Moving Average & Average True Range - A Winning Strategy :


In any trading, whether you trade Stocks, Future or Forex, the first key of success is having a good Strategy, which provides good result. Second most important key is Discipline and third key is Money Management. 

In this article, we will discuss about a strategy based on Moving Average and ATR, which gives me 50 – 100 PIPS per trading day in just 2 Hours. So let us come to point:


We need few things on our chart before we explain the strategy:

1. Time Frame: Minimum 15 minutes and above.

2. Moving Averages: 14 SMA Low Price (Yellow),
    14 SMA High Price (Blue).
     [SMA - Simple Moving Average]
3.  Average True Range: Period 14
4.  Support and Resistance


Now look at below Charts: 

Fig 1 : Short Position Illustration

Fig 2: Long Position Illustration


Trade Setup: 

First look at ATR. Is it greater than 0.0013? Yes. Great! When Candle close above Blue moving average, at the opening of next candle we will buy and when candle close below Yellow moving average, at the opening of next candle we will sell. Is not it simple?

This can be applied on any currency pair, and mostly I trade it with USD pairs, i.e. EURUSD, GBPUSD, & AUDUSD.

 

 


Here it is :

We will use ATR value to set our take-profit and stop-loss level.

Stop Loss level: 
        (ATR Value*1.5 + Trade open price) + 10 PIPS

Take Profit Level: 
         (ATR Value*3 + Trade open price) 

Manual exit of trade : 
   - For Buy Entry : If Candle closes below yellow
                                 moving  average.
   - For Sell Entry : If candle closes above blue 
                                  moving average.



Look for a trend on longer time frame, and find Support and Resistance. If you get any signal near to Support and Resistance level, never enter into the trade. There is a good proverb for trading is : "Trend is your friend."  

# Important points to remember :
1. Avoid News release time
2. Don't trade without Stop-Loss and Take-Profit
    Target
3. Keep Learning


The winner and looser in a trading is "how do you control your profits?" The typical trader watch out a trade every moment and most of times, they make wrong decision and in a winning trade, close the trade only with few PIPs gain, and wait for market to turn-back, when they are in loosing position. Therefore, you do not need to watch out a trade, whether you are a newbie or experienced trader. If you have done your analysis, then trust your analysis. 

I have attached my success story below in the form of strategy analysis.




Success story of above mentioned strategy from October, 2011 till now :
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Fig 3 : Strategy Analysis from October 27, 2011 till Feb 29, 2012.
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Disclaimer :  Please note that when you trade, it is your own decision. Above mentioned strategy has worked in past for me, it may work in future. If you use this strategy, take the responsibility of your trade, whether you loose or win.

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Please check out my next article about CoT analysis trading for long term success.

Thanks for your support. Happy trading!

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