Great SMA, EMA & MACD System

[sub2501]

Currency: GBP/USD (preferred) or any other.
Time frame: 3 hours (preferred) or 4 hours.
Indicators:

SMA 200, SMA 100 these are two influential SMAs; you will find price obeying their boundaries.
SMA 15
EMA 5
MACD (12, 26, 9)

Trading Rules:
Since we are dealing with unpredictable until set indicators (EMA, SMA, MACD) we will always be using signals AFTER the current signaling candle is closed.
1. Never open a trade if price is less than 25 pips away from 100 SMA or 200 SMA.
2. Do enter the market when price has crossed either 100 SMA (expect large move) or 200 SMA (expect very large move) and only after the current candle has closed on the opposite side of the SMA. SMAs this big do not get crossed very often.
3. Set stop loss initially at 50 pips. Look for nearest support/resistance level and adjust it accordingly it could grow up to 70-90 pips but it should not be less than 40 pips. Anyway this measure is taken only to save us from sudden exploding market, in all other cases it will not be hit as our system will take you earlier from the trade.
4. Enter in the direction of 5 EMA once two conditions are met:
1) 5 EMA crosses 15 SMA permanently which means the current candle is closed and lines are locked and will not move misleading us.
2) MACD lines are crossed, and the current candle is closed.
The 2 crosses do not have to happen simultaneously. MACD lines can cross earlier than EMA and SMA or shortly after, but there should be no more than 5 candles in between 2 crosses.
If 2-cross condition is not met no entry.

Exit rules: exit with the same rules as for entry: when two crosses are in place. If we have only one cross we are still in trade.
Profit target:

a) can be set to a desired amount of pips and followed with trailing stop further once the target is reached.
b) or use 50 pips profit target do start chasing the price with trailing stop after gaining 50 pips.
c) or you may not use trailing stop and set no profit targets, then exit according to Exit rules on the next 2-cross.

Lets walk through the numbers on the charts:-
#1 EMA 5 crosses 15 SMA, MACD lines also crossed, price is not close to SMA 100 we place Long order.
#2 again we have 2 crosses: moving averages cross and MACD we exit Long and immediately place Short order.
# 3 2 crosses are in place, by the time our current signaling candle is closed we are already far enough from 100 SMA, so we close Short and open Long position. Yes, till this point we were trading in sideways moving market so no profits here, may be some small negative results. Solution trading only during active hours, for GBP/USD it is London and New York sessions.
#4 As we were Long this point is our exit (2-cross condition is met again)
and immediately place Sell order.
#5 moving averages on the chart have crossed, however MACD does not, we stay in trade.
We watch price passing 100 SMA and closing below it it is a good sell signal, but we are already trading it.

#6 first appears MACD crossover, followed by moving averages crossover at this point we close our Short position. Do we open Long position immediately? No, because we are very close to 100 SMA. We need to wait until candle passes and closes above 100 SMA to open a Long trade. Once it happens we are in trading Long.

#7 MACD lines has attempted to cross, but nothing to worry as there is no second cross from moving averages.
#8 same as #7.
#9 time to finally close Long position and go Short.

i'm a new comer and has little or no knowledge abt TA,while browsing i found this system and thought of introducing it here so that the senior members would discuss abt the system's advantages& disadvantages and junior like me would learn.

N.B-- PLS DONT EXPECT ME TO COMMENT ON THIS SYSTEM 'COS I'M HERE TO KNOW MORE ABT IT FROM ALL OF U.

thanks
subha.

 

[sub2501]

The chart attached is my trade from 11/02/10 in 30 min time frame on ^NSEI (yah00 server till now, i'm not sure whether i'm with the strategy or not, seniors pls guide me.
I'm trying to follow Linkons DB-BB system, but its too tough for me to understand and will take much time for me to learn, till then i'm trading on this system with 30 min time frame (i dont like the 3-4 hrs TF) and learn DB-BB system.
thanks
subha.

 

[sub2501]

Senior Pls guide me if i'm in my strategy, Being in the strategy is more important than earning.
thanks.

 

[sachinnamdev]

hai pls send some information for this type chart where attemp in intra day

 

[sub2501]

Pls download the software from
h t t p ://www. amibroker. com/download.html (remove spaces)

and abt the realtime quotes :-

http://www.traderji.com/software/35442-realtime-stock-quotes-24.html#post411927

thanks
subha.

 

[Mangafreakz]

You trading this strategy on real account ?
Nice strategy btw combining crossover and MACD,

 

[sub2501]

Yes, i look for nifty spot from yahoo and trade on nf 01 lot.
though there r many strategy and i'm in my learning stage so thought of trading with simple strategy which i understand,
i would request the seniors to help me how to backtest and give feedback on this strategy.
thanks
subha.

 

[sub2501]

Hi,
will anyone help me to create an afl for this strategy to backtest.
Thanks
subha.

 

[sub2501]

Shall i exit at the crossovers or wait for the bar to close on monday,
i'm still in short- dint exit just thinking that the candle hasnt closed.
Pls guide

Thanks
subha.

 

[linkon7]

_SECTION_BEGIN("shub2501");
buy_Cond1 = EMA( Close, 5 ) > MA( Close, 15 );
Buy_cond2 = Close > MA( Close, 100 );
Buy_cond3 = Close > MA( Close, 200 );
Buy_cond4 = MACD(12,26) > Signal(12,26,9);

sell_Cond1 = EMA( Close, 5 ) < MA( Close, 15 );
sell_cond2 = Close < MA( Close, 100 );
sell_cond3 = Close < MA( Close, 200 );
sell_cond4 = MACD(12,26) < Signal(12,26,9);



Buy = Buy_cond1 AND Buy_cond2 AND Buy_cond3 AND Buy_cond4;
Short = sell_cond1 AND sell_cond2 AND sell_cond3 AND sell_cond4;
Col = IIf(Buy,colorBrightGreen,IIf(Short,colorRed,colorGrey40));

Sell = Col ==colorGrey40;
Cover = Col == colorGrey40;

Plot( C, "Close", Col, styleCandle ); 
Plot( MA( Close, 200 ),"", colorWhite, styleThick+styleDots ); 
Plot( MA( Close, 100 ),"", colorWhite, styleThick+styleDashed ); 
Plot( MA( Close, 15 ),"", colorBlue, styleThick ); 
Plot( EMA( Close, 5 ),"", colorRed, styleThick+styleDots ); 


_SECTION_END();

The bars are coloured based on simple conditions as laid by you on ur first post. If the candle is green, you buy, if its red, u sell. Avoid if color is grey.

I avoided the 50 pip wala rule where we avoid trades if price is near the 100 or 200 sma. Thats visual and is prone to system signal error as different stocks have different movement. I found results on nifty satisfactory specially on higher time frames, 15 min and above.

This is a good system based on moving average. But like all MA based systems, we are going to have low strike rate and very good risk reward ratio. Out of 10 trades, expect 6 to be misnomers and 4 to be winners. out of those 4, 2 will be biggies. enough to keep your account positive end of the month...

One needs patience when dealing with MA based systems and entry is always after the close of the signal bar. Trying to second guess the signal, normally leads to brokerage generating trades only...

best of luck Shuba...