ForexGetting StartedSwing & Position Trading

Trend Setter Strategy – A Secret of Fund Managers

"Rather than maniacally trading volatile pairs multiple times in a single day, rule-based discretionary traders are now holding onto open positions longer, relying more on planning and patience rather than fast reflexes."

Rule-based discretionary traders are among the best traders on this planet. The trading strategy I want to explain here is a rule-based discretionary system. Every trader will face both winning and losing streaks alternatively, so the key to trading successfully is to make more money during a winning streak than you lose during a losing streak.

It?s very disturbing that so many traders find it difficult to survive in the markets. The issue is; even if you?re disciplined, it?ll be difficult for you to survive with a worse expectancy system, i.e. a system whose risk is greater than the reward. Checking complex data ad infinitum isn?t sensible for simple markets either. Before I give the rules of the system, I?d like to make a mention that I?m doing this with the sanction of the head of my forex research group (a mad genius). This system has been with us for a long time and it?s what we use for long-term investments. Tthe probability of winning in the long run is very high and you can benefit from this system too trading along with me as I take buy and sell signals.

Details Of The Trading System

Timeframe: Daily charts


Indicators: SMA& ADX (customized)

Stop loss: 200 pips from the entry price (optional)

Take profit: A trend is ridden until it changes significantly

Trailing stop: 50-pip trailing stop for every 100 pips gained, applied from 200-pip profit onwards.

Position size: 0.01 lots for each $1000

Risk: 2% per trade (in a case of stop application)

Risk-to-reward: Risk limited, reward unlimited

Trading style: Position trading

Trading Approach

Moving Average: The simplest way to spot a trend is to use the Moving Average. As the name suggests, this is simply the average closing price of a given pair over a specified period of time. Moving Averages are lagging indicators but they?re still extremely useful for emphasizing the direction of the trend. The rule is that when the next price closes above its Moving Average it is in a positive trend and vice versa. A position should be maintained until the price closes back below/above the Moving Average.

Average Directional Movement Index: Moving Averages are good for identifying the trend, but they aren?t so good for timing the entries and exits. One way to improve on the entries and exits is to combine the Moving Average with the Direction Movement Index. The DMI plots a positive DI line (+DI) measuring buying pressure and a negative DI line (-DI) measuring selling pressure. When the positive DI line is above the negative DI line it means the pair is in a positive trend and vice versa, with the crossover indicating a point of change. The simplest way of using this information is to take the cross as the signal to trade, so that when +DI goes above ?DI traders should go long and when it drops back below they should switch to a short position. This type of analysis can be extended to include the Average Directional Index. The ADX is an oscillator calculated from two DI lines that show the strength as opposed to the direction of the current trend.

This system is effectively using the Moving Average to determine the direction of the trend and the DMI to get a good entry point by buying at the bottom of the chart or selling near the top. The combination of these 2 indicators helps to filter out some false signals. The 5 pairs we choose are more easily predictable than the major pairs. We don?t need to fall in love with any pairs as our aim is to make profits from trading. The movements on EURAUD and EURCAD in particular are easily predictable with over 70% accuracy. Another advantage is that we have fewer signals and pay much less spreads.

Stop Loss Issue: This strategy doesn?t primarily use stops, which increases the trader?s responsibility and the chosen pairs are also safer if compared to the majors. It even appeared that in the case of stops in the back-tested mode, too many winning trades would be curtailed and closed with a loss. Without stops, the strategy has been used successfully, plus if you stick to the position sizing recommended for this trading technique, you?d be fine. The use of stops is optional, but advisable if you think it?s against your psychology. A disciplined trader should exit a position as soon as it?s clear a trade is no longer going in the forecasted direction, and that?s exactly what?s intended. The ADX shows where a position should be entered or exited. Extreme losses occur mostly when a trader falls in love with the direction of a market, yet many a trader would continue to run a position despite a protracted change in the trend. If you thought the NZDUSD would fall to 0.6535, then at the later price of 0.6868, your assumption was wrong.

Some Recent Performances

Let me show you a few candid past performances of the Trend Setter Strategy.


Entry date: December 9, 2009

Order: Sell

Entry price: 1.5527

Trailing stop: 1500-pip trailing stop applied

Present date: June 11, 2010

Status: Open

Current price: 1.2513

Profit/Loss: 3004 pips


Entry date: February 12, 2010

Order: Sell

Entry price: 1.5376

Trailing stop: 600-pip trailing stop applied

Exit date: May 19, 2010

Exit price: 1.4106

Profit/Loss: 1260 pips


Entry date: March 16, 2010

Order: Sell

Entry price: 1.9299

Trailing stop: 700-pip trailing stop applied

Exit date: May 17, 2010

Exit price: 1.7776

Profit/loss: 1513 pips

In a bid to corroborate the fact that a Holy Grail doesn?t exit (but in position sizing, positive expectancy and discipline), let me show you this losing trade.


Entry date: April 23, 2010

Order: Buy

Entry price: 0.7162

Trailing stop: N/A

Exit date: May 6, 2010

Exit price: 1.7106

Profit/loss: -57 pips

Note that with a possible application of a trailing stop; perhaps this loss could?ve been avoided. But I show you this so that you?d reasonably expect that every signal can?t be a winner. I promise I?ll include the results and trading signals of this strategy in my future analyses. If you follow my future articles, you?ll be able to trade along with me.

Despite any experience you might?ve had on the markets you need to be objective when developing a trading system, not subjective. While a recent painful loss may tempt you to change our plans, you?ve to ensure that you make plans based on statistically significant sample of events, and not one painful experience

Welcome to the forex world – a world of financial freedom. 

Mustapha Azeez can be contacted at FX Instructor

Mustapha Azeez is a professional forex trader, signals strategist, fund manager, researcher and coach with many years trading experience. He started out as a non professional trader but since the year 2007, the approaches used by some great traders such as Ed Seykota, Van K. Tharp, Emilio Tomasini, Wolfgang Kurz, Mike Baghdady as well as others have been key to his development brining the breakthrough needed to become professional. Mustapha coaches new and advanced traders to be able to duplicate his own success which he demonstrates through a forex signals service

Mustapha Azeez is a professional forex trader, signals strategist, fund manager, researcher and coach with many years trading experience. He started o...


Active member
So the EURCAD trade which was 3000 pips up at the bottom of 1.25 would be exited at 1.40 because of the 1500 pip trailing stop? That's quite a large trailing stop! Lucky its the largest trend since 2003 you happened to be in. Doesn't add up.


Junior member
I have some conerns on exits. Sometimes the market may falls like anything, It means falling down would be more than rising. So when you don't have initial stop your risk also becomes Unlimited right ?


Junior member
From reading the article I believe that there were quite a few rules left out or not explained enough...position sizing & your trailing stops that allow too much profit to slip away. As to your losing trade (AUD/USD buy) being a small loss of 57 pips...Did you check the charts? At no time during the TF mentioned was that pair trading at your stated prices. It varied from (h/l) .9324 / .8728


Active member
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Riding The Trend


Dear XTF:

Thanks for reading my article.

One of the most powerful rule in trading is to ride a trend for as long as it remains. 3000 pips on EURCAD is not the best - you could've gotten over 4800 pips on EURAUD from July to October, 2008.

Mustapha Azeez,

Senior Analyst
FX Instructor, LLC


you never gave us the moving average you used I know alot of traders use the 20 SMA and the ADX and call the system the holy grail I trade daily and weekly charts myself but I use the donchain channals I use the 200 sma for trend direction and then trade the donchain channels in the direction of the trend so short if the price is below the 200 sma and go long if its above the 200 SMA what I do is wai t for open buy or open sell conditions if trend is up I wait for the price to hit upper Donchain Channal and call it open buy i enter at market and place a stop at the lower Donchain Channal I risk only 1-2% of my account and I ride the trend until it changes which ffor me the trend contiues as long as it is breaking higher high and I trail my stop as the channals move in upp trend I trail the stop with the bottom channal and in down trend I will do the opposite I trade the daily and weekly charts and have made some big gains doing it. Alot of the trades yeild major percentage gains compared to the percent that I risked I increase my position size when I have a 10-1 equity gained vs contract or lot size I have steadily increased account size and position size over the last 4 years.


Junior member
Missing info

As commented by another member, the SMA period isn't goven. But also the ADX settings are not goven (the method says its 'customised'. I suppose it gives a possible pointer to a method, but it seems more geared to getting people to go to his site to buy his products. Dubious to say the least.