Simple Trading Method for rookies

Hi All

I found this little trading method which seems quite interesting to me and I would like to share it here. The Key to this system is that the signal are fairly easy to determine from the indicators and any newbie to the trading arena should be able to master the method quite easily.

The method would be working on any pairs but we should stick to the majors as they usually has the best moves. Also, we are going to use only the 30 minute timeframe for our trading. If you want to use any other timeframe, then this will be your call.

WARMING UP

First if all, we will need to set our chart as follows:

1. Place a 50 period Exponential Moving Average (EMA50) - color GREEN

2. Place a 100 period Exponential Moving Average (EMA100) - color RED

3. Place a 200 period Exponential MOving Average (EMA200) - color light-BLUE

4. Place Stochastics Oscillator with settings of 14,3,3 and levels 20/80

5. Place the parabolic SAR indicator with default settings

After you are finished setting up your chart as such, you can start hunting for the trading opportunities which unveil to you through these indicators. You chart should be looking like this. You can download the template of the method at the end of the post.

Step 1 - Determine the trend

First and foremost, we need to determine if there is a trend exercising on the market. As this is a trend trading method, we will definitely need to identify the proper trend first in order to trade it. We will have a trend when the 3 Exponential Moving Averages stack upon one another and there is enough space between them so that they do not look clogged. For an up trend, we will have a GREEN on RED on BLUE sequence and for a down trend we will have the reverse which is BLUE on RED on GREEN. These 3 EMAs are here to give us the direction and once we have it, we should move to the nect step and look for an entry into in this trend and catch some pips from it.

Step 2 - Trade Entry Signal

We are going to use the other indicator, the stochastics to determine the trade entries. First we need to have a signal from the stochastics oscillator, then the parabolic SAR should support the signal. So, we are going to get a BUY signal when the stochastics goes below the 20 level, crosses then move out of the 20 level and goes up... As for a SELL signal, we need to have the stochastics move above the 80 level, crosses and then move out of the 80 level heading down

Step 3 - Final phase - Confirmation

After step 1, we got the trend direction we are going to trade... Then step 2, we get a trade signal in the SAME direction of the trend... And now, finally, before we open the trade and send a market order, we need to get this signal filtered and confirmed. We use the last indicator in our system to do that. For a long, as soon as the first parabolic dots appear UNDER the bars, we have confirmation of a BUY signal and if we see the first dot ABOVE the candles, then we have a confirmation of a SELL signal.

SUMMING UP

So here we are with some clear concise rules about this trading method. We first determine the trend and we are going to trade ONLY in the direction of the current trend, we are going to neglect all signals which are opposite to the trend. After that, we wait for the stochastics to give us a trade entry signal and we enter the trade only when the signal is confirmed by the parabolic SAR indicator. This is indeed simple to learn and apply, however, you will need to practice it for quite sometime to truly master it and find it weakness and potential. There is a trend present in the market most of the times and you should be getting trades each and every day. When there are no trades, just do not force it and wait for the market to generate a signal... sit tight and be patient. Hope this reading will benefit you... Good Luck