Hello guys, I want to talk real quick about my little trading system.
It’s quite an interesting one cos it’s very simple to use. It’s a moving averages cross over system which combines ema and sma. (8ema, 10sma and 45sma). You can choose to add the 100sma for a longer term perspective
Time frame : h1/h4
Strategy: As soon as the 8ema crosses the 10sma on the h1 you can take a trade in the direction of the cross over but do ensure that the 45sma is in the same direction,
If it’s a bullish move ensure that your cross over has occurred and both the 8ema & 10 sma are already trading above the 45sma
For a bearish market the reverse is the case. The 45ema should be above. The same applies to the h4 and always apply price action in your analysis for a clear understanding of the general situation with the instrument you are trading using both the h4 and daily chart.
Entry: h1 or h4 crossover
Exit: for h1 take profit ranges from 30 to 150pips depending on the situation of the instrument and for h4, take profits would range from 50 to 200pips.
Management: stop-loss should be set based on the situation and time frame. It should not exceed 60pips for h1 and 80 for h4.
If you’ll excuse a little digression, I have a friend who trades something pretty similar and is successful with it.
He actually uses an EMA-6/SMA-8 crossover for the set-up indicator, and either SMA-40 or an MACD as the bias indicator, but what he’s doing is essentially very similar to your system above - just a very slightly faster-moving version of the same technique.
It works well in trending markets.
I suspect that the people who have great difficulties with systems of this kind are those who try to use them in ranging markets and/or ignore the [B]very[/B] important details, such as “do ensure that the SMA-45 is in the same direction”, as you specified above.
In practice, what tends to happen when the price and shorter MA’s are above a rising SMA-45 is that the EMA-8 is already above the SMA-10 and the trades are therefore actually triggered when those shorter MA’s cross and then [U]re-cross[/U], which means that you’re effectively “buying the dips in an established uptrend” and conversely “selling the rallies in an established downtrend”. And that good and valid principle, of course, explains why systems like this, sensibly and cautiously applied to the right sort of market, can be so successful.
(For myself, I would want to relate the target to the current volatility by using an ATR-multiple rather than just using a set number of pips, and similarly relate the stop-loss to the position of the most recently formed swing-low/high. But that’s “just my perspective”, as the saying goes.)
Wow thank for your contribution @lexys I just had to put it out for whoever would like it to improve their performance. In ranging markets going to the h1 would be more preferable.
I also love your contribution on setting of targets using atr. Well I use lines and fibonacci plus EW analysis for setting my take profits and stop-loss. I’m glad to get such a response. Thanks a lot.
