Indicators: 20EMA. Donchian Channel 20. Slow Stochastic 5,3,3. ATR 5.
Set up your indicators on the daily chart time frame.
This strategy seeks to catch price moves that develop into trends. Like many good strategies it seeks to enter at swing highs in a downtrend and swing lows in an uptrend; and exit at a reversal.
For a trade setup to develop you need to see the following:
1. Price has previously touched the upper Donchian Channel line.
2. Price has pulled back to make a swing low.
3. This swing low must be above the 20EMA. This indicates that the move is strong as the EMA can act as a magnet to price action resulting in a sideways market; and it’s also a strong set up if the end of the 20EMA is leaning upwards. Ignore signals that occur after candles gather at the 20EMA.
If the price hits the Donchian channel without a pull back, well, that would be a missed opportunity. We’ll need a different strategy to trade that.
Entry: When you get a Stochastic cross to the upside, after candle closes, go long on the open of next candle.
Exit: Exit on Stochastic cross to the downside. Close trade after the open of the next candle to be sure that price continuation does not undo stochastic cross.
1. Price has previously touched the lower Donchian Channel line.
2. Price has pulled back to make a swing high.
3. This swing high must be below the 20EMA. This indicates that the move is strong as the EMA magnet has failed to hold back price action.
Entry: When you get a Stochastic cross to the downside, after candle closes, go short on the open of the next candle.
Exit: Exit on Stochastic cross to the upside.
This strategy is quite mechanical but it also has a few discretionary elements.
First before entry or exit you must make sure that you do on the open of the candle after the Stochastic cross, not on the day it crosses.
Secondly, you even though price action may gather on the 20EMA you can still take a trade if you see an engulfing candle in the direction of the current trend, as defined by the last Donchian Channel price touch and the slope of the EMA.
The trade management rules of this system are the key! Success depends on it!
The NCandle indicator with a setting of 2 gives you the high or low at which you should place your stops. Place your stop 20 pips below the low of the previous day for buy trades and 20 pips above the high of the previous day for sell trades.
Shift your stop to 20 pips above/below the NCandle indicator line as prices move in your favour. If price moves against you exit on Stochastic cross; you will often get this exit signal on losing trades long before your stoploss is hit, so don’t wait for it to be hit. Just get out! Don’t hang on still hoping. This is the corner stone of the success of this strategy.
Also if price spikes in your favour use the ATR (+/-20pips) to determine your stoploss because by then the high/low of the previous day will be just too far away.
Begin by trading only 3 currency pairs. Don’t place more than 3 trades at a time. Don’t switch currency pairs while you trade because you may get 3 or 4 losing trades in a row then you may miss out on the next great trade because your capital is tied up in another trade that is not among your defined 3 pairs. This is important as it helps you to start seeing positive results in a short time.
Don’t take signals that require more than 1 or 2 percent of your account balance. Begin by risking only 1% and later 2% when you have made appreciable progress. Some signals can appear to be perfect and very tempting but require large stops. For this I use the ATR +/-20pips rather than the high/low of the NCandle indicator. However stay clear of signals that occur immediately after a price spike.
This is just an example. It has not yet tested out.