Oh, but this one is so much fun!
What is it?
This is a trend trading system using very clean charts.
Which time frame (TF)?
Any two TFs with a ratio of 1:4 - 1:6, for example: I use the H1 and the M15 TFs with a ratio of 1:4. But you could use the H4 and H1 charts (ratio 1:4) or the daily and the H4 charts (ratio 1:6)....you get the picture.
Which pairs?
Any, but I will only use GBPUSD, EURUSD or AUDUSD for illustrative purposes.
How do we determine the direction of the trend for our purposes?
Simple. To a "blank" chart add a 200 EMA/close/0 shift indicator. See chart #1 below.
Looking from left to right at the 200 EMA on the H1 GBPUSD chart it is clear that direction has been going up since around October 7, thus, until the direction of the 200 EMA noticably changes, we will only be taking long trades, that is, only trades above the white 200 EMA line.
UPDATE: I am finding the MA crosss work very well on countertrend trades on lower TFs also....just monitor more closely and don't necessarily look for as many pips as in a trend trade.
Let's look at the H1 EURUSD chart for practice in determining direction. (chart #2 below) Again, the direction has been going up since approximately October 7. Go through this exercise on other pairs to get more practice in determining direction.
(Note: If you are trading from a higher TF as an H4 chart, you would use the 200 EMA on that higher TF to determine direction.)
Finishing setting up the trading chart.
To the blank chart with the 200 EMA add the following Smoothed MAs:
---3 Smoothed MA/close/0 shift = gold
---8 SmoothedMA/close/0 shift = purple
See chart # 3 in next post
After the chart is set up, make sure to save the template.
SUMMARY OF THE "RULES"
Big Picture for direction comes from the H1 chart (or higher if trading another TF, but drawdown will be significantly bigger the higher TF one uses)
Scan for direction of 3,8 Smoothed MAs in relation to desired direction.
Make note of pairs setting up or need later review, for example, if they are approaching the 200 EMA...what will they do? Bounce off the 200 and turn, go through it, or walk along it. Those are the only choices.
When 3 crosses 8 on higher TF , move to lower TF for entry...look for a strong cross on lower TF and enter.
I monitor the trade on the higher TF, but that is a trader preference.
What is it?
This is a trend trading system using very clean charts.
Which time frame (TF)?
Any two TFs with a ratio of 1:4 - 1:6, for example: I use the H1 and the M15 TFs with a ratio of 1:4. But you could use the H4 and H1 charts (ratio 1:4) or the daily and the H4 charts (ratio 1:6)....you get the picture.
Which pairs?
Any, but I will only use GBPUSD, EURUSD or AUDUSD for illustrative purposes.
How do we determine the direction of the trend for our purposes?
Simple. To a "blank" chart add a 200 EMA/close/0 shift indicator. See chart #1 below.
Looking from left to right at the 200 EMA on the H1 GBPUSD chart it is clear that direction has been going up since around October 7, thus, until the direction of the 200 EMA noticably changes, we will only be taking long trades, that is, only trades above the white 200 EMA line.
UPDATE: I am finding the MA crosss work very well on countertrend trades on lower TFs also....just monitor more closely and don't necessarily look for as many pips as in a trend trade.
Let's look at the H1 EURUSD chart for practice in determining direction. (chart #2 below) Again, the direction has been going up since approximately October 7. Go through this exercise on other pairs to get more practice in determining direction.
(Note: If you are trading from a higher TF as an H4 chart, you would use the 200 EMA on that higher TF to determine direction.)
Finishing setting up the trading chart.
To the blank chart with the 200 EMA add the following Smoothed MAs:
---3 Smoothed MA/close/0 shift = gold
---8 SmoothedMA/close/0 shift = purple
See chart # 3 in next post
After the chart is set up, make sure to save the template.
SUMMARY OF THE "RULES"
Big Picture for direction comes from the H1 chart (or higher if trading another TF, but drawdown will be significantly bigger the higher TF one uses)
Scan for direction of 3,8 Smoothed MAs in relation to desired direction.
Make note of pairs setting up or need later review, for example, if they are approaching the 200 EMA...what will they do? Bounce off the 200 and turn, go through it, or walk along it. Those are the only choices.
When 3 crosses 8 on higher TF , move to lower TF for entry...look for a strong cross on lower TF and enter.
I monitor the trade on the higher TF, but that is a trader preference.
Attached Images (click to enlarge)
