37# ADX and EMA Trading System

Submit by Janustrader 02/04/2011

 

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

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

 

Indicators:

Exponential Moving Average 18-period (EMA18, Blue color in the

illustrations)

Average Directional Movement Index 12-period (ADX12)

Rules for Sell Signals (Short Trades):

- First, price is in a downtrend - and ADX12 value is greater than

25.

- Second, price rises in a rally (retracement) – and touches

EMA18. But at the first bar when price touches EMA18, ADX12

value is still greater than 25.

(This ADX12 requirement is only applied for the first bar when

price begins to touches EMA18 – for subsequent bars, ADX12

value could be lower than 25)

- Once price touches (or penetrates slightly) EMA18, 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 Rally (Retracement).

Profit Targets: We place our target objectives at the last Swing Low.

Price is in a downtrend - and ADX12 value is greater

than 25.

 

 

Price rises in a rally (retracement) – and touches

EMA18. But at the first bar (yellow highlighted bar) when price

touches EMA18, ADX12 value is still greater than 25. In this

example, ADX12 value of that bar is 28.

 

 

Once price touches (or penetrates slightly) EMA18, we

place a sell order 1 pip below the Low of the preceding bar.

 

 

Next Bar (Big Red Bar): Price breaks below the Low of

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

 

 

We place our target objectives at the last Swing Low.

This target is easily hit in this example.



 

 

Rules for Buy Signals (Long Trades):

- First, price is in an uptrend - and ADX12 value is greater than

25.

- Second, price declines in a pull-back (retracement) – and

touches EMA18. But at the first bar when price touches EMA18,

ADX12 value is still greater than 25.

(This ADX12 requirement is only applied for the first bar when

price begins to touches EMA18 – for subsequent bars, ADX12

value could be lower than 25)

- Once price touches (or penetrates slightly) EMA18, we place a

buy order 1 pip above the High of the preceding bar. When price

breaks above the High of the preceding 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 place our target objectives at the last

Swing High.

 

 

 

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