After posting elements of my “wisdom” across the site, it occurs to me that maybe I haven’t posted in detail what I’m doing - how I actually put all this into practice. So, I felt a little obliged to be open about how I’m doing what I’m doing.
This is not a journal, I won’t be posting my trades, but I aim to post how to identify what I will be trading and how I will get in/out.
First off, I am a long-term trend-follower. A price chart will have to trend for more than a week before I’ll get interested. Also, I only enter/exit trades via orders, I never manually open/close a trade: there’s no need for me to watch price charts live and I’ve got better things to do.
I follow a very simple strategy with no off-chart indicators, no news input, no FA input. As far as possible, I want to use objective criteria only.
Primary requirements -
(example is for longs, reverse as appropriate for shorts)
All must be fulfilled.
- 20EMA is above 50EMA
- 50EMA is sloping upwards
- 50EMA is above 200EMA
- Price is above 200EMA
Secondary requirements -
As many as possible of these must be fulfilled: a higher score prioritises a trade in that pair.
5. At least 80% of last 16 weekly highs, lows and closes above 50EMA?
6. At least last 4 weekly bars not pierced by 50EMA?
7. At least last 8 weekly bars not pierced by 50EMA?
8. At least last 4 weekly closes above 50EMA?
9. At least last 8 weekly closes above 50EMA?
10. Does last complete weekly bar overlap fewer than 4 immediately preceding weekly bar ranges?
11. Does a clear majority of other pairs with same base currency also show 20EMA above 50EMA?
This gives a possible maximum score of 11 per chart. I will prioritise long entries into pairs with highest scores. Entry signals are not a key factor but will be typically -
a) just above a daily close that is above the 20EMA following a daily close below it on the previous day
b) just above a daily close on a bullish candle that has traded below the 20EMA but closes above it
An admission - I sometimes take a long when the 20EMA crosses above the 50EMA as long as price is above the 200EMA.
Stop-losses on the initial position is TA-based, e.g. just below the low of the last swing low on the dailies. If that’s too far away, use 1-2ATR below entry (the aim at this point is to be long in the uptrend, not to get the most finessed entry price).
When initial trade opened, set a new entry order where initial trade will reach profit equivalent to initial risk in £. When this triggers, set trade 2’s risk to the same in £, move Trade 1’s SL to b/e. Keep setting new entry orders at each increment of the same gain in £, and moving each existing trade’s SL up by the same £.
Be aware that pyramiding this way only shows an excess profit over a single buy-and-hold long once 5 consecutive trades are open. After that the advantage goes almost parabolic.
I could spend all day listing what I don’t give attention to but the main ones would be off-chart indicators, newsflow, support/resistance and trend-lines.
Cheers folks. A bit more detail to come later on my top-scoring charts.