"When you enter the markets, you are going into a competitive field in which your evaluations and opinions will be matched against some of the sharpest and toughest minds in the business. You are in a highly specialized industry - under the intense study by men whose economic survival depends on their best judgement. You will certainly be exposed to advise, suggestions, and offers of help from all sides. Unless you are able to develop some market philosophy of your own, you will not be able to tell the good from the bad, the sound from the unsound." – John Magee
If you have ever listened to the above quote, you may have known that there is no perfect method to make money in this business, no Holy Grail, no money-printing machine method...
But we certainly have an edge if we see at what big guys see.
It is clear that when you have a very big amount of money to invest, you are not likely to watch for complex technical system. You would rather plan for risk events and trade from an economist's perspective. Thus, the more simple your technical system is, the more effective and less time-consuming your decision making process would be.
In this article, I will guide you through how to setup a simple system based on SMA and important event in the economic calendar to detect and trade the market trend. Just follow the steps below and you will have time to experience how useful it can be. A real example is included below.
Step 1: Preparation
Open a chart, and zoom out like this. I prefer Blue and Grey on Grey theme.
Press f(x) and choose Add Indicator, then choose Overlap Studies, then SMA. We are going to use a set of SMA(100) and SMA(200) on High, Low and Close prices.
Settings for the first SMA should be as following:
- Price: Close price
- Time Period: 100
Next, go ahead and add other SMAs. Change Price to High price for the 2nd SMA(100), Low price for the 3rd SMA(100). Then repeat the process to get 3 other SMA(200).
After all, your chart should be like this
Step 2: Plan our trade with the economic calendar
Now let’s look at an example on GBP/USD to see how we can have chance to enter and make money using our SMA system and the economic calendar.
Below you can see the economic calendar of 28th November, U.S. New Home Sales came unexpectedly lower than forecast number.
This is the chart of GBP/USD when the news hits our market at 15:00 GMT on 28th November. Prices were consolidating above SMA 200 before the news hit, then it popped up. The news started a new wave to the upside.
If you entered market when it broke 1.5975, and exit when it hit the previous top at 1.6050, you would have got a profit of +75 pips.
In conclusion, it is still not easy to make money because for each opportunity, we have to watch out other risks. However, it is clear that anyone can replicate this system to monitor market trend and look for good trades.
It would be my pleasure to receive your vote if you like my post : )Happy trading to all!