Hello everyone! My mechanical trading system is just really simple, with simple crossover signals and a trend-following indicator for confirmation.
It’s pretty easy to implement, mostly because of its simplicity and also because it’s easy to catch quick pips on the 5-minute chart.
Anyway, here goes:
[B][U]Indicators[/U][/B]
10 EMA (green)
21 EMA (red)
50 EMA (blue)
ADX (14)
I will be using the 50 EMA to determine the general direction of the trend. Then, I will be using the 10 EMA and 20 EMA to filter out choppy price action. Lastly, I’m using the ADX to help me determine how strong the intraday trend is. The School of Pipsology says that a reading below 20.00 means that the trend is weak, so I will enter trades when ADX is at least 25.00
[B][U]Entry Signals[/U][/B]
[U]Short:[/U]
Sell when ADX is at least 25 and if the 10EMA is below the 21EMA, which should both be below the 50EMA.
Short when the price pulls back to at least halfway between the 10EMA (green) and the 21EMA (red).
[U]Long:[/U]
Buy when ADX is above 25 and if the 10EMA is above the 21EMA, which is above the 50EMA.
Buy when the price pulls back to at least halfway to the 21EMA (red).
[B][U]Exit Signals[/U][/B]
Set stops 5 pips + spread above entry price if shorting, and 5 pips _spread below entry price if going long. Aim for at least 15 pips in profit but you can opt to keep the trade open while ADX is still above 25.
[B][U]Other rules to remember[/U][/B]
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Don’t trade during releases of top-tier reports. This system works on shorter-term time frames like the 5-minute charts, but there’s a higher chance of getting whipsawed during important releases.
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Don’t trade during the first and last hours of the London or U.S. sessions. There’s usually higher volatility during session opens and closes, which could lead to dramatic moves in the 5-minute chart.
Here are some sample charts of my Trendy 3EMA system in action:
In the first example, EUR/USD is in an uptrend. I bought the pair at around 1.4305 since it’s more than halfway in the distance between the 10 EMA and the 20 EMA. At the time the ADX was way above 20.00 at 39.86, which indicates a strong trend. In this case, price didn’t reach my stop loss and instead went up to 1.4320, my profit target.
In this next example, EUR/USD was in a downtrend. Again, ADX is above 20.00 at 51.52, and I shorted the pair when price was halfway between the 10 EMA and 21 EMA. This was a close one since price hit lows just a few pips below my profit target. Whew!
Any thoughts on how I can still tweak this?
