Parallel EMAs

Parallel EMAs

I am trying out this method. Using GBP as test cases. This method allows me safety to place my order for the day and wait to collect my "sure" profits at the end of the day (hopefully). No need to monitor until the end of the day and thus allow me to do other things, like trading on another account, or other commodities or simply spend time with my family. Good for intra day and inter day trading.

Using a 0800 to 0800hrs time frame, I calculate the Pivot line, R1, R2, S1 and S2 for the day.
Next checking using the 1 hour chart for ensure that WMA5 is parallel to EMA21, EMA55, EMA100 and EMA200, I will place my limit order buy at R1 (take profit at R2, stop loss at Pivot) and limit sell order at S1 (take profit at S2, stop loss at Pivot).

Contrast to Parallel EMAs is what David Kolachi termed as dispersion, where WMA5 cuts EMAs or when a "lower time frame" EMA starts or has cut a "higher time frame" EMAs. Example EMA21 cuts EMA55, or EMA55 cuts EMA100. In such a day, I will reserve my trade and trade with caution.

Which Time Frame to use?

Using a 0800 to 0800hrs time frame yield the white Pivot line, S1 and S2 lines at 1.9451, 1.9375 and 1.9321 respectively for 5th Jan 07.

Using a 1200 to 1200hrs time frame yield the yellow Pivot line, S1 and S2 at 1.9430, 1.9328 and 1.9269 respectively for 5th Jan 07 .

But using a similar technique for placing limit orders at S1, take profit at S2 and stop loss at Pivot Line, resulted in good profit.

As seen, both cases filled the limit order at different time and managed to square the position for the day, without triggering stop loss.

For the 0800 to 0800 time frame, a total of 54 pips, while the 1200 to 1200 time frame has 59 pips.

On 3rd Jan 07, there is 70pips from the 0800 time frame and 75 pips for the 1200 time frame.

I will leave the decision to you, dependings on what time frame you are comfortable.

4 and 5 Jan 2007

This is one of my first few trades for the year.
Notice the parallel lines form by EMA200, EMA100, EMA55 and EMA21.
To me this is clearly a down trend for cables.

On 4th Jan 0800hrs, I set a sell limit order at S1 support line at 1.9417. The order was filled that day around 1650. The profit was set at S2 at 1.9316 and stop loss at 1.95840.

Unfortunately, the day failed to square my position until the next day 5th Jan at about 1100hrs.

Another sell limit order is placed on 5th Jan at 0800 at S1 (1.9360), with profit taking at S2 (1.9321). Stop loss set at Pivot line at 1.9451

The ordered was filled at 1200hrs and close at 2130hrs.
A good profit of about 80pips from these two trades.

I am testing out this method which I have not given a name yet. It involves analysis based on the daily and 1hour chart formation of the EMAs. After determine the direction it will go for the day, I will set the order at 0800hrs at either S1 or R1. Take profit at S2 or R2 and place stop loss at Pivot Line.

This enable me to place trade beginning of the day and off I go running the day with other activities. I am always looking for method that gives me more "sure" pips in less time spend in trading.