This strategy is based on stochastic and exponential moving average. Although it is very simple but it is very effective for short term
Indicators which are used: - Stochastic (5,3)
- 2 Days exponential moving average
- 4 Days exponential moving average
- Stochastic (5,3) should be below 50
- Buy when 2 Days EMA crosses 4 Days EMA from the downside to upside
- Stochastic (5,3) should be above 50
- Short when 2 Days EMA crosses 4 Days EMA from the upside to downside
- Below the low of the entry day but it should not be more than 3 % from your entry price
The risk:reward ratio should be at least 1:3.
- Exit when Stochastic (5,3) reaches the near of the overbought zone e,g, near 80 if you are long
- Exit when Stochastic (5,3) reaches the near of the oversold zone e.g. near 20 if you are short
2 Days and 4 Days emas crossover are providing early entries into the trend and the stochastic helps to filter out false signals.