Trading with 60 EMA

This trading system is simple in design yet very powerful in the application of finding great trades. As you might have deduced from the title, we will be using a 60 period Simple Moving Average. (SMA) An advantage to using this system is that your charts look so clean and free from clutter. There are 3 stages to this trading system with each stage building up a picture of the likely direction the price will be taking in the short to medium term.

Stage 1 4 Hour price Chart The first thing we have to do is add a 60 period “Simple” moving average to a 4 hour price chart. Any price chart you want to trade will do.

You can see from the screenshot above the 60 period “Simple” moving average is the pink line, and what we are doing with this 4 hour chart of the EUR/USD is ascertaining if the price is above or below our moving average. In this case the price is below our SMA so we now need to move onto the next chart.

Stage 2 1 Hour Price chart

On this 1 hour price Chart of the EUR/USD the price has had a couple of peaks above the 60 SMA (pink line) but has now moved back down below it. Looking at both the 4 hour and 1 hour charts the price is below the 60 SMA, so now is a good time to look for an entry point.

Because the conditions are right in both stages 1 and 2 we then move on to stage 3

 Stage 3 5 Minute Price Chart

The conditions are ideal for a trade as both the 4 and 1 hour charts are showing the price below the 60 SMA; we will enter a short position on the 5 minute chart. To find our entry point the price must first come below the 60 SMA and in this case, because we are looking for short entries, the price must make a low and then pull back. As soon as the pull-back is significant an entry order will be placed at this low or just a couple of points below it. The screenshot below shows the entry point and also where you can place you stop loss orders. Moving you stop loss orders down reduces the risk and starts to lock in profit.

The 3 stage 60 SMA just highlights how a trading system does not have to be all complicated to produce results. In fact there is a rule of thinking that says the simpler the system the easier it is to follow. The Exit When to exit a trade is very much a personal choice because we all have different tolerances to risk We have different options to use as our exit with this system, and you will have to use the one that bests suits your personality. Exit 1 Have a predetermined target; either at least the same amount as you are risking, or twice or 3 times the risk. Exit 2 Follow the trade by moving your stop loss order as the price makes pull-back highs (short trades, opposite for long trades) each time a new pull back-high is made ride the trade down. Exit 3 Employ a trailing stop .

Exit 4 Move your stop loss order to break even as soon as possible, this way you have eliminated the risk completely and can enjoy the trade (stress free!)