Trading System with the Awesome, Stochastic, and EMA indicators

Next, we will present a simple technical analysis trading system based on signals from three well-known technical indicators: the stochastic oscillator, the Awesome oscillator, and the exponential moving average (EMA).

As such, it is a technical system with clear rules that do not require extensive interpretation. Essentially, it is a trend-following strategy that opens positions in the direction of the EMA 200 on H4 and D1 charts.

Like any technical trading system, it often generates false signals during periods of significant fundamental news releases, so caution is advised during these times.

As always, we recommend testing this method on a demo account before using it for real-money trading in the market.

Trading System Configuration

  • Recommended Markets: This trading system was originally designed for use in Forex, especially with major currency pairs, but it can be tested in other markets such as precious metals, indices, and cryptocurrencies.
  • Recommended Timeframes: This strategy was developed to operate on the 4-hour (H4) and daily (D1) timeframes.
  • Recommended Market Sessions: The system can be used during any market session. However, it should be noted that the Australia and Asia market sessions exhibit lower volatility and fewer profit opportunities.
  • System Indicators:

Trading System Rules

Open and close positions according to the following rules:

Long Positions

A buying position is opened when the following conditions are met:

  • Price action is above the 200-period Exponential Moving Average (uptrend).
  • The Awesome Oscillator has changed its color to green.
  • The main line of the Stochastic Oscillator is above the level of 50.
  • Position Opening: The position is opened on the signal candle that meets the above conditions. Another option is to wait for the opening of the next candle.
  • Stop Loss: Place a stop loss 50 pips below the entry point on the H4 chart or 100 pips below the entry point on the D1 chart.
  • Take Profit: The position can be split into two parts and managed as follows:
    • First Part: Assign a fixed take profit target of 100 pips to this position.
    • Second Part: Let this position run until the Awesome Oscillator signals a reversal (changes from green to red).”

Short Positions

  • Price action is below the 200-period Exponential Moving Average (downtrend).
  • The Awesome Oscillator has changed its color to red.
  • The main line of the Stochastic Oscillator is below the level of 50.
  • Position Opening: The position is opened on the signal candle that meets the above conditions. Another option is to wait for the opening of the next candle.
  • Stop Loss: Place a stop loss 50 pips above the entry point on the H4 chart or 100 pips above the entry point on the D1 chart.
  • Take Profit: The position can be split into two parts and managed as follows:
    • First Part: Assign a fixed take profit target of 100 pips to this position.
    • Second Part: Let this position run until the Awesome Oscillator signals a reversal (changes from red to green)

Real Example of this trading system

Example of a Buy Trade Generated with the Trading System on an H4 Chart of the EUR/USD Pair
Example of a Buy Trade Generated with the Trading System on an H4 Chart of the EUR/USD Pair

 

In the previous image, we see an example of a buy trade executed with this system. On a 4-hour chart, the price is above the EMA 200, indicating an uptrend. We then wait for the other bullish signals to occur. Once the Awesome Oscillator changes to green and the Stochastic rises above the level of 50, we open the buy position.

Subsequently, the price starts to rise and reaches the profit target marked as TP.

As shown in the image, the system later generated three more buy signals, which also resulted in profits. Of course, this is not always the case, as like any trading system, this method also generates false signals, especially in ranging markets. Therefore, it is recommended to implement risk management practices that limit the impact of losses on losing trades.

You can access more trading methods for Forex and other markets at: Winning Trading Systems


 

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