This trading system was developed specifically for tracking operations trend graphs 5 minutes , although with different changes can also be used in graphs 15 minutes. Makes use of several standard technical indicators to generate trading signals, which can be found at any trading platform, including Metatrader 4. These indicators include moving averages, RSI and MACD.
Although the number of indicators, the system is not as complex as it may seem, however requir care because their operations are short-lived, falling on the territory of scalping. In addition, we recommend using your signals only at specific times, as discussed below, in order to increase the percentage of successful operations.
It is based on the use of moving averages crossings to generate the input signals. The other indicators are used as filters, because as is well known, crosses moving averages tend to produce many false signals. Therefore, the filters help improve system reliability.
As always, it is recommended to evaluate this system of trading with a demo account before using it in a live account to trade with real money.
System configuration
- Recommended markets: The system can be used in any market, including Forex and (gold and silver spot) precious metals.
- Recommended time intervals: This trading system can be used in time frames of 5 minutes and 15 minutes.
- A weighted moving average of 10 periods (WMA 10).
- A simple moving average of 20 periods (SMA 20).
- A stochastic oscillator slow (10, 6, 6 - exponential)
- An RSI (28).
- Un MACD (24, 52, 18)
System rules
: To improve the reliability of trading signals, only signals generated in the following periods they are used 8:00 a.m. to 12:00 p.m. EST and 2:00 a.m. to 4:00 a.m. EST .
The following rules apply to operate in graphs 5 minutes.
Purchase transactions
purchase positions open when the following conditions are met:
- The WMA 10 crosses above the SMA 20 (bullish cross).
- The stochastic oscillator has a bullish signal (fast indicator line is above the slow line).
- E RSI (28) must be above the level 50.
- The MACD histogram must be above 0 and the moving average of the MACD (the indicator line) must be above the zero line and upward direction.
Sales operations
Sales open positions when the following conditions are met:
- The WMA 10 crosses below the SMA 20 (bearish cross).
- The stochastic oscillator has a bearish signal (fast indicator line is below the slow line).
- E RSI (28) must be below the level 50.
- The MACD histogram must be below 0 and the moving average of the MACD (the indicator line) must be below the zero line and downward direction.
-Stops loss: It is discretionary, every trader should use stop loss levels that best suit your risk profile. One option is to place the stop loss above the last peak in sales or below the last minimum purchase transactions.
-Objectives profit taking: It is recommended to take profits near key price levels. For example, you can close transactions with profit when the price is close to levels ending in 00, 20, 50, 80, etc., such as 1.1000 for the EUR / USD.
Rules for graphics 15 minutes
To apply this method in graphs 15 minutes, you can be used the same rules described above but changing the values of the following indicators:
- A weighted moving average of 5 periods (WMA 5).
- A simple moving average of 10 periods (SMA 10).
- A slow stochastic oscillator (5, 3, 3 - exponential)
- An RSI (14).
- Un MACD (12, 26, 9).
Example System
Example buy signal on M5 chart of EUR / USD
In the above image is an example of buy signal produced by the system. First we see the upward crossing of the WMA 10 on the SMA 20. At the same time we see that the RSI (28) is above 50 and the Stochastic oscillator has a bullish signal (fast line is above the slow line). As the MACD, the histogram is above the zero line while the moving average MACD (red dotted line) is above the zero line and upward direction also.
All signs of the indicators means that the buy signal is strong enough.
final Thoughts
This trend tracking system has a lot of filters, which increases the reliability of their signals but also limits the amount of trading signals that can be obtained. Probably if you delete one of the filters, such as MACD, system reliability will be just committed and the number of signals, including the winners, will be increased.
Therefore, it would be advisable to test this methodology with two variants:
- Trading system with all its filters.
- The trading system with a filter less, in this case the MACD.