Simple Moving Average 50 period crosses over the period. When this happens we will look to making a trade in the direction of the cross over i. First we wait for a pullback in price, and enter the trade on the next bullish candle if trading long or bearish candle if trading short. IF the crossover happens as price is already pulling back from a move in that direction we simply wait for the candlestick confirmation and enter there.
IF the first trade fails, we will look to re enter, but only if price breaks through a key resistance point in the direction of the trade. We do this because we try to get a confirmation that price is in fact going to continue in that direction and not just enter a side-wards range. This is the one part of the system that in very few cases may need some human judgement.
If the last swing low is so far away that you are risking maybe pips on a single trade, I would perhaps go half way. You can safely suggest that if the price falls pips from where you first entered, that the price is not heading in the direction you thought it would, and its time to get out.
IF the price takes off from your entry in the direction you desire we will be looking at the next pullback to enter again. Wait for a consolidation and a confirming candlestick to place another trade, effectively adding to the size of your trade. If price takes off again in your desired direction we do the same. Wait for a consolidation and confirming candlestick to place another trade. Move your last trades stop loss to break even. At this point you should have one trade in profit, one trade at break even and one trades worth of risk.
We do not add to the position more than twice after the initial trade. No more than 3 trades open on one currency pair at a time. We can trade the 50 day moving average strategy across all major currency pairs, although some yield better results than others. In my experience, anything paired with CHF has not performed that great using this system, but I would still not write it off. Catching one major trend nicely can make up for even ten losing trades.
Although I have used this system for a good while and have plenty of results and stats in my live trading account, they are kind of mixed up with results from other trading systems I use too. I would always suggest before trading any strategies on a live market even the ones I am showing you now that you invest in a simple back testing software and check for yourself that the system is profitable. There are also other good software on the market, but I find them a little too complex.
I will show below exactly what happens and how play it out when the market starts to trend. As you can see from the image below, the 50 day moving average has moved above the day moving average and price has pulled back.
Upon seeing the bullish candles we enter the trade. Price does not take off straight away from this point, it goes side-wards for five days before taking off in the direction we would like.
Price then consolidates a little more and gives us another bullish signal. At this point I will add to the position by placing another trade as per the instructions mentioned earlier. I move the stop loss of my first trade to break even and put the stop loss for this trade below the last swing low. Looking at the chart below, we can see that price takes off again in our direction. We add to our position again for the final time during this trade. Now we have 3 positions open.
One at break even, one in profit and one trades worth of risk. Below is a snapshot of my trades during this trade so far. Bare in mind, for the sake of testing, my lot size has only been 0. The snapshot below shows how the up move on this pair continued and we had more opportunities to get in again for some profitable trades and a few small losing trades.
In this particular case the trade went really well. But it just shows that catching one major trend like this can more than make up for the periods of side wards movement. The trick is to make sure you never miss a trend by not missing any signals.
Consistency is the key. Even if the market is clearly going side wards and you get a buy or sell signal, take it, because that can be the start of a major trend like this. If not, you make a small loss and wait for the next opportunity. See below the trades from riding this trend. These trades failed for a small loss and when we got the signal, we entered back long. And finally what my equity was looking like throughout the test. As you can see there are periods of drawbacks during the side ward moving times of the market.
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