I've been trading pullbacks against this two averages from some time with consistency. Rules are simple: Just wait for price to pull against the two averages. Place an order(long or short) and place your stop at the last swing high or low. You can opt to place your stop at the upper/lower average but need to be careful not to be too far away from your entry.
Yes, as every trend following technique you will face whipsaws. What I do is to use proper money management and if the day is choppy I just quit.
The charts I have here is a trade I took today 10/26/2010. The pullback was somehow a bit away from the averages but my risk reward was adequate for that trade. I exit when the price goes inside the opening of the averages. I look for 2:1 risk and reward. Sometimes is more, sometimes is less.
This a very simple strategy, no complicated stuff. The idea is not to trade the moving averages but the price in relationship with the averages.
21/50 and I should say 200 are one of the most used averages across all markets. As you know there's no holy grail but at least it works.
Note: The vertical red line is the beginning of New York session(8:00 AM.)
Yes, as every trend following technique you will face whipsaws. What I do is to use proper money management and if the day is choppy I just quit.
The charts I have here is a trade I took today 10/26/2010. The pullback was somehow a bit away from the averages but my risk reward was adequate for that trade. I exit when the price goes inside the opening of the averages. I look for 2:1 risk and reward. Sometimes is more, sometimes is less.
This a very simple strategy, no complicated stuff. The idea is not to trade the moving averages but the price in relationship with the averages.
21/50 and I should say 200 are one of the most used averages across all markets. As you know there's no holy grail but at least it works.
Note: The vertical red line is the beginning of New York session(8:00 AM.)
Attached Image (click to enlarge)
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