selling short of a breakout of the low of almost every price bar
that made a local high would have resulted in a nice profit, or at
the very least, have covered costs. We've placed an 'x' by every
point at which we think this could have
happened. The very last 'x' would
almost surely have resulted in a loss.
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