Alrighty… here goes.
As this is one of my first posts on the forum I seem unable to submit posts with links… So please excuse the unlinked post.
I call this the SHI channel strategy
- Philosophy behind the system.
Most currency pairs trade between certain ranges. Know the ranges know the market. We can use trend channels in conjunction with other indicators to determine the current range and overall direction of the market e.g. uptrend/downtrend etc.
- Indicators and parameters.
I use 2 main indicators, moving averages and a custom trend channel indicator which can be found by going to Free download of the 'SHI Channel true' indicator by 'Collector' for MetaTrader 4 in the MQL5 Code Base
The moving averages I use are the 5 and 10 period exponential moving averages applied to the close.
- Entry and exit signals.
This is a swing trading strategy. So firstly load up your chart of choice on the daily time frame. For the purpose of this forum I have chosen this weeks winning trade of the week pair the AUDUSD
Hopefully you can see from the above chart that the pair has hit a double top and the moving averages are signalling a downtrend.
Now move to the 4 hourly time frame and apply the trend channel indicator above.
Now as long as the indicator confirms a downsloping trend and the pair is trending [B]above[/B] the midline of the channel [B]AND[/B] the fast EMA is below the slow EMA then you are good to go short. The best possible point being at the crossover.
(The reverse would be true for a long entry - i.e. up-sloping trend, and crossover of the moving averages such the the fast EMA is above the slow EMA below the midline of the trend channel.)
Position size is normally 2% of the account balance and calculated using the babypips tool
Exit would be signalled on the daily chart when the fast EMA crossed back above the slow EMA. (Or the reverse for a long entry)
- Stop loss and profit target placement.
As this is a swing trading strategy the SL has to be quite wide. I tend to use a 120 pip SL. I move the SL to breakeven when I have a clear 120 pips in the bank.
Profit target - not limited, relax, sit back and aim for a manual exit with EMA crossover on the daily.
- Sample chart with signals.
Just incase you missed it…
This system effectively allows you to jump in to a trend at the most opportune moments. If you are a sit back and wait for a trend to properly establish itself kinda person then this will suit you. If you are someone who like to get in right at the apex then this system will help confirm the best point of entry.
Hope you like it…
I’m sure there will be questions… I will do my best to answer any and all.