After lot of reading and testing I will be following the system which is mentioned below. This thread will be a like a trading journal for me. This will be helpful for people who are on a regular job like me. You need to just check the possibility of a trade once in a day.
Pairs - EUR/USD and GBP/USD
Timeframe - Daily chart
Indicators - EMA 8 (Red line) & EMA 21 (Blue line)
BUY:
8EMA is above the 21 EMA. Wait for a BULLISH candle.
The wick or part of BULLISH candle is touching or below the 8EMA. The candle could be below 8 and 21 EMA as well.
Avoid the trade if it is a BEARISH pin bar alone.
StopLoss should be usually the low of the candle -5 pips.
Initial Take Profit - 1:2 is the ratio that we are looking for. But just close half the position of your trade and move the stop loss to break even.
Final Take Profit - Mark a Fibonacci retracement on the previous / current bullish leg. Pick up a price which is midway of 138.2% and 161.8% as final take profit.
SELL:
8EMA is below the 21 EMA. Wait for a BEARISH candle
The wick or part of BEARISH candle is touching the 8EMA. The candle could be above 8 and 21 EMA as well.
Avoid the trade if it is a BULLISH pin bar alone.
StopLoss should be usually the high of the candle +5 pips.
Initial Take Profit - 1:2 is the ratio that we are looking for. But just close half the position of your trade and move the stop loss to break even.
Final Take Profit - Mark a Fibonacci retracement on the previous / current bearish leg. Pick up a price which is midway of 138.2% and 161.8% as final take profit.
I will be posting some examples from testing.
Additional Tips:
Please note this system will generate losses in a ranging market. You need to wait for a bullish / bearish break once you get two consecutive losses in the opposite direction.
Price mostly makes a false break out on rounding number like 1.3 or 1.35 or 1.355. While deciding SL / ITP / FTP give 5 to 15 pips for this false break outs. Example if you are SL is 1.3005 place the stop at 1.2985.
Disclaimer:-
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
This one was a winner. The ITP was taken on 19th Sept and FTP was taken on 25th Oct. I will post the chart later as there is some issue with the uploading.
If you have a mechanical system like this why not just code it up and show the back test results? This is far easier for anyone to digest and save a lot of time in terms of manual evaluation.