3EMAs Swing Trading System

The 3EMAS swing trading system is a very simple trading strategy that is based on 3 exponential moving averages(ema). These are 10ema, 25ema and the 50ema.  A trade is initiated on the FAILURE of the retracement that happens after the 10ema crosses the 50ema.

 

Now, you may wonder, why not initiate a trade when the 10ema crosses the 25ema on the very first instance?

 

Well, the simple answer I can think of is this: the 50ema line acts as a support if price is above it and acts a resistence when price is below it, therefore, to make sure that price does not bounce off from this 5oema line, the 10ema must cross the 50ema before a trade can be taken.

 

Timeframe: 1hr and above

 

Indicators: 10ema, 25ema and 50ema

 

Currency Pairs: Any

 

Trade Entry Rules:

 

  • Place a buy stop order 2-5 pips above the the high of the candlestick which has a lower high than the previous candlestick  after the 10ema crosses the 50ema to the upside.
  • Place a sell stop order 2-5 pips belwo the low of the candlestick which has a higher low than the previous candlestick after the 10ema crosses the 50eam to the downside.
  • If the buy stop/sell stop order is not executed then continue to move the buy stop /sell stop order above/below each new lower high/higher low that forms until the retracement fails and the high/low of the candlestick is broken and trade is executed.

 

 

Take Profit

 

  • You can use previous swing low levels as your profit target for a sell trade or previous swing high level for a buy trade.
  • Or another option is not to have a profit target but use a trailing stop to place behind each lower swing high(for a sell trade) as  your trade moves in favour so that your can ride out that trend for as long as you can extracting maximum pips out of the price swing until you get sopped out.
  • Do the exact opposite for a buy trade.

 

Stop Loss Placement

 

  • For a buy order, place your stop loss 2-5 pips below the low of the candlestick that has its high broken which then activated your buy stop order.
  • For a sell order, place your stop loss 2-5 pips above the high of the candlestick that has it low broken which then activated your  sell stop order.

 

Trade Management

 

  • One of the best way of trade management is to trail stop behind lower swing highs (for a sell trade) or trail stop below higher swing lows,
  • This enables you to lock in profits as trade moves in favor until your profit target is hit or if you don’t have a profit target, you can ride our the trend as far as it can go until you get stopped out.
  • See the attached chart for more clarity regarding this.

 

Advantages of the 3EMAS Swing Trading System

 

  • A very simple forex trading system, easy to understand and use.
  • In strong trending markets, there is potential to make large profits very quickly.

 

Disadvantages of the 3EMAS Swing Trading System

 

  • Ema’s are lagging indicators therefore any trade taken based on these indicators means that you are getting into a trade after price has moved, sometimes to a great deal already so you may not be entering a trade at right time
  • If price moves a great deal, when you enter a trade, it may be due for a reversal and this would also get you stopped out.
  • This trading systemwill perform poorly in ranging markets.

Attached Files:

Posted By michaeloliver : 31 August, 2020
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