This is quite simple intraday trading system for 15 minutes candlestick charts which is based on exponential moving averages (EMA) and the stochastic oscillator. The rules of this strategy are very simple as we shall see below:
This trading system is specifically designed for intraday trading. For this reason all open positions using this technique should be closed at the end of the trading session, as otherwise the result is quite uncertain. The use of EMA and the stochastic oscillator allows to detect changes in the market trend in the 15 minutes chart, however it is important to follow all the rules to ensure the reliability of the signals.
Trading instruments
This trading system was designed to trade with currency pairs, precious metals and even crypto. Recommended pairs are major currency pairs like EUR/USD, USD/JPY and GBP/USD and minor currency pairs like EUR/GBP, EUR/JPY and GBP/JPY.
System indicators
The indicators used in this system together with its configuration are the following:
- A 15 minutes candlestick chart.
- 1 EMA of 3 periods on the price.
- 1 EMA of 6 periods on the price.
- 1 stochastic oscillator with the following configuration: 8, 4, 3.
Trading system rules
Buy Signals
- When the stochastic moves below the 50-55 range and the EMA (exponential moving average) 3 crosses over the EMA 6, buy above the candle in which the signal is generated and put the stop loss below the low of the day or near any point pivot.
- When the EMA 3 moves above the EMA of 6 periods but the stochastic is in sell mode, do not open a long position and wait for the stochastic buy signal. If the signal is generated, buy on the top of the candle in which the signal is generated.
- Be patient and let the candle to complete, do not close any position with a market order, instead allow the operation to continue and develop.
- Remember that this technique requires that radio Profit / Reward is 1:1, which means that no matter what the stop loss should be equal in magnitude to the Take Profit (the price level where we take profits). So keep your sell orders as they were at the time of opening the position. For example, if we open a long position in EUR/USD at 1.3520 with a stop loss of 1.3480, our Take Profit should be 1.3560.
- If the price reaches the predetermined Take Profit level, close the position and take profits.
- Close the position at predetermined stop loss, do not move it if you see that the trade moves in the opposite direction to that expected in the belief that the market will reverse.
- Close the long position if a negative crossover occurs between the exponential moving averages, ie if 3 EMA crosses below the EMA 6. In this case the stop loss should be placed down the low of the candle where the crossing occurred.
- In a long position avoid any subsequent sell signal of the stochastic and focus on the crossing of EMA.
- Hold the position until the price reaches the Take Profit or Stop Loss or the latter should be revised.
Sell Signals
- When the stochastic moves above the 50-55 range and the EMA (exponential moving average) 3 crosses below the EMA 6, open a sell position below the candle in which the signal is generated and put the stop loss above the high of the day or near any point pivot.
- When the EMA 3 moves below the EMA of 6 periodos but the stochastic is in buy mode, do not open a sell position and wait for the stochastic sell signal. If the signal is generated, sell on the top of the candle in which the signal is generated.
- Be patient and let the candle to complete, do not close any position with a market order, instead allow the operation to continue and develop.
- Remember that this technique requires that radio Profit / Reward is 1:1, which means that no matter what the stop loss should be equal in magnitude to the Take Profit (the price level where we take profits). So keep your sell orders as they were at the time of opening the position. For example, if we open a short position in EUR/USD at 1.3520 with a stop loss of 1.3560, our Take Profit should be 1.3480.
- If the price reaches the predetermined Take Profit level, close the position and take profits.
- Close the position at predetermined stop loss, do not move it if you see that the trade moves in the opposite direction to that expected in the belief that the market will reverse.
- Close the short position if a positive crossover occurs between the exponential moving averages, ie if 3 EMA crosses above the EMA 6. In this case the stop loss should be placed above the high of the candle where the crossing occurred.
- In a sell position avoid any subsequent buy signal of the stochastic and focus on the crossing of EMA.
- Hold the position until the price reaches the Take Profit or Stop Loss or the latter should be revised.
Additional Notes
- Do not trade using this system during the first & last 30 minutes of the session.
- The profit/risk ratio should be 1:1 in any trade to ensure the profitability of the system.
- Before entering the market, the trader must decide how much is the maximum that he is willing to lose (money management) to adjust the volume of the position accordingly.
Example of this intraday trading system
The following is an example of this technique applied on a 15 minutes chart of the EUR/USD:
