post

Trading the AUDUSD with Moving Averages and Moving Averages of RSI

This strategy is designed to work ranging markets on the 15 minute timeframe

It uses a slow Moving Average (MA) to ensure we only take trades in the direction of the longer term trend and triggers the trades on the cross of the MAs of RSI.

Strategy Conditions
Double MA crossover based on:

  • Fast Smoothed MA (SMMA) of 10
  • Slow Simple MA (SMA) of 100

Double MA crossover of RSI

  • RSI period 30
  • Fast SMA of RSI, 10
  • Slow SMA of RSI, 40

On the shorter timeframes it is easy to get whipsawed and thus quickly lose money. Hence in this strategy we only take trades in the direction of the longer term trend as indicated by the slow MA. We use the MAs crossover of RSI rather than RSI itself because that provides a smoother response to changes in price.

Trading Rules
Enter a trade when SMMA 10 crosses SMA 100 (crosses up for a Buy and crosses down for a Sell) AND SMA 10 of RSI crosses SMA 40 of RSI (crosses up for a Buy and crosses down for a Sell).
Exit the trade when both sets of MAs cross in the opposite direction.

Suggested Trade Settings

  • TP of 20
  • SL of 40 or rely on the Exit condition
  • Partial TP of 50% at 10 and
  • BE at 10

This is a strategy for the 15 minute timeframe so don’t expect large moves. Large moves do occur sometime but it is generally more profitable to ensure we capture the smaller moves rather than risk the trade reversing on us for a loss. Hence we use small TP and BE settings.

Example
In the chart below the indicators for this strategy have been included on a 15 minute chart of AUDUSD. I have highlighted the trade entries (and exits which occur at the same time unless closed on TP or BE) with vertical green lines.

The commentary on the chart shows the four trades for the period with three wins and one loss.

Over the period 8 May to 7 June 2014 this strategy when traded with FX Autotrader Elite gained just over 4% ($230 on a $5K account) while trading at a lot size of only1% risk per trade.

Trading the AUDUSD

Google+ Authorship

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.