Daily and 4hr price action with EMA Trend

First of all, this is not a mechanical system. You are going to have to do some of your own analysis but it is not time consuming. We are only interested in looking the Daily and 4hr timeframes. All trades will be with the current trend only, if that does not exist, then you switch to another pair.

I am only looking at the following pairs:
EURUSD, EURJPY, GBPUSD, AUDUSD, USDJPY, USDCHF, USDCAD, GOLD, OIL.
You can add an index and bonds if you wish like the EuroBund and the DAX/SNP500.

How to setup your charts:

  1. Load a Daily and a 4hr chart next to each other.
  2. On the daily chart, add the following indicators:
    Exponential moving averages: 10, 20, 50, 100
    Simple moving average: 200 - simply because it is an important market indicator.
  3. On the 4hr chart, add the following indicators:
    Exponential moving averages: 60, 120.
    The 60 is approximately the same as the 10 moving average on the Daily chart.
    The 120 is approximately the same as the 20 moving average on the Daily chart.

You should then end up with a chart layout similar to this:
10 Green, 20 Red, 50 Blue, 100 Orange, 200 Black


The idea is to look for entries on the 4hr charts that are in the same direction as the daily trend.
If the Daily trend is down, all EMAs pointing downwards and price staying strongly below the 10 and 20 EMA, then we look for any sort of signal on the 4hr charts. Preferably, this can be a topping candle signal but you can also look for breakout consolidation patterns, and support/resistance.

If the trend is down on the Daily chart, but price is not below the 10 and 20EMAs then we need to wait for a Daily signal and/or confirm our trades/hypothesis with fundamental analysis. For example, on the EURUSD chart above, we are in a strong bullish retrace at the moment so I am NOT looking for any entries short on the 4hr. I am waiting for a Daily signal to get short again OR I am waiting to see how the fundamental analysis turns out in the next few days/weeks (Jan 2012, we have FOMC and Greece talks to think about).

As an example, of trade setups we are looking for, I have attached 3.
The first is a breakout of the AUDUSD, the second is GOLD, and the third is the textbook trend definition of the EURUSD (note the dates).






I will put up some more examples as we go along.
Set up an alarm on your computer to go off every 4hrs, do not bother trading the overnight action, there are plenty of FX pairs to choose from in the list above. Just await an entry and be patient.

In summary,
STRONG DOWNTREND ON DAILY:
…identified by the EMAs and other technical/fundamental analysis, you will look to short the instrument on the 4hr charts. You are looking to short when:

  • you get a candle signal
  • you get a candle signal at resistance (better)
  • you get a bearish consolidation at support and can trade the breakout (you need more experience to identify these).

STRONG UPTREND ON DAILY:
…identified by the EMAs and other technical/fundamental analysis, you will look to buy the instrument on the 4hr charts. You are looking to buy when:

  • you get a candle signal
  • you get a candle signal at support (better)
  • you get a bullish consolidation at resistance and can trade the breakout (you need more experience to identify these).

Any questions, let me know.

Current charts I am looking at:
[B]EURUSD:[/B] No trade, awaiting Daily signal for bearish trend to continue. If 10 and 20 > 50 EMA then will consider new bullish trend.
[B]EURJPY: [/B] No trade, awaiting Daily signal for bearish trend to continue. If 10 and 20 > 50 EMA then will consider new bullish trend. Nearing Daily resistance.
[B]GBPUSD:[/B] No trade, awaiting Daily signal for bearish trend to continue. If 10 and 20 > 50 EMA then will consider new bullish trend.
[B]AUDUSD:[/B] Looking for another entry to buy.
[B]USDJPY:[/B] No trade, awaiting Daily signal for bearish trend to continue. If 10 and 20 > 50 EMA then will consider new bullish trend.
[B]USDCHF:[/B] No trade, but getting close to looking for bearish entries.
[B]USDCAD:[/B] Looking for areas to sell.
[B]GOLD:[/B] Looking for areas to buy.
[B]OIL:[/B] No trade.

Note: All trades will be a minimum of risk:reward 1:2.

So, 1600 GMT on Tuesday, we have a long AUDUSD, short UCAD, long GOLD.
I will add some pictures shortly with reasons for entry.
Note, that tomorrow is the FOMC statement so if you want to give these trades a miss then no problem.

Hi SanMiguel,
Thanks for posting. Moving Averages, Price Action and Higher time frames (Daily, H4) helped me turn my trading to profitable. I will follow your thread and learn more.

Cheers,

Just closed AUDUSD for a profit of [B]3.93%[/B] (including the overnight carry): it was a bit worrying sitting through that big red candle but all the spikes in the support area showed it was likely to hold.

GOLD was a stop out sadly as it is now soaring but the volume was quite volatile this morning. Best not to trade AUDUSD and GOLD at the same time. [B]-1.75%[/B]

USDCAD still open but profitable by [B]1.67%[/B]

Nicely done sir!

After yesterday’s moves, the only thing I am looking at at the moment is a possible short on USDJPY based on the Daily chart.
I want to see what happens though on the next few hours.
So, be patient, no more updates for the moment - this is what Daily and 4hr trading is about - make around 10% a month and build slowly.

Could you please share your analysis with us regularly so we can join the party as well. you know i study on the candle patterns but i still have some way to go about that,and also not enough confidence and experience so thepeople like me can benefit by your analysis… i think we better grab some money instead of the billionars or millionars :slight_smile:

This is quite a good strategy, working along the same line as my trading strategy, should bring in some good pips.

It’s a variation on many strategies out there but you need to consider some extra things.
As above, the best setup is a candle pattern at support or resistance with the trend.
You will end up sitting around waiting for the right trade quite a lot but that will save you on spreads.

Your strategy seems very sensible. Just to be clear, you only use the daily TF to identify the trend? Also how long have you been using your strategy for? What’s your rationale to trade on the 4H TF rather than the daily? I’m very curious. :slight_smile:

[B]you only use the daily TF to identify the trend? [/B]
Yes, with an additional “zoomed in” trend indicator on the 4h charts.

[B]Also how long have you been using your strategy for?[/B]
I trade other strategies too but only on the FTSE 100. This is the strategy I use for FX and have been trading like this for a while including support and resistance analysis.

[B]
What’s your rationale to trade on the 4H TF rather than the daily?[/B]
Better timing on the entry and smaller stop ranges. But I will trade the Daily if I think the trend is going to resume. For example, I am thinking of short EURUSD soon.

Feel free to stick up some charts with examples or questions or your own analysis.


Currency correlations.

USDJPY move.
Keep an eye on the 2 topping candles of EURUSD but beware any Greek deals over the weekend.


hi, SanMiguel
what for 50 and 100 EMA?
have not find any description about those indicators…

That’s a great way to view the correlations, I really like that. Nice big hotspot in the middle there. Where did you get that from?

The USD/CHF is very strongly inversly correlated at the moment because all the volatility has been removed from the EURCHF. As a result, the CHF has a direct inverse correlation with all the other majors. At the moment, if EUR goes up, then USDCHF goes down. EURGBP up, GBFCHF down, etc.

Audusd


It’s on Oanda I think.

Hi SanMiguel,
Hope all is well. waiting for your analysis using your strategy.

cheers,

Try putting one up yourself and I’ll let you know what I think of it. :slight_smile: