Extremely Simple MA-ADX System With a Twist (MM)

Hello traders,

I originally got this idea from the 2MA, 1RSI thread ( http://www.forexfactory.com/showthread.php?t=574065 ) and have been trying with different MAs to find the perfect fit. It was in this thread ( http://www.forexfactory.com/showthre...00#post8780000 ) that the MA was brought to my attention, and the system really improved after adding the linearly weighted MA. The whole idea is based on 2MA, 1RSI, where you try to trade after a small reversal within the trend. The system uses RSI and I decided to use ADX along with a simple money management system that should keep me going for decades to come!

Basically, you wait for all three moving averages to line up in the same direction, which will define your trend. You then wait for a simple dip and wait for price to move back in the direction of your trend, all of which requires you to focus on the ADX. ADX must be higher than 25! This is where things get interesting... I use the fourth MA, which is the same as the third (slow) MA, but moved 15 times. This MA acts as your stop loss and it will track your position. Your risk will be no more than 2%/portfolio, and your target price will be twice that risk.

Here's an example of a long entry:



As you can see, both fast MAs are above the slow MA and the ADX is above 25. You can also see the moving slow MA (pink) located just below the 60 MA, which is the SL.

There are three trades here, one marked red (i.e. a loss) and two marked blue. The first trade was stopped out and recorded as a 1% loss for each portfolio, and the other two trades each had losses of 2%.



In the next example, you will see two long entries (the second one is FALSE because the 12MA is below rather than above the 25MA), one of which brings about 0.3% profit for each portfolio, and the other with a stop loss of -1%. Soon after, all moving averages crossed over and issued a short signal. The short position also generated a 2% gain.



Below you will see two incorrect entries because the ADX is below 25, and one legal entry because the ADX is above 25.



So here's a quick summary of the entry and exit rules:

First long entry (shortly after the moving average crossover):

1) MA12 must be higher than MA25, and MA25 must be higher than MA60.
2) ADX must be higher than 25.
3) Price must be above all three moving averages

Additional long entries (the 12 and 25 moving averages will be above the 60 moving average, which will only happen if price breaks below and retraces above).

1) MA12 must be higher than MA25, and MA25 must be higher than MA60.
2) ADX must be higher than 25.
3) Price must cross from below MA12 and close above MA25 within three candles.

*Note: The only difference between these two entries is that when the trend is not fresh, the price needs to clear both fast moving averages and then retrace, whereas when we take the first position, we don't care if the price has already retraced, it is (hopefully the start of a trend, which should retrace soon anyway).

First short entry (shortly after moving average crossover):

Completely opposite to the above

Additional short term entries:

Completely opposite to the above

Money management:

1) Never risk more than 2% of your portfolio, your stop loss is set to a moving 60MA and will move as the price moves.
2) The take profit point is exactly twice the distance from the entry to the stop loss point.

I trade on H1 charts and haven't really looked into what it can do on slower or faster charts!

Having said that, thank you Sisyphus for introducing the 2MA, 1RSI systems, and thank you Zevkes for showing me your master's shift system.

Please tell me what you think!

Mung beans for everyone!