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Simple 5 / 8 moving average crossover

  • #301
  • Oct 27, 2007 10:54pm Oct 27, 2007 10:54pm
Quoting wilddream
hi slkosier,
thank you very much for your reply. can i clarify some points with you?

1) do you only use the cross over of 5 and 8 ma for a signal?

2) how do you set your sl and profit target?

3) what is your exit signal? is it the crossover of the 5 and 8 ma again?

once again, thanx.

rgds
wilddream
I have been setting SL like PeterM Has posted in his 1 post on here and trying a couple of other indicators to helpme confirm my trade...
  • #302
  • Oct 28, 2007 3:07am Oct 28, 2007 3:07am
Quoting Slkosier
I have been setting SL like PeterM Has posted in his 1 post on here and trying a couple of other indicators to helpme confirm my trade...
Hey Slkosier I'm impressed with the results you've been getting on the H1 timeframe. Good work! I prefer the Daily because the H1 is a bit choppy for my liking, but nevertheless I've started dabbling on a one hour but on a demo account. I guess you inspired me.

On the subject of indicators to confirm a trade, I use the RSI. I don't trade a 5/8 cross if it is against the higher timeframe trend. This is my rule. If I get a cross to go long on the daily, I will only take it if the RSI is above 50 on both the daily and the weekly. Likewise If I'm trading the H4, then RSI must be above 50 on the H4 and the Daily.

If you think about it there are only 2 trading scenarios. Either a MA cross is telling you that you have reached the top or bottom of a major long term trend and you're picking up the reversal which is rare on a daily, or more often, and this is what I like to trade - price is in an established trend and there is a pullback. This retracement often hits a fib level and then continues on its way giving you the cross.

Last weeks AUDUSD is a perfect example which I traded. Currently up +155 pips with SL at B/E and more to go this week I think. As you can see I wouldn't have taken the first cross to the downside as RSI was above 50 showing we are in an uptrend. The second cross which I traded was in sync with the daily and weekly trend and in fact was a retracement of the uptrend.
Attached Images
  • #303
  • Oct 28, 2007 3:13am Oct 28, 2007 3:13am
Quoting bujal38
errr...i enter here
NZD/USD .7569 Long
AUD/USD .8988 Long
Hello Bujal38. I guess we're trading in the same time zone. You're just next door to me. I'm in Phuket, Thailand and I'm a Brit.

How far do you think the AUDUSD will go?
  • #304
  • Oct 28, 2007 6:30am Oct 28, 2007 6:30am
Quote
On the subject of indicators to confirm a trade, I use the RSI. I don't trade a 5/8 cross if it is against the higher timeframe trend. This is my rule. If I get a cross to go long on the daily, I will only take it if the RSI is above 50 on both the daily and the weekly. Likewise If I'm trading the H4, then RSI must be above 50 on the H4 and the Daily.
Thanks for posting. How long have you been trading these setups and how is it going for you?

Pete
  • #305
  • Oct 28, 2007 9:13am Oct 28, 2007 9:13am
Quoting peterM
Thanks for posting. How long have you been trading these setups and how is it going for you?

Pete

Hi Pete

Not that long actually. Only about 2 months with the 5/8. But these trend rules evolved from a system I was trading previously on the hourly charts with good success using a crossing 9 and 30 Ema, but because of more market noise on the H1 the trade was confirmed with a Tom Demark trend line break after the cross and above 50 level on the RSI, above 100 on Momentum and MACD above the waterline for a bullish signal - and confirmed again on the H4.

I decided I wanted less screen time in my life and moved to the daily charts. I came across the 5/8 somewhere else in my travels can't remember where. Because trends are generally smoother on the daily I decided RSI was enough.

I first got into forex about a year ago. Before that I traded options and stocks. I got Peter Bain's Forexmentor course which is really focussed on capturing the big moves during the London session. Works best on the 15 min charts. The best thing I got from that course was the importance of top down trading. In other words always look at the trend on the higher time frames for market flow and work down. Oh and pivots.

I have an issue with profit targets. I don't use them. It was appropriate to use TP's when I was trading the EURUSD on an M15 chart at the opening of the London session when I knew that the average daily range was 80 pips. But on the daily with the 5/8 I'm not sure.

Look at this trade on the EurCad which resulted in a 529 pip profit.

I entered short at 1.4351. SL was the high of the previous bar at 1.4422. Note that it had moved decisively through the monthly pivot point. After 2 days I moved the SL to B/E and never moved it again. That's the other issue. If I had moved the stop down each day to the previous bar high I would have been stopped out at 1.4234 giving a profit of only 117 pips. You are bound to get retracement at some point. And if I had a TP for some meaningless number like 50 or 100 pips I would be exiting the trade prematurely. On these time frames I take the view that the time to exit is when the market tells you to. In this case price had run into a boring sideways channel but I could have waited for a reverse cross to exit. The bottom line is as long as I see good angle and separation of the EMA's as each day of the trade progresses I see no need to exit or take any profits. On the contrary, if the trend really starts to go and maybe breaks through another support or resistance level, there may be a case to add to the position. I don't think it's possible to make a profit long term with this system on the daily timeframe if you only take 30 pips or follow with a tight trailing stop. I think you have to accept more losses but catch the big moves. That may mean staying in a trade for a month. I know its boring. We are all itching to press those by and sell buttons

But have to confess I haven't done a proper backtest comparing the different approaches. Maybe if I have time I'll do one this week on one currency pair and post the results here.

As a complement to you and the thread you started you should know this is the only thread on any forex forum I have ever been tempted to post to. Keep it pure. Too many threads here end up with 25 indicators by the time it gets to page 20. LOL.
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  • #306
  • Oct 28, 2007 9:28am Oct 28, 2007 9:28am
Quoting SlushFund
Hey Slkosier I'm impressed with the results you've been getting on the H1 timeframe. Good work! I prefer the Daily because the H1 is a bit choppy for my liking, but nevertheless I've started dabbling on a one hour but on a demo account. I guess you inspired me.

On the subject of indicators to confirm a trade, I use the RSI. I don't trade a 5/8 cross if it is against the higher timeframe trend. This is my rule. If I get a cross to go long on the daily, I will only take it if the RSI is above 50 on both the daily and the weekly. Likewise If I'm trading the H4, then RSI must be above 50 on the H4 and the Daily.

If you think about it there are only 2 trading scenarios. Either a MA cross is telling you that you have reached the top or bottom of a major long term trend and you're picking up the reversal which is rare on a daily, or more often, and this is what I like to trade - price is in an established trend and there is a pullback. This retracement often hits a fib level and then continues on its way giving you the cross.

Last weeks AUDUSD is a perfect example which I traded. Currently up +155 pips with SL at B/E and more to go this week I think. As you can see I wouldn't have taken the first cross to the downside as RSI was above 50 showing we are in an uptrend. The second cross which I traded was in sync with the daily and weekly trend and in fact was a retracement of the uptrend.
Yes I like using the RSI to help confirm my trade..I use level setting at 56 and 44...above 56 for a buy and below 44 for a sell and between for a ranging market..It knida the same that you use with your RSI 50 above and 50 below...

Slkosier
  • #307
  • Oct 28, 2007 10:07am Oct 28, 2007 10:07am
Quoting SlushFund
Hello Bujal38. I guess we're trading in the same time zone. You're just next door to me. I'm in Phuket, Thailand and I'm a Brit.

How far do you think the AUDUSD will go?

Hi SlushFund, I'm a Brit in Bangkok.

I trade something similar to the 5/8 (but actually highlight 5 & 12) with RSI confirmation.
I've attached a typical chart, it's somewhat busier than the charts elsewhere on this thread, but I like to use Guppy MAs as a visual, and the Tunnel to confirm which side of the trend I'm on.
I also use a 21 MA of the RSI itself; I find it offers good confirmation either when RSI crosses 50, when it crosses the MA or better yet when in crossing the 50 it also crosses the MA.

Attached Image
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  • #308
  • Oct 28, 2007 10:11am Oct 28, 2007 10:11am
Quoting rathcoole
Hi SlushFund, I'm a Brit in Bangkok.

I trade something similar to the 5/8 (but actually highlight 5 & 12) with RSI confirmation.
I've attached a typical chart, it's somewhat busier than the charts elsewhere on this thread, but I like to use Guppy MAs as a visual, and the Tunnel to confirm which side of the trend I'm on.
I also use a 21 MA of the RSI itself; I find it offers good confirmation either when RSI crosses 50, when it crosses the MA or better yet when in crossing the 50 it also crosses the MA.

Attachment
oh, plus SpeedLines, the lazyman's Fib levels
  • #309
  • Oct 28, 2007 10:52am Oct 28, 2007 10:52am
Quoting rathcoole
Hi SlushFund, I'm a Brit in Bangkok.
I also use a 21 MA of the RSI itself; I find it offers good confirmation either when RSI crosses 50, when it crosses the MA or better yet when in crossing the 50 it also crosses the MA.

Attachment

Hi Rathcoole. Hope you're not getting the rain and flooding we're getting in the south.

That 21 ma on the RSI. Looks a bit like the fozzy indicator. Have you come across it? The difference is the fozzy is an 8 MA on an 8 RSI.
  • #310
  • Oct 28, 2007 11:04am Oct 28, 2007 11:04am
Quoting SlushFund
Hi Rathcoole. Hope you're not getting the rain and flooding we're getting in the south.

That 21 ma on the RSI. Looks a bit like the fozzy indicator. Have you come across it? The difference is the fozzy is an 8 MA on an 8 RSI.

sounds a bit short for trading dailies ? I've just had a quick look at 8+8ma. At first glance it seems to give more signals earlier but with the potential for far many more whipsaws.
Also, it seems to actually occur before the MA cross-over so it would mean turning the method on it's head and using the MA-x as confirmation of the RSI signal. Not too comfy with that, as I say, it seems to have the potential to throw up whipsaws.
I guess everyone has their own settings, I know of traders who swear by RSI 14. I just know what suits me.

And, no, no rain for a week. I've even had to start watering the plants !
  • #311
  • Oct 28, 2007 11:12am Oct 28, 2007 11:12am
Quoting SlushFund
.

I moved the SL to B/E and never moved it again.
If I had moved the stop down each day to the previous bar high I would have been stopped out at 1.4234 giving a profit of only 117 pips. You are bound to get retracement at some point. And if I had a TP for some meaningless number like 50 or 100 pips I would be exiting the trade prematurely. On these time frames I take the view that the time to exit is when the market tells you to.

Well said ! A great trade !
by the way, do you use this mthod on anything else but forex ?
It's given me great signals on gold, oil and the soyas lately too.
  • #312
  • Oct 28, 2007 12:10pm Oct 28, 2007 12:10pm
Quoting rathcoole
Well said ! A great trade !
by the way, do you use this mthod on anything else but forex ?
It's given me great signals on gold, oil and the soyas lately too.

No I'm just trading forex now. Funny, when I was trading options on futures commodities, I was happy with the daily charts then when I got into forex I was seduced into the excitement of scalping on 5 minute charts. Now I've come back full circle and decided that the daily charts are more profitable in the long term - and it takes up less of your time.

Problem is for a lot of people once you've got used to the adrenaline buzz of short term intraday trades for 10 or 20 pips it becomes psychologically difficult to avoid the temptation of cashing in quickly if you're 100 pips up on the daily chart. That's a big mistake.
  • #313
  • Oct 28, 2007 12:38pm Oct 28, 2007 12:38pm
Hello all,

Thanks PeterM for this great system. I think the system will suit me well and I'll start demo trading tomorrow. I use ema 5 apply to close and ema 8 apply to open as automatedtrader has advised, trendlines and RSI with levels 44 and 56 also. I wont put trailing stop all the time further, just to breakeven when it is possible, that way I try to catch the whole big move and ride with the wave. 5/8 ema's crossover to the opposite way, trendlines etc. will tell me when the trend could change and jump off the trade.

Many pips to all! Keep it simple.

See one of my chart as attachement. If you entered long somewhere at 1.1430 you would possible still be at that trade imo. Btw my first post here. http://www.forexfactory.com/images/icons/icon10.gif
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  • #314
  • Oct 28, 2007 12:48pm Oct 28, 2007 12:48pm
Quoting SlushFund
Hi Rathcoole. Hope you're not getting the rain and flooding we're getting in the south.

That 21 ma on the RSI. Looks a bit like the fozzy indicator. Have you come across it? The difference is the fozzy is an 8 MA on an 8 RSI.
8 over 8 (Fozzy) is great for Daily and 4 hour charts. Take a look at combining these two strategies, you might like what you see..........
  • #315
  • Oct 28, 2007 1:01pm Oct 28, 2007 1:01pm
Peter,

Nice simple system you have here..seems like it has sparked interest from the small time frame traders as well, which is great. I haven't read the entire post but got the jist of it. I too trade primarily daily and 4hr TF's using something very familiar to your 8/5 cross over, which does work great in trending markets..to filter the ranging times I simply use a larger TF to give me an overall trend direction..only trade that direction and also employ a cci 14 (qqe works great too). If it is not in sync with the cross, meaning going long crossing the 0 line from below at the same time as the MA's then I stand aside until the "stars" align..Again, it's not the holy grail, but it is simple and produces. Thanks for sharing.

NP
  • #316
  • Oct 28, 2007 1:33pm Oct 28, 2007 1:33pm
Can you provide the basis behind the indicator, will it work on the 4 hr/1hr charts? can you provide info on the channels and forec/snakewith borders that was refered to in a reply to your post as well as the JMA/Jaime abbreviations??

regards from a newbee to forex
  • #317
  • Oct 28, 2007 6:46pm Oct 28, 2007 6:46pm
I am going to try my Laguerre indicator next couple of days to see how it works on giving me an entry.... I am trying it on the EUR/JPY right now and it is pointing above .15 on it for a buy.. I am going to try a small trade and I'll let you guys know how it works out....

took 53 pips at openning of market...

Slkosier
  • #318
  • Edited 7:39pm Oct 28, 2007 6:49pm | Edited 7:39pm
Quoting Peke5
Hello all,

Thanks PeterM for this great system. I think the system will suit me well and I'll start demo trading tomorrow. I use ema 5 apply to close and ema 8 apply to open as automatedtrader has advised, trendlines and RSI with levels 44 and 56 also. I wont put trailing stop all the time further, just to breakeven when it is possible, that way I try to catch the whole big move and ride with the wave. 5/8 ema's crossover to the opposite way, trendlines etc. will tell me when the trend could change and jump off the trade.

Many pips to all! Keep it simple.

See one of my chart as attachement. If you entered long somewhere at 1.1430 you would possible still be at that trade imo. Btw my first post here. http://www.forexfactory.com/images/icons/icon10.gif
Can someone confirm that these are the correct EMA settings and what the default colors are?
I appreciate it guys, I read the entire thread and it's never actually stated.

Thanks for all the great info

Sawat Dee Khrap Slushfund and Rathcoole
  • #319
  • Oct 28, 2007 7:38pm Oct 28, 2007 7:38pm
Thanks for your comments guys. Slushfund, glad to hear u are doing so well. When using the strategy with the smaller time frames, using a confirmation indicator such as RSI could be a great idea as like you said, there is a lot of random noise. Regarding the 5/8 on the daily, I have done well with it, but youe ar right, I would be unlikely to catch a big move with it as I will inevitably have the trailing stop activated early for a smaller profit. Small pips are ok with me though.. it's the consistency I try to focus on.
  • #320
  • Oct 28, 2007 7:40pm Oct 28, 2007 7:40pm
Quoting Northpro
Peter,

Nice simple system you have here..seems like it has sparked interest from the small time frame traders as well, which is great. I haven't read the entire post but got the jist of it. I too trade primarily daily and 4hr TF's using something very familiar to your 8/5 cross over, which does work great in trending markets..to filter the ranging times I simply use a larger TF to give me an overall trend direction..only trade that direction and also employ a cci 14 (qqe works great too). If it is not in sync with the cross, meaning going long crossing the 0 line from below at the same time as the MA's then I stand aside until the "stars" align..Again, it's not the holy grail, but it is simple and produces. Thanks for sharing.

NP
You are welcome
It's certainly not holy grail, but that really doesn't exist. I do believe it does give us a great chance to succeed in the long term though. It's great to hear people doing well here with the strategy and similar strategies. Going with the trend on the bigger time frames, I like that idea. I am a big fan of going with the trend.

I am going to try the system on the 4 hour charts on demo, along with trading it live on the daily charts that I have done for a few months now.
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