3 Little Pigs Trading System

3 LITTLE PIGS TRADING SYSTEM
I have been a frequent visitor to BabyPips for a while as I have been looking around for a free trading system that didn’t require much screen time. I was told of the 3 Little Pigs swing trading strategy by a friend and after looking into it a little more and checking it on a kind of back-test I decided to get a little more formal with myself. I have opened a small account and will trade this in real-time and report all my trades here. I’ll do his in the hope it keeps me disciplined and also that others will join in and share trades and ideas with me. The manual offers a number of options for Entry, Stop and Target so I documented the approach I will take to help keep me on the straight and narrow.

OVERVIEW
The 3 Little Pigs is based on 3 timeframes, Weekly, Daily and 4 Hour. The idea is to “swing” trade in the direction of all 3 timeframes, a Buy signal, as an example:
• Price is above the 55 Simple Moving Average (SMA) on the Weekly timeframe
• Price is above the 21 SMA on the Daily timeframe
• Price closes above the 34 SMA on the 4 Hour timeframe
When the above conditions are met a Long position is opened.
These are the basics - Sell is vice versa.

ENTRY
As I mentioned, there are a number of options in the manual – Here is my chosen approach:
BUY
• Price is above the 55 SMA on the Weekly timeframe and
• Price is above the 21 SMA on the Daily timeframe, I will enter
• On close of the next candle that touches and then closes above the 34 SMA on the 4 Hour timeframe
SELL
• Price is below the 55 SMA on the Weekly timeframe and
• Price is below the 21 SMA on the Daily timeframe, I will enter
• On close of the next candle that touches and then closes below the 34 SMA on the 4 Hour timeframe

STOP LOSS
My choice here may seem a little complicated but only when written down, in practice it’s really straight forward.
First, I check the 14 period Average True Range (ATR(14)) which I added to all my 4 Hour charts. I add the High and the Low values (displayed on the right) and multiply this by 25% – I place my stop above/below the 34 SMA on the 4 Hour timeframe by this number of PIPs.
I have included an example as an attachment.
This is not a real setup just a chart I decided to use to demonstrate how I calculate my Stop loss.
This is the 4 Hour timeframe and assumes price is above the 55 SMA on the Weekly timeframe and the 21 SMA on the Daily timeframe. Price has touched the 34 SMA and has closed above it. The High and the Low of the ATR(14) is 26 and 14 which gives me 40. I take 25% of this value which is 10 PIPs. To get my Stop loss I subtract this from the current 34 SMA value (8460 – 10) so my Entry here is 8482 (the candle close), plus Spread and my Stop loss is 8450.
I will then use a Trailing Stop loss behind the 34 SMA on the same basis, e.g. if the 34 SMA rises to 8475 I will then trail my Stop loss to 8465.

TARGET
Again the manual offers a number of options but I use an open target and exit only when my Trailing Stop loss is taken out.

RE-ENTRY
If I get stopped out I will re-enter according to my Entry rules.

ONE OTHER RULE
Buy explained, Sell vice versa.
If, for example a candle touches and then closes above the 34 SMA on the 4 Hour timeframe and price is above the 55 SMA on the Weekly timeframe but below the 21 SMA on the Daily timeframe I will wait. I will wait until price is above both the 55/21 SMAs on the Weekly/Daily timeframes and then, if price is still above the 34 SMA on the 4 Hour timeframe I will enter a trade on close of the next candle on the 4 Hour timeframe.
Same Stop loss/Target rules applied.

FOREX PAIRS & RISK
I will trade the 8 currencies mentioned in the manual (AUDUSD, EURGBP, EURJPY, EURUSD, GBPUSD, USDCAD, USDCHF, USDJPY) and (also mentioned in the manual) I will risk 1% of my account on each trade.
BROKER
I am using GXFX Spread bet account charts but place my trades on IG Index – Just my preference.

SUMMARY
I know this is not going to make me much money in choppy markets but I like the idea of trading in the direction of the Weekly, Daily and 4 Hour trend on the basis I will catch all the big moves – When they happen!
I believe this system will take me less than a few minutes every day and reckon the main downside time commitment wise is missing the 4 Hour candles that close when I am asleep, I will monitor the impact of this.
I am now going to officially start looking for opportunities from the start of July and report all trades here. As well as my trades and thoughts I welcome yours on what I hope will be a profitable journey as I do my best to make this work for me.


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Thanks for the post - Look forward to your updates - You refer to a manual - Please can you tell me, where do I get it ?

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It’s on a website called Forex Useful. There’s actually another free system on there called PAST which I will try and look at after I am comfortable with this one - I cannot post links for some reason so you will have to google “Forex Useful” or “3 Little Pigs Trading Strategy” to get the manual.

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Thanks - Found it!

Just a quick update, as promised. I opened no new trades yesterday and continue to wait for now… Back soon

Checking back through the rules I’ve found that I missed a couple of trades yesterday afternoon.
These were the 16:00 bars:
Sell AUD/USD, entry is at the 9230 close, stop is (76+44)/4 = 30 pips from MA of 9244 so 9274
Buy USD/CAD, entry is at the 10502 close, stop is (48+18)/4 = 17 pips from MA of 10491 so 10474
I’ll include these trades in my results for consistency.

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LOL!

With 3 DUCKS and 3 LITTLE PIGS, we’ll soon have a forex farm going on here ;)!

All the best to you Phil!

Cheers!

Very funny - LOL

No further trades yesterday, the existing AUD/USD and USD/CAD trades are heading in the right direction.

AUD/USD is currently around 9080, I’m going to move my stop to 9140 to lock in some profit.

Any winning/losing trades yet - I think EURJPY and GBPUSD look valid from 08:00 candle close - Am I right?

Just observing at the moment.

Yes, there are two new trades on the close of the 8:00 bars:
Sell GBPUSD, entry is at the 15240 close, stop is (66+28)/4 = 23 pips from MA of 15249 so 15272
Buy EURJPY, entry is at the 12933 close, stop is (94+37)/4 = 33 pips from MA of 12901 so 12868

GBPUSD hit stop at 15272 for -32
EURJPY hit stop at 12868 for -65
Running total -97

At the close of the 12:00 bar yesterday there was another Buy signal on EURJPY:
Buy EURJPY, entry is the 12930 close, stop is the (94+37)/4=33 pips from MA of 12905 so 12872.
At the close of the 16:00 bar yesterday there was a buy on USDCHF:
But USDCHF, entry is the 9471 close, stop is (54+24)/4= 19 pips from MA of 9457 so 9438.

The AUDUSD sell at 9230 nearly hit stop at 9140 but is still open.
The USDCAD buy at 10502 is still open.

Thanks for the updates.I have a question.Are you using the indicator or are you checking the higher time frames manually?

Hi Bigalmal, I use the indicator. I did a 1:1 with Jon who runs the ForexUseful website, and got the indicator as part of this. He’s a good guy, very helpful.

Loads of action today
The AUDUSD Short from 1 July hit my moved stop at 9140 for +90 pips.
Running total -7pips

The USDCAD Long from 1 July was within 5 pips of hitting the 10474 stop on the 12:00 bar
Yesterday’s EURJPY Long at 12930 went to 12882 and nearly hit stop of 12872
Yesterday’s USDCHF Long at 9471 is currently 9564, I’m moving stop to 9521 to lock in 50 pips
3 new trades
Long EURGBP entry is the 8562 close of the 12:00 bar, stop is (31+16/4)=12 pips from MA of 8550 so 8538
Short GBPUSD entry is the 15084 close of the 12:00 bar, stop is (66+28/4)=23 pips from MA of 15223 so 15246
Short AUDUSD entry is the 9160 close of the 16:00 bar, stop is (76+42/4)=30 pips from MA of 9174 so 9204

The EURUSD 12:00 bar came within a couple of pips of a sell signal.

Rereading the rules I should have taken a sell on EURUSD when both Daily and Weekly indicators were Down after the sell signal, and this was on the 12:00 bar from 4 July.
EURUSD Short from 12917 (4 Jul 12:00), stop 13038.

EURJPY stopped out today on 8:00 bar at 12872 for -58pips