Tuesday, July 19, 2011

S'ema Forex Trading Strategy

This forex strategy called S'ema because it uses a combination of several indicators like ema and sma forex trend line. S'ema currently in stages of development and is been testing. So far it works well and effective in predicting price movement of any currency pair. During ranging/consolidation market the result is quite good, and when market in trending the forex strategy give a better results.

S'ema forex strategy works effective in almost any currency pair so far. In any chart time frame. Recommended to use in 15 min time frame and use 4H chart to see of the overall trend. But not recommended for use trading longer than day-chart.

Set up for S'ema forex strategy:

  • Candle stick
  • BB(14,2)
  • EMA(10)
  • EMA(20)
  • EMA(50)
  • EMA(100)
  • EMA(200)
  • STOCH, FULL (14,3,3)
  • ATR (14)

Long Position:
  1. See uptrend by direction of EMA's: open up in the same direction, at least EMA (200) is underneath
  2. In Stochastic, crossover below 20 line
  3. Crossover of EMA(10) SMA(14) (EMA should cross over SMA upwards)
  4. Close of the entire candle stick above and after crossover of EMA(10)&SMA(14)

Trigger: The close of the candlestick

Target: Recent swing high OR next 00/50 number (i.e. 1.4000, 1.4050)

Stop: The price of swing low extended with ATR(14) value. (i.e. swing low is 1.4089, and ATR(14) is 14; then, the stop is 1.4075)

Short Position:
Do the opposite. Stochastick must have crossover above 80 line. And Candlestick must close below the MA crossover.

Volatility: More distance between EMA's, more volatile.
Note: that in high volatility, it's ok to get in trade even if the only body part of candle is above the crossover.

Trendiness: More EMA's are in same direction, more trendy.
Note that if the price movement is so trendy (a.k.a. all EMA's are in same direction and fanning out upwards), it's ok to be greedy for the take profit (i.e. skipping one 00/50 value).

For really greedy trader and risk taker, it's not too bad to trade with this S'ema forex strategy against the trend as long as for the short term (i.e. 15-min chart).

Source: Babypips.com