100EMA & 200EMA Pullback System using MTFA
***After Reading 25th Before you continue reading, first of all because there is a guy named Whatfx who demonstrated this and if you take his word for it, you better not waste your time here. ***
Foreword:
I apologize to anyone who followed me and used my system in my previous post "Another Heiken Ashi tactic - hat tip to lawgirl21". The reason I stopped this post is not because I was unsuccessful, but because I felt the need to optimize the entry timing of the system instead of relying solely on Heiken Ashi to make every trading decision.
While HA itself is a lagging indicator, I have paper traded it (3 months) and live traded it (2 weeks) with good results until recently when I discovered two major drawbacks while using this system. Fir s t, it doesn't help identify price pullbacks. So we lose the " buy the dip, sell the dip " and we simply enter randomly every time. If the market pulls back sharply, this could result in a sharp decline. Secondly, exiting a trade based on a change in HA color can often burn our profits and it is not flexible.
Use MTFA to increase your odds of winning:
Trading is all about probability. Prices can go up or down, that's all. If I don't see any setup and a good reason to do so, I ignore sideways markets. I always employ Multiple Time Frame Analysis (MTFA) to assist my trading decisions, as I did with my previous MTF Heiken Ashi strategy. Before using my strategy, you should have a good understanding of what multiple time frames are, so please take a moment to read this great article by Dons Steinitz. Here are 3 key points I extracted based on: :
1. Each time frame has its own structure.
2. The higher time frame overrides the lower time frame.
3. Prices in lower time frame structures tend to respect the energy points of higher time frame structures.
To summarize, MTFA is a technique that first uses multiple higher timeframes to identify significant trends and then only takes entry signals directly from smaller timeframe charts. The general idea is to trade in line with the current trend. (Source: http://www.markettradingconcepts.com...=57&Itemid=101)
set up:
This is a very simple MTF strategy that uses only two moving averages, the 100-period EMA (white) and the 200-period EMA (red) . For this strategy I will only use the H1, H4, D1 and W1 timeframes. So be patient and set them up as I did (see screenshot below). You can also switch periods between charts. Sometimes, I avoid being distracted by standard candlestick charts, so I use a line chart (it's up to you). I added an average true range (period=14) to the D1 chart only.
** (I found this somewhere in FF). **
Buying rules:
On the H4, D1 and W1 time frames, the price is significantly above the 100EMA and 200EMA. Buy only if the price falls between the 100EMA and 200EMA on the H1 chart.
Selling rules:
On the H4, D1 and W1 time frames, the price was significantly below the 100EMA and 200EMA. Sell only if price bounces between the 100EMA and 200EMA on the H1 chart.
Exit rules:
Stop Loss - Enter the current ATR value shown on the D1 chart as the emergency SL. Hold your trade as long as your stop loss is not reached.
Taking profits – This should depend on your trading style and holding period. I use a risk to reward ratio of 1:1 or 1:2 and sometimes the closest S/R level (Murray Math Line) for TP.
Here is a living example of how I entered the market:
1. First I identify the general trend. On the H4, D1 and W1 time frames, the price must be above the 100EMA and 200EMA. Looking at the screenshot below, it's clear that the NZD is overwhelming the JPY (which is the weakest currency at the time of writing), so my first order of business is to just go long NZD/JPY.
2. Now I look for good entry signals on the H1 chart. Sometimes the price hits the 100 EMA and bounces back, but in this case, the price has fallen between the 100 EMA and the 200 EMA, so I am going long here.
My trading system explains:
This strategy is based on the following solid principles: Buy the dips, sell the dips because prices typically retrace after strong increases or decreases. It is very similar to using the RSI or Stochastics to determine overbought or oversold conditions, except I only use a combination of moving averages and MTFA. The logic is simple and clear: prices on lower time frames always tend to respect the prices shown on higher time frames. When the price on the lower timeframe is "out of sync" (counter-trend), this indicates that we have an opportunity to wait and pull the entry trigger. The screenshot below is taken from my USD/JPY live trade to illustrate this idea:
The screenshot below is a visual backtest of using the system on an H1 chart when all entry criteria are met.
Final note to my readers:
This is a high probability system, but it is also a very one . I recommend everyone to use sensible stop loss placement and manage risk carefully because we never know when the market will turn against us and eat our account. Once you place a trade, you should let the market do its work for you. When using this system, only two outcomes are certain:
Result 1: Your SL is hit and you lose money. But if you allow yourself to lose the money you're willing to lose, you can deal with it. I learned this important lesson from Nial Fuller that you should think of risk in dollars, not percentages or pips of your trading account. Although trading longer timeframes requires larger stops, the risk exposure remains the same if you limit your trade size.
Result 2: Your TP is hit and you win money. If the time comes, look for another entry opportunity, but don't try to rush the market. If there is no signal, either wait, search for other pairs of signals, or do nothing. The best way not to lose money is to not trade at all without a good reason.
If you have something to say or new ideas to share after reading my post to improve the accuracy of your system, I welcome any comments or criticism. This modified strategy uses the same MTFA approach as my previous MTF Heiken Ashi system, except we only have the opportunity to buy or sell pullbacks. You can use the Currency Strength Meter (CSM) from my old thread here to help you make trading decisions and increase your odds of winning.
Thank you for taking the time to read my new post and I wish you good luck in your Forex trading career.
Best regards,
Amica King
Foreword:
I apologize to anyone who followed me and used my system in my previous post "Another Heiken Ashi tactic - hat tip to lawgirl21". The reason I stopped this post is not because I was unsuccessful, but because I felt the need to optimize the entry timing of the system instead of relying solely on Heiken Ashi to make every trading decision.
While HA itself is a lagging indicator, I have paper traded it (3 months) and live traded it (2 weeks) with good results until recently when I discovered two major drawbacks while using this system. Fir s t, it doesn't help identify price pullbacks. So we lose the " buy the dip, sell the dip " and we simply enter randomly every time. If the market pulls back sharply, this could result in a sharp decline. Secondly, exiting a trade based on a change in HA color can often burn our profits and it is not flexible.
Use MTFA to increase your odds of winning:
Trading is all about probability. Prices can go up or down, that's all. If I don't see any setup and a good reason to do so, I ignore sideways markets. I always employ Multiple Time Frame Analysis (MTFA) to assist my trading decisions, as I did with my previous MTF Heiken Ashi strategy. Before using my strategy, you should have a good understanding of what multiple time frames are, so please take a moment to read this great article by Dons Steinitz. Here are 3 key points I extracted based on: :
1. Each time frame has its own structure.
2. The higher time frame overrides the lower time frame.
3. Prices in lower time frame structures tend to respect the energy points of higher time frame structures.
To summarize, MTFA is a technique that first uses multiple higher timeframes to identify significant trends and then only takes entry signals directly from smaller timeframe charts. The general idea is to trade in line with the current trend. (Source: http://www.markettradingconcepts.com...=57&Itemid=101)
set up:
This is a very simple MTF strategy that uses only two moving averages, the 100-period EMA (white) and the 200-period EMA (red) . For this strategy I will only use the H1, H4, D1 and W1 timeframes. So be patient and set them up as I did (see screenshot below). You can also switch periods between charts. Sometimes, I avoid being distracted by standard candlestick charts, so I use a line chart (it's up to you). I added an average true range (period=14) to the D1 chart only.
** (I found this somewhere in FF). **
Buying rules:
On the H4, D1 and W1 time frames, the price is significantly above the 100EMA and 200EMA. Buy only if the price falls between the 100EMA and 200EMA on the H1 chart.
Selling rules:
On the H4, D1 and W1 time frames, the price was significantly below the 100EMA and 200EMA. Sell only if price bounces between the 100EMA and 200EMA on the H1 chart.
Exit rules:
Stop Loss - Enter the current ATR value shown on the D1 chart as the emergency SL. Hold your trade as long as your stop loss is not reached.
Taking profits – This should depend on your trading style and holding period. I use a risk to reward ratio of 1:1 or 1:2 and sometimes the closest S/R level (Murray Math Line) for TP.
Here is a living example of how I entered the market:
1. First I identify the general trend. On the H4, D1 and W1 time frames, the price must be above the 100EMA and 200EMA. Looking at the screenshot below, it's clear that the NZD is overwhelming the JPY (which is the weakest currency at the time of writing), so my first order of business is to just go long NZD/JPY.
2. Now I look for good entry signals on the H1 chart. Sometimes the price hits the 100 EMA and bounces back, but in this case, the price has fallen between the 100 EMA and the 200 EMA, so I am going long here.
My trading system explains:
This strategy is based on the following solid principles: Buy the dips, sell the dips because prices typically retrace after strong increases or decreases. It is very similar to using the RSI or Stochastics to determine overbought or oversold conditions, except I only use a combination of moving averages and MTFA. The logic is simple and clear: prices on lower time frames always tend to respect the prices shown on higher time frames. When the price on the lower timeframe is "out of sync" (counter-trend), this indicates that we have an opportunity to wait and pull the entry trigger. The screenshot below is taken from my USD/JPY live trade to illustrate this idea:
The screenshot below is a visual backtest of using the system on an H1 chart when all entry criteria are met.
Final note to my readers:
This is a high probability system, but it is also a very one . I recommend everyone to use sensible stop loss placement and manage risk carefully because we never know when the market will turn against us and eat our account. Once you place a trade, you should let the market do its work for you. When using this system, only two outcomes are certain:
Result 1: Your SL is hit and you lose money. But if you allow yourself to lose the money you're willing to lose, you can deal with it. I learned this important lesson from Nial Fuller that you should think of risk in dollars, not percentages or pips of your trading account. Although trading longer timeframes requires larger stops, the risk exposure remains the same if you limit your trade size.
Result 2: Your TP is hit and you win money. If the time comes, look for another entry opportunity, but don't try to rush the market. If there is no signal, either wait, search for other pairs of signals, or do nothing. The best way not to lose money is to not trade at all without a good reason.
If you have something to say or new ideas to share after reading my post to improve the accuracy of your system, I welcome any comments or criticism. This modified strategy uses the same MTFA approach as my previous MTF Heiken Ashi system, except we only have the opportunity to buy or sell pullbacks. You can use the Currency Strength Meter (CSM) from my old thread here to help you make trading decisions and increase your odds of winning.
Thank you for taking the time to read my new post and I wish you good luck in your Forex trading career.
Best regards,
Amica King
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