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Advanced system #18 (Trend lines + WMA swing strategy)

Submitted by Hessel

Currency: EUR/USD
Time Frame: 3 hours

This (swing) strategy uses trend lines in combination with WMA 21 and WMA 11.
A good knowledge on how to draw trend lines is required for this system to work successfully.

I think this strategy is best explained by some pictures:

As you see, I connect lows, bottoms in a uptrend and highs, resistances in a downtrend. I prefer trend lines that connect at least 3 lows/highs.
When a trend line is broken, a change in trend is likely to occur. But we only enter the market when the WMA's cross on almost (may take a few candles) the same time as price breaks the trend line.
Patience is very important when using this strategy, waiting for the WMA's to cross prevents traders from trading a false breakout.

When you opened a position, it may occur that price action moves the other way. Don't worry, this is just a pullback, and it will make a lower high or a higher low!
If you don't feel comfortable with this, you can enter the market during this pullback using Fibonacci Retracement. When a trend line is broken, price often moves aggressively in the opposite direction, so a retrace to the 23,6 or 38,2 Fibonacci Retracement would provide a very reliable entry (trend has changed, WMA's crossed, retracement made a higher low or lower high!).

Once again, a picture to make it more clear:

When you're short, exit the market when price makes a higher low, breaks trend line or WMA's cross.
When you're long, exit the market when price makes a lower high, breaks trend line or WMA's cross.

Can't really help you with providing a useful stop loss. I watch the market every 3 hours and simply don't use stop losses. The last high or low would be a good stop loss, but this could easily be 80 pips away!
You could use RSI 18 or 20 to determine when to exit the market too. Help would be welcome here!

Remember, patience is important, wait for the trend line to be broken AND the WMA's to cross. Or, when you want to take less risk, wait for a pullback to 23,6 of 38,2 Fibo Retracement and then enter the market. I like this strategy very much because you don't have to monitor your computer whole day long. I just check my charts once in 3 or 6 hours. This strategy is excellent for swing traders.

Good luck!

Will this system work on 1 hour chart?

Yes it will. There's an interesting opportunity on the EUR/USD right now.
I attached a picture, as you see the trend line is broken and WMA's have crossed. I'm now waiting for a valid pullback to the 1.3250 level to enter a long position. After that, I think the way up will be resumed, and the former high at 1.3282 will be broken.

I love Trendlines! It's Price Action ;)

Anyway how long do you trade this system?and how do you rate the accuracy in percentage%? Just rough estimate will do (^_^)

Have been using this strategy for a couple of months now. Only gave a few trade signals when using the 3 hours chart, but all very profitable! I'm long on the eur/usd after the buy signal on yesterday's chart. The down trend line was broken and the wma's crossed. Look what happened, a beautiful move up.

That's nice! keep it up ;)

By the way, is it nescessary for the WMA to cross first?or the trendline must be broken first then we look for a cross of the WMA?

Sorry for asking too many questions.

It works kinda like a filter for false breakouts.. Just to make signals even more reliable!

If a retracement observed after break out , price must not close below 0.618 ( uptrend)or above 0.618 ( down trend ).

Hi nice strategy. WMA is Moving Average and calculation period should be "linear weighted" or there is some other setting for moving average in this strategy.
Happy New Year ! to all fellow traders.