Very simple trend-following set-up

tomorton

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Feb 28, 2002
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#31
After reviewing old trades and performance, some slight revisions to this simple method -

1. last Close must be above 200EMA
(unchanged)

2. vertical sequence on chart preferably reads, from high to low – price, 50EMA, 100EMA and finally 200EMA
(downgraded from 'essential' to 'desirable')

3. swing phase using 3-bar reversal chart must be bullish (i.e. last swing, low or high, is higher than previous)
(unchanged)

4. how many daily Closes are above 50EMA in last 3mths?
(simplified trend measure)

5. how many consecutive weekly bars are completely above 200EMA, counting back from the most recent? (the more the better)
(timeframe extended from 50EMA to 200EMA, point of reference changed from weekly Close to whole bar)

6. is last full week’s bar completely above 50EMA? (caution if it straddles it or is completely below)
(unchanged)

7. how many adjacent weekly bars overlap the last full week’s range? (caution if more than 3)
(unchanged)

8. has price risen over last 1mth and 3mths?
(new - obvious)


Applied across a market, 1 and 8 alone should give a pretty clear basis as to whether to consider buying or selling a particular target. In forex, that might mean e.g. buy EUR/JPY, sell USD/CHF, and no trades right now on EUR/CAD. I use the 'consensus' of these results from across the pairs I can spreadbet, applied to the major currencies to then allow a sense-check that my longs and shorts are on the right side of the bias. At present, I see -
AUD - 1 buy, 2 wait, 4 sell
CAD - 2 buy, 2 wait, 2 sell
CHF - 5 buy, 1 wait, 0 sell
EUR - 4 buy, 6 wait, 0 sell
GBP - 5 buy, 3 wait, 1 sell
JPY - 1 buy, 1 wait, 6 sell
NZD - 0 buy, wait, 5 sell
USD - 3 buy, 8 wait, 1 sell

I hope this goes some way to quantifying the indecision in the majors at the moment for various fundamental reasons, the USD and EUR especially. Currently, I am long GBP/JPY, short NZD/USD.
 

tomorton

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#32
I like this simple trend-following systen too, FX-Ed, by Ed Ponsi ("Forex Patterns & Probabilities", 2007)

* Check 10, 20, 50, and 200EMAs in descending order (for uptrends)
* Check for at least the last 10 consecutive closes above 10EMA
* Buy when price dips intra-day below 10EMA
* Set a stop-loss equivalent to half the daily ATR (14 days) below the 10EMA: trail this higher as price rises, leave it alone if price falls.

(invert directions for short in a downtrend)
 

0007

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Jun 19, 2005
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#33
I like this simple trend-following systen too, FX-Ed, by Ed Ponsi ("Forex Patterns & Probabilities", 2007)

* Check 10, 20, 50, and 200EMAs in descending order (for uptrends)
* Check for at least the last 10 consecutive closes above 10EMA
* Buy when price dips intra-day below 10EMA
* Set a stop-loss equivalent to half the daily ATR (14 days) below the 10EMA: trail this higher as price rises, leave it alone if price falls.

(invert directions for short in a downtrend)

I've used systems like this very successfully for non-short-term trading. The important thing seems to be getting the MAs reasonably parallel and in the correct order. You can play about with different values/types/prices but it all comes out more or less the same in the end if you spot a good trend. Using PSAR makes for a good stop wide enough to keep you in the trade commensurate with enough risk to make it profitable while trailing and reducing as the trade becomes more profitable – again quite useful to play around with the PSAR settings to find what suits you best.

The best thing about this mode of trading for me is that it's basically "fire and forget" just do most your work at EOD and let the profits accrue. Scanner software will find your potential trades very easily, feed that data into a spreadsheet to work out the best trades, place your order the next day. Nice and simple.
 
Likes: tomorton

tomorton

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#34
Not a bad day for trend followers, despite the NFPR and everything else.

Its a simplistic guide that its good to buy when price is above the 200EMA and short when its below.

Of the 35 pairs that I monitor, 31 followed that simple rule today (so far) - most of those that started the day above the 200EMA went up, most of those below the 200EMA went down. Looking at the weekly price changes, 24 of the 35 went the "right" way.

Quite pleasing really. Best of luck all.