36# Trend Follow Trading System

Submit by janus trader 02/04/2011

 

Time frame:15-min, 1-hour, 4hour and daily timeframes.

Pairs:EUR/USD, GBP/USD, USD/CHF, EUR/JPY, USD/JPY.

 

 

Indicators used :

Exponential Moving Average 7-period (EMA7, Black Color in the

illustrations)

Exponential Moving Average 21-period (EMA21, Blue Color in the

illustrations)

Rules for Buy Signals (Long Trades):

- Firstly, we need to confirm that we’re in a strong uptrend. The

criteria for determining that price is in a strong uptrend are as

follows:

a. The EMA7 line is above EMA21 line

b. The EMA21 line is either rising or flat (that means, the slope of

EMA21 line is up).

c. Price must be trading above both EMA7 and EMA21.


- Secondly, once we’re sure that we have an uptrend, we wait for price to pull-back (retrace). Price declines from above the EMA lines to enter the area between two EMA lines. Then, one or more bars touch EMA21 (or decline slightly below EMA21).

- Thirdly, once one or more bars touch EMA21 (or decline slightly

below EMA21), we place a Buy order 1 pip above the High of the

last bar. When price breaks above the High of the last bar by 1

pip, we enter a Buy (Long) trade.

Stop Loss: We place a protective stop loss 1 pip below the

Lowest Price of the Pull-Back (Retracement).

  • Profit Targets: We have Two exit strategies as follows:


  • Exit Strategy 1: We set our target objective such that our potential profit is two times our potential loss. For instance, if the entry price is 1.0000 and we place stop loss at 0.9900, our potential loss is -100 pips. Therefore, we set our target objective at 1.0200, so that our potential profit is +200 pips.

Exit Strategy 2: We watch the slope of the EMA7 line. When the line EMA7 line changes from up to down (EMA7 points downward), we exit the trade at market price.

Buy (Long) Trade Example:

- Price is trading above both EMA7 (Black color) and EMA21

(Blue color). EMA7 is above EMA21. EMA21 is rising. All criteria for a

strong uptrend are fulfilled

 

 

Once one or more bars touch EMA21 (or decline slightly

below EMA21), we place a Buy order 1 pip above

the High of the last bar (the last red bar)

 

 

We place a protective stop loss 1 pip below the Lowest

Price of the Pull-Back (Retracement).

 

 

Rules for Sell Signals (Short Trades):

- Firstly, we need to confirm that we’re in a strong downtrend.

The criteria for determining that price is in a strong downtrend

are as follows:

d. The EMA7 line is below EMA21 line

e. The EMA21 line is either falling or flat (that means the slope of

EMA21 line is down or flat).

f. Price must be trading below both EMA7 and EMA21.

- Secondly, once we’re sure that we have a downtrend, we wait for

price to pull-back (retrace). Price rises from below the two EMA

lines to enter the area between two EMA lines. Then, one or

more bars touch EMA21 (or rise slightly above EMA21).

- Thirdly, once one or more bars touch EMA21 (or rise slightly

below EMA21), we place a Sell order 1 pip below the Low of the

preceding bar. When price breaks below the Low of the

preceding bar by 1 pip, we enter a Sell (Short) trade.

- Stop Loss: We place a protective stop loss 1 pip above the

Highest Price of the Pull-Back (Retracement).

Profit Targets: We have Two exit strategies as follows:

Exit Strategy 1: We set our target objective such as our

potential profit is two times our potential loss. For instance, if

the entry price is 1.0000 and we place stop loss at 1.0100, our

potential loss is -100 pips. Therefore, we set our target objective

at 0.9800, so that our potential profit is +200 pips.

Exit Strategy 2: We watch the slope of the EMA7 line. When

the line EMA7 line changes from down to up (EMA7 points

upward), we exit the trade at market price.

Sell (Short) Trade Example:

 

 The EMA7 line is below EMA21 line . The EMA21 line is

either falling (that means the slope of EMA21 line is down). Price

is trading below both EMA7 and EMA21

 

 

Once one or more bars touch EMA21 (or rise slightly

below EMA21), we place a Sell order 1 pip below the Low of the

preceding bar.

 

 

We place a protective stop loss 1 pip above the Highest

Price of the Pull-Back (Retracement).



 

 

 

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