This is a simple but powerful strategy on how to trade using but a limited number of Forex indicators mainly the 3 moving averages and discipline to profit and loose less.
When trading the stacked moving average system, the point of entry must always be when the candle has crossed all 3 moving averages. These are in the order 200ma, 20ma and 8ma when “shorting” and the opposite when trading “long”. The candle concerned must close above or below the 8 moving average (depending if you are short or long.) Look out for and respect the 3 moving averages order of entry!
Never immediately trade a previous days trend continuation… wait for a retracement in price and trade the Parabolic SAR indicator after a retracement – or take the trade only if the 3Ma’s have just started to cross in favour of the trend indicated by the Parabolic SAR.
The stop loss must be set at the level of the SAR indication, you must have a discipline, in other words you must have a target for the day as a guide so that you can then change to a lower time frame and move the stop loss to lock in profits if the trade goes further in your favor so be it, just keep moving your stop loss.
The order of how to trade using Forex indicators in charts is as follows…
o Confirm underlying trend
o Bollinger Band spike or touch (confirm overbought and oversold)
o Parabolic SAR indication
o RSI must be visible in the corresponding area (bulls or bears) when the first SAR indication is noticed.
o Stochastic lines must either be separated or are just starting to peeling apart (this is not a must)
o Take that Trade!
Finally it is very important that you look at the overall picture and never trade against your rules or strategy – no matter how tempting the chart looks! Wait for the Forex indicators to show you your correct setup before you enter!