This is a system I am currently refining. Not sure if there are similar systems but this definitely has elements of other systems out there.
Not too much to it and plenty of ways it can be personalized/customized.
I am doing this as kind of a personal journal and if others have suggestions or find it useful then all the better.
Basically:
I use multiple time frames to funnel or filter out potentially bad trades. I do this very much mechanically on higher time frames not because I think it is a more accurate method of trading, but because it keeps me more consistent and helps keep emotional judgement from clouding my decisions.
It starts on weekly to get trend direction, Daily to get go/no go signal, 4h/1h to get entry signal, 15min/5min to get entry point and SL.
The details:
I use weekly chart and 5ema to get trend direction. A more aggressive intraday trader may want to use 5ema on daily. They may want to use 3ema on weekly. A more conservative longer term trader may want to used 10ema or 10sma on weekly. A 5ema trendline on weekly is what I am currently using.
I only take longs on the pair if 5ema on weekly chart is up. I only take shorts if 5ema on weekly chart is down.
Next I go to the Daily chart. If Daily is above it's opening price and weekly 5ema is up that is a green light to take a long trade on this pair. If the Daily is below the opening I do not trade this pair today unless the daily goes above it's opening. There is an unavoidable technical problem with daily bars because they vary with brokers. Some start at Aussie session, some at Asian, some at London, some at US. I use daily bars that start at London start (6:00 GMT). If your broker uses different time frame you can use 1H chart to determine the London start and that gives you opening price of daily bar starting at London session. Add horizontal trendline and make sure your trade direction is on the proper side of the line. Or maybe you feel more comfortable using Aussie start daily bars. It kind of depends on the hours you trade. These are things each trader needs to work out for themselves. The process of thinking through it will help understand the best way to interpret what they are seeing in the bars as well so it's a good mental exercise.
Moving on to the intraday time frames. I use these for entry signals and entry points. Now that we have determined that we will be taking a long position on this pair today because the weekly 5ema is up and the daily is above it's opening price, we now are looking for opportunities to enter a long with a small stop loss. There are many many entry methods one can use. A lot of people use indicators but I pretty much only use price action. In order of importance, candle stick patterns, s/r areas, whole numbers, fibonacci, trendlines.
So say, for example I see an inside bar on 4H or 1H, I then go to 15m or 5m and look for s/r areas and candlestick patterns to pinpoint my entry with a small SL. If price keeps trending my way I move SL to BE and add another long position. I will keep doing this till the intraday trend runs out of steam.
So that's basically it.
No predefined exits strategy as of yet. Currently I am holding positions for multiple days/weeks so I have plenty of time to think about exits. When weekly 5ema goes from up to down I will average out my longs as I take shorts on the same pair. Technically this is hedging but not really as the other side of the trade is at SL of break even so zero risk of loss on existing positions. Yes, some positions you worked hard for and held for days/weeks will be stopped out at zero pips after having been up hundreds. That's just a natural part of the process.
To summarize:
*Weekly to determine trend. Only trade in direction of trend.
*Daily to get green light/red light signal. If daily is above opening price and weekly trend is up that is a green light for a long and if daily is below opening it is red light. The reverse is true for weekly trend going down.
*Intraday time frame to pinpoint entry with small SL using a variety of methods depending on our preferences. 4H/1H to look for volatility/breakout/momentum signal. 15min/5min to pinpoint entry with minimal SL. Simple price action is the recommended method. If our bet works out we move SL to BE after price moves on and try pile on additional positions while the trend continues. But only one position at a time until we have moved our SL to BE and are in a zero risk position.
*If weekly 5ema goes from up to down we start to average out long positions as we start to take short positions or visa versa. If broker does not allow hedging then use 2 subaccounts. One for buys and the other for sells.
*Exercise proper money management at all times. Since we are stacking positions on low time frames we can use a small percentage to great effect while minimizing drawdown. Say 0.5% - 1% per trade.
Not too much to it and plenty of ways it can be personalized/customized.
I am doing this as kind of a personal journal and if others have suggestions or find it useful then all the better.
Basically:
I use multiple time frames to funnel or filter out potentially bad trades. I do this very much mechanically on higher time frames not because I think it is a more accurate method of trading, but because it keeps me more consistent and helps keep emotional judgement from clouding my decisions.
It starts on weekly to get trend direction, Daily to get go/no go signal, 4h/1h to get entry signal, 15min/5min to get entry point and SL.
The details:
I use weekly chart and 5ema to get trend direction. A more aggressive intraday trader may want to use 5ema on daily. They may want to use 3ema on weekly. A more conservative longer term trader may want to used 10ema or 10sma on weekly. A 5ema trendline on weekly is what I am currently using.
I only take longs on the pair if 5ema on weekly chart is up. I only take shorts if 5ema on weekly chart is down.
Next I go to the Daily chart. If Daily is above it's opening price and weekly 5ema is up that is a green light to take a long trade on this pair. If the Daily is below the opening I do not trade this pair today unless the daily goes above it's opening. There is an unavoidable technical problem with daily bars because they vary with brokers. Some start at Aussie session, some at Asian, some at London, some at US. I use daily bars that start at London start (6:00 GMT). If your broker uses different time frame you can use 1H chart to determine the London start and that gives you opening price of daily bar starting at London session. Add horizontal trendline and make sure your trade direction is on the proper side of the line. Or maybe you feel more comfortable using Aussie start daily bars. It kind of depends on the hours you trade. These are things each trader needs to work out for themselves. The process of thinking through it will help understand the best way to interpret what they are seeing in the bars as well so it's a good mental exercise.
Moving on to the intraday time frames. I use these for entry signals and entry points. Now that we have determined that we will be taking a long position on this pair today because the weekly 5ema is up and the daily is above it's opening price, we now are looking for opportunities to enter a long with a small stop loss. There are many many entry methods one can use. A lot of people use indicators but I pretty much only use price action. In order of importance, candle stick patterns, s/r areas, whole numbers, fibonacci, trendlines.
So say, for example I see an inside bar on 4H or 1H, I then go to 15m or 5m and look for s/r areas and candlestick patterns to pinpoint my entry with a small SL. If price keeps trending my way I move SL to BE and add another long position. I will keep doing this till the intraday trend runs out of steam.
So that's basically it.
No predefined exits strategy as of yet. Currently I am holding positions for multiple days/weeks so I have plenty of time to think about exits. When weekly 5ema goes from up to down I will average out my longs as I take shorts on the same pair. Technically this is hedging but not really as the other side of the trade is at SL of break even so zero risk of loss on existing positions. Yes, some positions you worked hard for and held for days/weeks will be stopped out at zero pips after having been up hundreds. That's just a natural part of the process.
To summarize:
*Weekly to determine trend. Only trade in direction of trend.
*Daily to get green light/red light signal. If daily is above opening price and weekly trend is up that is a green light for a long and if daily is below opening it is red light. The reverse is true for weekly trend going down.
*Intraday time frame to pinpoint entry with small SL using a variety of methods depending on our preferences. 4H/1H to look for volatility/breakout/momentum signal. 15min/5min to pinpoint entry with minimal SL. Simple price action is the recommended method. If our bet works out we move SL to BE after price moves on and try pile on additional positions while the trend continues. But only one position at a time until we have moved our SL to BE and are in a zero risk position.
*If weekly 5ema goes from up to down we start to average out long positions as we start to take short positions or visa versa. If broker does not allow hedging then use 2 subaccounts. One for buys and the other for sells.
*Exercise proper money management at all times. Since we are stacking positions on low time frames we can use a small percentage to great effect while minimizing drawdown. Say 0.5% - 1% per trade.