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Simple 5 / 8 moving average crossover

  • #1
  • First Post: Edited Dec 30, 2012 8:03am Aug 30, 2007 5:28am | Edited Dec 30, 2012 8:03am
I have been using a strategy for a few months now. It is very simple and I have followed the rules exactly. Its certainly not holy grail but it has made me some nice pips over the last few months.

I use the 5 EMA and 8 EMA crossover on the daily chart. For the stop loss I use the low or high for the previous day (depending on if we are or short). Alternatively if this is too close or too far away, so the risk/reward ratio would be too low, I draw fib lines on the daily chart and trendlines to try and pickout important support and resistance points and place the stops at these. I always give priority to points where the market has bounced previous. I usually place the stop just above or below these points.

I have used it on these pairs: NZD/JPY, GBP/JPY and GBP/USD. It has worked best on these pairs in the past.

For the take profit, I trail it, usually by 50 pips on nzd/jpy , 100 on GBP/JPY and 50 on GBP. It loves trending markets but doesnt work to well in ranging markets, however as I used strategic stops and tps, The losses have been very small when the market ranges, sometimes even a small profit. On the plus side it has picked up and rode some nice trends. I picked up the first part of the major carry unwinding on gbp/jpy and nzd/jpy for some very very nice pips, A nice gain on equity whilst not risking too much. I had the sell signal on GBP/USD but that one got stopped out at +2 pips.
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  • #2
  • Aug 30, 2007 4:51pm Aug 30, 2007 4:51pm
ive used 5/8 for about 4yrs..works great..you should try with channels ..and force/snakewithborders indi..you can find quite a few indicators to help with trending and stoplosses
  • #3
  • Aug 30, 2007 5:45pm Aug 30, 2007 5:45pm
Here're the indicators:
Attached File(s)
File Type: mq4 EMA Crossover Signal.mq4   4 KB | 21,452 downloads
File Type: mq4 MovingAverages1.1.mq4   7 KB | 15,239 downloads
  • #4
  • Aug 30, 2007 7:46pm Aug 30, 2007 7:46pm
oops forgot to mention...8open 5close is what you really want to set it at.. JMA/Jaimo is even better at those settings than EMA
  • #5
  • Aug 31, 2007 4:16am Aug 31, 2007 4:16am
Quoting automatedtrader
ive used 5/8 for about 4yrs..works great..you should try with channels ..and force/snakewithborders indi..you can find quite a few indicators to help with trending and stoplosses
Great, nice to hear someone else having success with it. Do you use channels for stops and take profit ?

I am starting to believe even very simple strategies can work nicely in the longer term if applied with tight risk management.
  • #6
  • Aug 31, 2007 5:18am Aug 31, 2007 5:18am
Quoting banzai
Here're the indicators:
Thanks so much for those banzai.. very helpful indeed :-)
  • #7
  • Aug 31, 2007 5:40am Aug 31, 2007 5:40am
What time frame do you use?

Quoting automatedtrader
ive used 5/8 for about 4yrs..works great..you should try with channels ..and force/snakewithborders indi..you can find quite a few indicators to help with trending and stoplosses
  • #8
  • Aug 31, 2007 12:00pm Aug 31, 2007 12:00pm
Quoting Eureka
What time frame do you use?
daily time frame
  • #9
  • Aug 31, 2007 12:15pm Aug 31, 2007 12:15pm
Thanks.
  • #10
  • Sep 3, 2007 5:34pm Sep 3, 2007 5:34pm
I agree, simplicity sometimes is the best solution. A lot of people keep trading smaller time frames and keep getting burned.

Longer time frames are the best. No wonder most professional traders use only daily charts. I know that UBS traders do that for example. I work at UBS (not as a trader and not in Forex) and sometimes I talk over the phone with top forex people at the company in Zurich. They only work with daily charts, support and resistance levels and a few more indicators. Nothing fancy, basic simple stuff.

The 5/8 emas work very well when it trends, less when it ranges. But what indicator works well on ranging markets anyways, right ? If the markets were always trending we would all be filthy rich by now. The problem with trading, no matter what (stocks, commodities. forex etc.) is when the market ranges, period. That's when most profit obtained while it was trending are burned and the you start all over again.

Funny how most new threads here promising for the best system yet last a few months until they all start to realize that 'hey, in the long run it will not work.' Why ? 'Cause of the ranging times...

Hopefully everybody gets to understand that and stop hoping for the holy grail.

Even trading news has its "ranging" moments: that's when a news does not move the currency in the expected direction. How many times that has happened, and people go all crazy saying things like "well, it is going down because you see, the news was good, but not as good as it was expected and plus yesterday John Doe said that this and this therefore I think that people were hoping for......blah blah blah"

It is all BS, all pure BS. Systems come and go (look at Vegas) and people still look for the next best thing. When will they learn ?

Keep it simple and you might have a chance at it, but you will never, EVER become filthy rich at it, especially when you start with little capital.

I might sound mean and negative but we all know it is the truth, otherwise we wouldn't be here looking for new magical systems all the times.

If, after realizing that, you still want to play with it, then enjoy the ride and have fun ! Only when you eliminate all that financial pressure you can really have fun at it and see charts in a different way.

Mr. Future
"Lunch ? Lunch Is For Wimps !"
  • #11
  • Sep 3, 2007 5:41pm Sep 3, 2007 5:41pm
Quoting MrFuture
I agree, simplicity sometimes is the best solution. A lot of people keep trading smaller time frames and keep getting burned.

Longer time frames are the best. No wonder most professional traders use only daily charts. I know that UBS traders do that for example. I work at UBS (not as a trader and not in Forex) and sometimes I talk over the phone with top forex people at the company in Zurich. They only work with daily charts, support and resistance levels and a few more indicators. Nothing fancy, basic simple stuff.

The 5/8 emas work very well when it trends, less when it ranges. But what indicator works well on ranging markets anyways, right ? If the markets were always trending we would all be filthy rich by now. The problem with trading, no matter what (stocks, commodities. forex etc.) is when the market ranges, period. That's when most profit obtained while it was trending are burned and the you start all over again.

Funny how most new threads here promising for the best system yet last a few months until they all start to realize that 'hey, in the long run it will not work.' Why ? 'Cause of the ranging times...

Hopefully everybody gets to understand that and stop hoping for the holy grail.

Even trading news has its "ranging" moments: that's when a news does not move the currency in the expected direction. How many times that has happened, and people go all crazy saying things like "well, it is going down because you see, the news was good, but not as good as it was expected and plus yesterday John Doe said that this and this therefore I think that people were hoping for......blah blah blah"

It is all BS, all pure BS. Systems come and go (look at Vegas) and people still look for the next best thing. When will they learn ?

Keep it simple and you might have a chance at it, but you will never, EVER become filthy rich at it, especially when you start with little capital.

I might sound mean and negative but we all know it is the truth, otherwise we wouldn't be here looking for new magical systems all the times.

If, after realizing that, you still want to play with it, then enjoy the ride and have fun ! Only when you eliminate all that financial pressure you can really have fun at it and see charts in a different way.

Mr. Future

your negativity sucks. sorry to hear you LOST at the game of Forex. maybe something else would be better for you
  • #12
  • Sep 3, 2007 5:51pm Sep 3, 2007 5:51pm
Quoting Repipula
your negativity sucks. sorry to hear you LOST at the game of Forex. maybe something else would be better for you

Looks like you are a great reader...

I am actually having a great time trading and I've been enjoying it even more since taking the "realistic approach" and abandoning the "holy grail exist" one.

You may wanna read things a couple times more before you start replying, just a suggestion...

Mr. Future
"Lunch ? Lunch Is For Wimps !"
  • #13
  • Sep 3, 2007 6:33pm Sep 3, 2007 6:33pm
Well MrFuture, for what its worth, I tend to agree with you as regards the simplistic outlook on trading. In all my years of intimacy with the markets, and the numerous systems, and courses, methodologies, complex or whatever... I always seem to go back to the second method I ever used (one MA and stochs) which, incidentally, has been the most successful overall FOR ME. Still is. I usually use it to confirm other methods.
But this will not stop me from prowling these forums because I really enjoy checking out other peoples' efforts and there are some good ones here.
So in a nutshell, yes I agree with you and I'm in the 'simple' camp. But because I read these and other systems, it doesn't make me a loser.
Btw nice post
Dave
  • #14
  • Sep 3, 2007 7:32pm Sep 3, 2007 7:32pm
Quoting Acko
Well MrFuture, for what its worth, I tend to agree with you as regards the simplistic outlook on trading. In all my years of intimacy with the markets, and the numerous systems, and courses, methodologies, complex or whatever... I always seem to go back to the second method I ever used (one MA and stochs) which, incidentally, has been the most successful overall FOR ME. Still is. I usually use it to confirm other methods.
But this will not stop me from prowling these forums because I really enjoy checking out other peoples' efforts and there are some good ones here.
So in a nutshell, yes I agree with you and I'm in the 'simple' camp. But because I read these and other systems, it doesn't make me a loser.
Btw nice post
Dave
Dave,

I would never, ever suggest that who reads FF is a loser. For starters, I am a reader, at least once a week and enjoy reading about other people's approaches.

The only thing I do not like is to see over an over the same old story of people getting excited about the next holy grail and then see the same pattern all the times where the thread starts losing posts as people realize that, on ranging times, the system does not perform well. I have been there, done that.

All I am suggesting is to keep it simple and change the attitide: if you are hoping a system will make you rich, you will only get stressed out and lose money.

If you realize a system can only help out and give you some extra cash DEPENDING ON HOW MUCH YOUR STARTING BALANCE IS, then you will be good at it and have fun.

Reality is, 90% of people in here are hoping to get rich quick and therefore hate reading posts like mine and get all defensive, and I know that 'cause not too long ago I was exactly in their same shoes.

As time goes by they will realize that I was not THAT wrong after all....

Mr. Future
"Lunch ? Lunch Is For Wimps !"
  • #15
  • Edited 7:01am Sep 4, 2007 4:00am | Edited 7:01am
Quote
The 5/8 emas work very well when it trends, less when it ranges. But what indicator works well on ranging markets anyways, right ? If the markets were always trending we would all be filthy rich by now. The problem with trading, no matter what (stocks, commodities. forex etc.) is when the market ranges, period. That's when most profit obtained while it was trending are burned and the you start all over again.
Yes, I fully agree with this. This is why there is no holy grail strategy and never will be. With this kind of strategy and any strategy really, is to keep losses small and let the profits run, so we have a consistant long term edge.

I understand what you mean about short time frames. I traded these at first, but it was very labour intensive and I did a lot more trades than I do now which meant a lot more spreads to the broker, meaning I had to have a much bigger win ratio just to break even. People do make money on this kind of trading, but it just doesn't suit me.

I must also agree that fx is not a get rich quick scheme, this kind of approach is potentially dangerous in my view. However, with strict discipline and risk management and a good strategy, it is possible to make above average returns on your money, not without some degree of risk though. I am more conservative than many traders, I trade with very low leverage, I aim for 2-3% per month. If I get to 4% I stop trading for the month so not to risk losing it.
  • #16
  • Sep 4, 2007 4:09am Sep 4, 2007 4:09am
Currently I am waiting for a signal on GBP/USD, it may come today, it may come in a few days, I will wait. Last trade on this pair was the cross on the 24th August. Entry was 2.0040. It got very close to my stop which was below support at the time, then price changed in favour of my position and hit 2.0191 and my trailing stop was activated at 2.0141 for +101 pips. Patience and discipline, I am getting there!
  • #17
  • Sep 4, 2007 6:28am Sep 4, 2007 6:28am
PeterM, good thread. Thanks for sharing your experience. I'm currently long GBP/USD with a few pips locked in and will follow your daily signal and hop on short too, if it materialises and the R:R looks OK.

Thanks again and good trading to you.
  • #18
  • Sep 4, 2007 7:04am Sep 4, 2007 7:04am
Hi im a novice but i been following the cross over method qutie some time and from all my experiments its been one of the most simple and most effective
i have a couple of questions
1) how would u define a ranging market
2) being a laggard the MA do you place the order at market once the EMAs cross each other?
thanks guys
  • #19
  • Sep 4, 2007 8:06am Sep 4, 2007 8:06am
tx for the indicators banzai

and yes PeterM, despite what others may say... MA crosses is one of the simplets and most effective methods that I came accross.

wrt. ranging markets, I ussally stay out of trouble with MTF and trading on the daillies or 4hr.
  • #20
  • Sep 4, 2007 8:45am Sep 4, 2007 8:45am
It took me a while but now I'm a simplicity zealot.

For those who find 2 moving averages devilishly complicated why not try my method of using only 1?

I now use just a 10ema (5 or 8 is just as good). When it cuts through price you have a signal.

If the ema line is flat I wait for a bit of slope but other than that its just eyeball and a bit of candle patterns.

It is also less frustrating than moving average crosses as there are numerous opportunities to get in so I don't fret if I miss one. With a very tight stoploss it works very well.

I have used it from 1 minute up to 1 hour with good returns.

Good luck to all
Considering a move to Memphis
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