MA Crossover System that works for me

I have decided to start a new thread on this topic as I couldn't find another one where my approach fits and I didn't want to cause confusion by posting about my strategy on other people's threads. I posted the below yesterday on Phillip Nel's 5 Min Intraday System (https://www.forexfactory.com/thread/...ntraday-system), hence my reference to Phillip, but then realised he is in the Commercial section, so I'm starting again here under Trading Systems.

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I have been a member of FF since 2017, but decided to change my nickname to my real name, so I'm back to being a newbie!

I've been looking for a suitable thread to post my work in and Phillip Nel's work, at least in the earlier pages, is as close as I could find to mine, so it feels right here. But his work is widely respected so I don't really want to get in the way of that. I hope what I post adds value. And as Phillip is a fellow South African, it feels even more like home! Phillip, if you read this, Groete!

I use an 8/21 EMA strategy. There is nothing special about those two numbers. No magic. You could use Phillip's 10/21 EMAs or 10/25 or 6/15, or 12/35, whatever. But I did not suggest 50/200. Smaller MA numbers means the MAs never get very far from price and there is a reason for that - it gives a visual reference for price behaviour, you can judge almost up to the minute how stretched price is from the MAs and whether it is more likely to undergo a correction (reversion to the mean) or to break away from the mean.

This chart summarises my strategy. I wait for a new trend to form, as defined by the EMA crossover, then wait for a pullback to (or close to) the EMAs, which I have now discovered is similar to what Phillip teaches, and then enter a trade. I almost always use stop orders so that if a pullback turns into a reversal, there is less chance of that trade being taken out as price continues the 'wrong' way. Note that I identified a two-bar pullback setup and two inside bar setups. They all represent a pullback, or at least a pause, or a local consolidation period. And after the multi-IB setup, price exploded away. That's just perfect. I look for that kind of setup all the time.

This trade has just triggered. There is a small S/R level at the entry level, but otherwise it seems good.

Hi AlistairC
Thanks for starting this thread, it's quite similar to how I trade, but what time-frame are you using? On your first chart I see it's H4 but can't make it out on the second. Do you use H4 all the time?

I've just spotted you stated H4 lol

Yes, H4.

I started trading using the daily but found that it's too slow (for me) and that things just happen faster on H4. I don't believe H4 is any less effective than D1. When I want to test something live I will go down to H1 and trade as usual using smaller lot sizes, but then my learning curve is that much quicker.

This wasn't part of the plan! My "safety checklist" includes not trading into S/R, I just thought this one wasn't much to worry about. Hopefully this doesn't turn into a self-inflicted injury.

Here's an interesting example - how do you enter on a fast-moving trend?

This one took off like a rocket. I would be cautious about entering at the end of the breakout bar, or crossover bar, if you like. It's too long and explosive. One of my safety check rules is to avoid such bars (I'll post this safety checklist another time). So the next entry opportunities are the two-bar pullbacks indicated, entering on the tip of the pullback bar. The first one is almost an inside bar setup, but the second bar extends lower than the "mother bar", so it's not. I prefer the second example for an entry because it s a decent pulback and touches the 8 EMA. If that pullback had kept pulling back the buy stop order would likely not have been triggered, firstly, and then we could have followed each pullback bar down (but not too far) until price finally took off again.

Safety checklist

In my strategy there are no strict rules – you have to understand what is happening on the chart and use the trading tool between your ears. But there are some basics, which I call safety checks. These are things every trader should use for every trade. Basic common sense. I think that if you applied these safety checks properly, you could probably trade ANY system successfully.

1. Dominant trend: Check the trend direction on the next time frame up. I use H4, so I check what is happening on D1. It doesn’t have to be officially up/down yet just as long as it is clearly heading in that direction. It also helps to have a look at what is happening on the next TF down (in my case it’s H1). Sometimes you can see details there that are not clear on your trading TF.

2. S/R obstructions: Avoid trading into support or resistance – this could be horizontal levels or inclined levels as in trend lines or channels. Also, what looks like a strong uptrend on H4 might just be a pullback leg on D1 within a down channel. It would be foolish to buy at the upper boundary line joining successively lower swing high points.

3. Enter when price is close to the EMAs, which means you should avoid entering when there is open space between price and the EMAs. Here the rubber band is stretched, so price is likely to bounce back before it continues with the trend.

4. Avoid long/explosive bars, enter where the bars are short or “quiet” (and such bars are usually close to the EMAs).

5. Avoid trading into price extremes – look at the monthly or weekly chart to see if price is at a long-term low/high.

6. Beware of "old" trends. No trend continues forever, so if a trend has continued for a long time (e.g. it starts in the lower left corner of your screen and goes all the way up to the top right corner) it is an old trend, probably getting tired, its life expectancy is reducing rapidly (as with all of us eventually ). It might continue still, but as a safety precaution, just walk away. Wait for a fresh trend to start.

Here's a tool to give you a view of trend behaviour across time-frames at "one glance". It comes from a fellow FF member, zoheb01 https://www.forexfactory.com/thread/...dicator-system who produces some very useful One Glance Trader (OGT) tools. It provides a dashboard showing when the three MAs you have selected are all aligned (a green or red block) or grey when they are not aligned fully yet.

The dashboard lets you know when trend (as defined by the three EMAS you have selected) is up, down or neutral across whichever TFs you have selected. It is just one extra tool to help you make decisions about whether to take a trade or not, but if it just clouds your judgement, rather dump it.

Unfortunately the OGT site provides only the closed file (.ex4) not the editable one (.mql4), so the settings it comes with are the default settings and you need to edit them on a chart and save those to a template. Also, as it requires 3 EMAs to work correctly, I use 8/20/21 EMAs and that extra 20 EMA setting has very little effect on the outcome. But you could use a slightly slower set of EMAs, for example 8/21/30 (that's still quick) or 15/30/60 or watever. It's yours to play with.

Here's where the OGT trend dashboard might be useful.

This NZDCHF trade has survived and returned (very slowly) to the entry level and that S/R level. So should I stay in this trade? Breathe a sigh of relief and close at B/E? According to the trend dashboard, this thing is very bullish (remember that it is merely telling us how the EMAs are arranged on each time-frame).

Hi Alistair!
Thank u for ur sys, I just tested it and have 2 winning trades, so far so good.
Btw, can u kindly share more about your exit? And where do u set SL? Last swing?
Thank u again and have a great day!

I usually place stops at the recent swing point.

Exits are very important and I haven't cracked that one. At the moment I move to B/E at about 50 pips, depending on which pair it is and I set the target at 100 pips, again depending on the pair. But having said that, I also have a look at chart structure and will adjust the target accordingly. My ideal day (which does happen sometimes!) is when I place about 5 trades, all of them go into profit and I close the whole lot later in the day, even if some of them are not much in profit or even losing. I look at them as a basket of trades and the overall value of the basket for the day.

Yesterday I had that situation and had 2% growth on account balance for the day, then suddenly everything turned around and it evaporated, probably because of the important news events for CAD and USD. I'm still kicking myself over that and it's an area I need to tighten up on. If I get anywhere over 1% for the day and there is something significant coming up in the news I must overcome my instinct to let it run and just take the profit. After all, 1% for the day is still very good!

Hi mq112358

If you have had two successful trades would you mind sharing them? How you entered, where you set your SL and TP, and other considerations / safety checks you used? We can all learn from that, I'm sure.

Thanks, Alistair

I did an experiment, as much for myself as anyone else.

I randomly went to CADJPY H4. Note that the chart has plenty of sideways movement, consolidation areas and some fairly jumpy price behaviour. It is not a cherry-picked case. I also zoomed out 1 click to get more on one page.

Using arrows to mark the crossovers I traded EVERY arrow using the methods I normally would. Where I could I traded two legs following one crossover. I used my standard method of using a move to B/E at 50 pips (that saved a number of losses) and a TP of 100 pips. SL was at the previous swing point.

The results are marked on the chart. I placed the label as close to the relevant arrow as I could. The numbers speak for themselves. I doubt we would find this on every chart, but maybe someone here would like to give some of them a go?

I'll join you.

This trade has worked out nicely (so far!). I placed a buy stop order at the top of the consolidation area and, although it seemed to take an age to do anything, it has just taken off. I love that kind of breakout and it makes sense to look for trades out of consolidation areas. I'll soon be able to move the stop to B/E.

Other moving average...

Yeah, I take this trade too, 50 pips for now ))

I placed this sell stop order during yesterday and it triggered later in the day. It would have been better to get in near the crossover, but looking at the daily chart at that stage I wasn't sure about it. It broke through local support / consolidation easily and is now moving well.

Alistair, Do u trade on Fri and keep trades through the weekend? Bcz this sys is swing trade, right?