Entering an existing trend

Hello all,

I am using a swing trading system based on the 30 period SMA applied to the 4 hour and 1 hour time frames. The system is summarised below;

Long Position
4 hour trading above 4 hours 30pd SMA
1 hour closes above 1 hour 30 period SMA then makes a new high

Stop Loss is 10 pips below the lower of the 1 hour 30 period SMA or 1 hour 5 period low.

Short positions is the revers of all of the above.

I am only trading the Aussie and I try and place my trades during the business day.

If the day starts and a trend has become established, I’m struggling with how I should enter a trade. I’ve come up with two alternatives;

  1. Enter a trade as the price moves above the previous hourly high (or below low for short). If I choose this option, the price could be an excessive distance from my stop loss level. I have thought I could address this by making my initial stop loss 5 pips lower than the low of the previous 1 hour bar.; or
  2. Wait until the price falls within a nominal risk parameter (say 20 pips) and buy then. This has the advantage of minimising the risk while maximizing the potential upside, but it down mean I would be entering on the down swing.

I would appreciate any thoughts or alternative approaches that other members may have.

Thanks in advance.

you may want to take the RSI into consideration.