Yet another 50 SMA trading strategy
I'm trading this strategy right now and it looks very promising and the entry is completely mechanical.
I had to find a good exit strategy.
Necessary indicators:
50 SMA for 15M (longer TF cycles are faster)
Fractal (I use the Support and Resistance indicator which is a fractal based indicator as it is easier to see by the eye)
rule:
You wait for price to pierce the 50 SMA and then wait for the fractal to move towards a breakout. For those who don't know what a fractal is, it is simply a cluster of 5 candles as shown below.
http://i.investopedia.com/inv/articl...ractals_1r.gif
To elaborate more, a fractal refers to an upper fractal, i.e. the candle between 4 lower candles (2 lower candles, one upper candle, 2 lower candles)
For example, if the price breaks above the SMA to the upside, you would wait for an upward fractal to form above the SMA. You should not consider lower fractals because they are above the SMA.
All you have to do now is place a pending order in the direction of the breakout at the fractal level. Your stop loss should be a fixed number based on ATR, or more simply take the previous inverse fractal and make a proper risk calculation.
Side note: You should not do a fractal breakout if you missed the previous fractal breakout in the same direction. If you miss a deal, too bad for you. You can still use Fibonacci retracements or sexy stochastics to enter trades you missed, but don't use fractal breakouts for this.
Take profit:
-The minimum value should be 2:1 so if you have 2 losing trades and 1 winning trade you will break even, but the system can provide a ratio much higher than 2:1.
- Other options are to move your stop loss as the fractal forms, but you may be stopped out when the fractal approaches the SMA. But I will reduce your losses on losing trades to a great extent.
-The last option is to move your SL until you can start using the SMA50 on the next TF, as far as you can go when you are on a really big move.
See the screenshot below. This is of course a best case scenario, but 9 winning trades out of 10 trades over 4 days (I just found out I forgot one trade at the end which could have resulted in a loss), that's not a bad win rate, is it?
All we need now is a good exit strategy.
tell me what you think
Added: If a fractal pattern existed before the SMA was broken, but one candle of the fractal pattern broke the SMA, you have a valid entry pattern.
SMA50 looks fine on 15M, but seems too slow on longer TF. You should use shorter periods for longer TFs. For example, on H1 you can use 20 or less.
I had to find a good exit strategy.
Necessary indicators:
50 SMA for 15M (longer TF cycles are faster)
Fractal (I use the Support and Resistance indicator which is a fractal based indicator as it is easier to see by the eye)
rule:
You wait for price to pierce the 50 SMA and then wait for the fractal to move towards a breakout. For those who don't know what a fractal is, it is simply a cluster of 5 candles as shown below.
http://i.investopedia.com/inv/articl...ractals_1r.gif
To elaborate more, a fractal refers to an upper fractal, i.e. the candle between 4 lower candles (2 lower candles, one upper candle, 2 lower candles)
For example, if the price breaks above the SMA to the upside, you would wait for an upward fractal to form above the SMA. You should not consider lower fractals because they are above the SMA.
All you have to do now is place a pending order in the direction of the breakout at the fractal level. Your stop loss should be a fixed number based on ATR, or more simply take the previous inverse fractal and make a proper risk calculation.
Side note: You should not do a fractal breakout if you missed the previous fractal breakout in the same direction. If you miss a deal, too bad for you. You can still use Fibonacci retracements or sexy stochastics to enter trades you missed, but don't use fractal breakouts for this.
Take profit:
-The minimum value should be 2:1 so if you have 2 losing trades and 1 winning trade you will break even, but the system can provide a ratio much higher than 2:1.
- Other options are to move your stop loss as the fractal forms, but you may be stopped out when the fractal approaches the SMA. But I will reduce your losses on losing trades to a great extent.
-The last option is to move your SL until you can start using the SMA50 on the next TF, as far as you can go when you are on a really big move.
See the screenshot below. This is of course a best case scenario, but 9 winning trades out of 10 trades over 4 days (I just found out I forgot one trade at the end which could have resulted in a loss), that's not a bad win rate, is it?
All we need now is a good exit strategy.
tell me what you think
Added: If a fractal pattern existed before the SMA was broken, but one candle of the fractal pattern broke the SMA, you have a valid entry pattern.
SMA50 looks fine on 15M, but seems too slow on longer TF. You should use shorter periods for longer TFs. For example, on H1 you can use 20 or less.
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