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.
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.
As I mentioned, there are a number of options in the manual – Here is my chosen approach:
• 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
• 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
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.
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.
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.
I am using GXFX Spread bet account charts but place my trades on IG Index – Just my preference.
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.