36# Trend Follow Trading System
Submit by janus trader 02/04/2011
Time frame:15-min, 1-hour, 4hour and daily timeframes.
Pairs:EUR/USD, GBP/USD, USD/CHF, EUR/JPY, USD/JPY.
Indicators used :
Exponential Moving Average 7-period (EMA7, Black Color in the
illustrations)
Exponential Moving Average 21-period (EMA21, Blue Color in the
illustrations)
Rules for Buy Signals (Long Trades):
- Firstly, we need to confirm that we’re in a strong uptrend. The
criteria for determining that price is in a strong uptrend are as
follows:
a. The EMA7 line is above EMA21 line
b. The EMA21 line is either rising or flat (that means, the slope of
EMA21 line is up).
c. Price must be trading above both EMA7 and EMA21.
- Secondly, once we’re sure that we have an uptrend, we wait for price to pull-back (retrace). Price declines from above the EMA lines to enter the area between two EMA lines. Then, one or more bars touch EMA21 (or decline slightly below EMA21).
- Thirdly, once one or more bars touch EMA21 (or decline slightly
below EMA21), we place a Buy order 1 pip above the High of the
last bar. When price breaks above the High of the last bar by 1
pip, we enter a Buy (Long) trade.
- Stop Loss: We place a protective stop loss 1 pip below the
Lowest Price of the Pull-Back (Retracement).
-
Profit Targets: We have Two exit strategies as follows:
-
Exit Strategy 1: We set our target objective such that our potential profit is two times our potential loss. For instance, if the entry price is 1.0000 and we place stop loss at 0.9900, our potential loss is -100 pips. Therefore, we set our target objective at 1.0200, so that our potential profit is +200 pips.
- Exit Strategy 2: We watch the slope of the EMA7 line. When the line EMA7 line changes from up to down (EMA7 points downward), we exit the trade at market price.
Buy (Long) Trade Example:
- Price is trading above both EMA7 (Black color) and EMA21
(Blue color). EMA7 is above EMA21. EMA21 is rising. All criteria for a
strong uptrend are fulfilled
Once one or more bars touch EMA21 (or decline slightly
below EMA21), we place a Buy order 1 pip above
the High of the last bar (the last red bar)
We place a protective stop loss 1 pip below the Lowest
Price of the Pull-Back (Retracement).
Rules for Sell Signals (Short Trades):
- Firstly, we need to confirm that we’re in a strong downtrend.
The criteria for determining that price is in a strong downtrend
are as follows:
d. The EMA7 line is below EMA21 line
e. The EMA21 line is either falling or flat (that means the slope of
EMA21 line is down or flat).
f. Price must be trading below both EMA7 and EMA21.
- Secondly, once we’re sure that we have a downtrend, we wait for
price to pull-back (retrace). Price rises from below the two EMA
lines to enter the area between two EMA lines. Then, one or
more bars touch EMA21 (or rise slightly above EMA21).
- Thirdly, once one or more bars touch EMA21 (or rise slightly
below EMA21), we place a Sell order 1 pip below the Low of the
preceding bar. When price breaks below the Low of the
preceding bar by 1 pip, we enter a Sell (Short) trade.
- Stop Loss: We place a protective stop loss 1 pip above the
Highest Price of the Pull-Back (Retracement).
- Profit Targets: We have Two exit strategies as follows:
- Exit Strategy 1: We set our target objective such as our
potential profit is two times our potential loss. For instance, if
the entry price is 1.0000 and we place stop loss at 1.0100, our
potential loss is -100 pips. Therefore, we set our target objective
at 0.9800, so that our potential profit is +200 pips.
- Exit Strategy 2: We watch the slope of the EMA7 line. When
the line EMA7 line changes from down to up (EMA7 points
upward), we exit the trade at market price.
Sell (Short) Trade Example:
The EMA7 line is below EMA21 line . The EMA21 line is
either falling (that means the slope of EMA21 line is down). Price
is trading below both EMA7 and EMA21
Once one or more bars touch EMA21 (or rise slightly
below EMA21), we place a Sell order 1 pip below the Low of the
preceding bar.
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debasish banik (Monday, 05 February 2018 14:42)
good