Let's Catch BIG PIPS

A few weeks ago my friend send me avery simple strategy
And I want to share with you the strategy. Please read on.
This system will have you miss many opportunities. You might
still say to yourself "I shouldn't have closed that position"
or "I should have gone the other way," then odds are that
you will try to modify the system for better entries and exits
and eventually you will make it either far too complex to be
practical, or a loser. If you want to modify it, please make a
new website about it so that the beginning traders don't get
confused when they try to apply what they just learned to their
trading.

I expect many of you to brush off the system as bad once you
get to the chart setup section. Why? Because you probably have
tried something very similar when you first started and gave up
after the first few losses. This is what happened to me when I
started as well... But enough of this, let's get to the system.

The System:
The system is based on what I mentioned previously, all
commonly accepted principles of successful trading: go with
the trend, cut your losses short, let your profits run.

Currency Pair:
First we need a currency pair that trends. Most crosses
accomplish that rather well so we'll pick EUR/JPY.

Timeframe:
As we mentioned before, small time frames are ideal for whipsaws,
so for the sake of our profits and for practicality purposes
we'll stick with a middleweight time frame: H4. That way, we'll
only have to look at the market for a few minutes 6 times a day.
Only place your orders and limits right before the open of the
new H4 bar.

Fundamentals:
We won't bother with fundamental trading here, this is for
the advanced traders who are able to handle high stress situations.
The system will force us to protect our position against any
adverse fundamental movement anyway.

Chart Setup / Indicators:
This is where I expect most of you to roll your eyes. We'll
use two indicators for this system: one for entry and one for
exit.Open your 4 hour chart and place a Simple Moving Average (SMA)
with a value of 39. This will be used for entry. Now add an
Exponential Moving Average of 13. This will be used for exits.
That's it, nothing more, nothing less. These two indicators in
themselves will get us in with the trend and let us ride our
profits.

Trading Rules
Entry: Go long when the price crosses the 39 SMA up from below.
Go short when the price crosses the 39 SMA down from above. The
best way to make sure you get your entry at the right price is
to put a limit order. If you don't have a position open, simple
put a limit order to buy or sell at the 39 SMA level.

Stop Loss & Reverse:
In the spirit of keeping the system as simple as possible we'll
use a fixed 50 pip SL&R. The point of the reverse order is to
make sure you are back in the right direction if the trend were
to change direction before you could take profit. Your reverse
order should also be protected with another SL&R.

Exit / Taking Profit:
We will trail our profits with the 13 EMA. In a long position,
when the price closes below the 13 EMA, exit the position for
a profit. In a short, when the price closes above the 13 EMA,
exit the position for a profit. Do not revere your position
once it's closed.

If the price closes below or above the EMA while in a loss,
don't close your position, let it run to the stop loss. This
will keep you from getting whipsawed too many times.

Money Allocation:
I like to open 1 lot per $10,000 I have in the account. As
the account goes up, increase the number of lots proportionally,
as it goes down, decrease the number of lots proportionally.
After a 50 pip loss, if you see a 50+ pip profit, you can
protect this position or even close it and start over on the
next trade.





There were two trades last week. The first one was a short
when the price crossed below the 39 SMA from above (red circle,
stop loss and reverse is the red line). We exited that trade when
the price closed above the 13EMA (black circle). We placed a
Buy Limit at the 39 SMA. This was triggered within 4 hours and
now we had a buy (blue circle) with a 50 pip SL&R (blue line).
The trade is still going. It will be closed once the price closes
below the 13 EMA.

Behind the numbers:
13 EMA: Thirteen is Fibonacci number that many traders like
to use. I simply chose it because it trails the trends of
EUR/JPY nicely.

39 SMA: This is three times thirteen. Plotted for longer
term trend.

50 pips: I used this number on the first page to explain the
idea behind the SL&R technique. I kept it in the system for
good measure.