This system will keep you busy and it is intended for those who want to be in the market at all times. Extremely good under high volatility market conditions, this system allows you to profit by still following the trend while having a higher edge on entries. However we place shorter stops on this one, based on 1xATR (as the system is based on volatility mostly).
As in other opportunities, we’ll use a simplified way to find the major direction of the trend by looking at the direction of exponential moving averages. However, further down we will show how this whole system is focused more on the Entries rather than anything else.
To find the direction of the trend plot a 100 period high EMA and a 100 period low EMA on a 4H chart. Look at how these two curves behave (downwards trending, upwards trending or not trending). 100 periods EMA traditionally represent good resistance and support levels and when they are broken we can expect, with a high degree of probability, a rebound in the price. See figure 1 below:
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Entry signals are generated in the direction of the trend when the price breaks the 100period EMA in the opposite direction. Stops are trailing with the red 100period low EMA. The position is finally closed when the price hits the 100period low EMA. |
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| Notice the edge that these positions gain when entering the trend. This will ensure a superior performance on the trend following system you choose |