80-20 Trading System

Author Tradeology.com

This is a robust system built on Stochastic Oscilllator, MACD Indicator, and two Exponential Moving Averages to ensure precise entries and the maximum profits possible. With this system you will also get a template that comes with an autoinstaller, making it easy and painless to install. Yes, it's called the 80/20 system because of the way it uses the moving averages and the stochastic oscillator, but it also is very helpful when it comes to finding accurate trend trading entires. You could say it finds you 80% more profitable trades in only 20% of the time. Which saves you time and could make you a lot more money, if you follow the very simple rules we have laid out here. It is a very versatile system and can be used on all time frames, so whether you're a scalper or a long-tern trader, the 80/20 system could help you find more accurate entries and more profitable trades, in less time. It's quite simple to use and has solid trade management that will ensure risk reduction while it maxes out your profits, so you make more and keep more of it, which is the end goal, right? To have more money in your account at the end of each trading session. Because when it comes down to it, making consistent conservative profits every day, and keeping at it, is how you go from broke to profitable and from wherever you are right now to successful.

Swing Highs and Swing Lows

Before we get into the rules of the system, let's start by identifying what we mean by 'Swing Highs' and 'Swing Lows,' which we will need to identify in order to set our targets properly. Basically, what we call a swing point is a point at which price reverses and moves in the opposite direction from the price's original direction.

Swing High

A swing high is formed when the high of the price at a paricular point is greater than the high of the candle to the left and the candle to the right of it.

Swing Low

A swing low is formed when the low of a price at a particular point is lower than the low of the candle to the left and the candle to the right of it.

Let’s take a look at a few examples of swing highs and swing lows on the chart:

Now, let's have a look at the rules we need to use so we trade the system effectively.

Indicators setting

Stochastic Oscillator (5,3,3, close).

MACD (12, 26, 9 , close).

EMA 20 period,close.

EMA 80 period, close.

BUY (LONG) Trade Rules

1. Price has to be above the Orange EMA 

2. Stochastic Oscillator's Blue line has to be above 20 

3. MACD Histogram has to be above the 0 level

4. Enter the trade when price closes above the White EMA

5. Stop Loss set a few pips below the most recent swing low 6. Exit the trade as soon as the first swing high has formed.

SELL (SHORT) Trade Rules

1. Price has to be below the Orange EMA 

2. Stochastic Oscillator's Blue line has to be below 80

3. MACD Histogram has to be below 0 level 

4. Enter the trade when price closes below White EMA

5. Stop Loss goes few pips above last swing high

6. Exit the trade as soon as the first low high forms.

Trade Management

In order to extract even more pips with this system, you could add a second target and incorporate some effective and profitable trade management. The first target, as per the rules, is set after the first swing point forms. Your second target will be the next swing point. To manage the trade, you shoud do the following: 

1. When the price reaches your first target (first swing point), close half of your position. 

2. Move the Stop Loss to break-even point (your entry level) 

3. At this point you've banked some pips which are safely stored in your account. If the price reaches the second target, you'll bank some more. In the event that price reverses and takes you out of a trade (by hitting your Stop Loss), you will not lose any money, since the Stop Loss is moved to your break-even point (the level of your entry), so you're in a very good position.