This is a Moing Average Cross or MA-X strategy setup.
MA-X strategy consists of the 100 period ( ) in red,
and the 20 period in blue.
If the 20 is above the 100 then we only take buys or longs.
If the 20 is below the 100 the we only take selss or shorts.
*In this case price is above the 100 so we will only take buys or longs.
*This Pair has been in a nice uptrend foe some time.
*It's now pulled back below the 20 and consolidating below the 20.
*We are going to look for a close above the 20 to go long.
*This trade plan we buy a daily candle close above the 20 .
On the breaking candle to enter a full-sized position we want to the bar reach up to the average.
If it doesn't reach the average but does reach 75% of the average open a ½ size position to reduce risk.
You can calculate the percentage by dividing the first average by the second average.
You should at least get 75%, if you don't then stand aside on the trade.
The stop loss will be 1.5 x ATR.
The first target will be 1 x ATR.
So the way that works is you get your candle close above the 20 that's your entry point.
At that time you look at the ATR of that candle.
You multiply that by 1.5 to get your SL.
You measure that distance behind the entry and that will be your SL.
Then you measure 1 ATR above the entry and that will be your first target.
If after entering the trade the candle closes back below the 20 , tke the loss right then.
Do not wait for price to hit the SL.
Our intention is that a breakout above the 20 should be explosive and hit our target fairly quickly.
If the momentum goes away we want to shut the trade down without taking a full stop if possible.
When price hits our first target, close half the position for profit and set the SL to break even on the remainder.
Follow stops as price moves in our direction until the market takes us out.
These two rules are the very definition of cuttoing your losses and letting your winners run.
Typically does this by using two positions.
The first position has a stop loss and a take profit.
That position will close automatically when the first target is hit.
The second position will only have a stop loss and not take profit.
This is the position that will be allowed to run.
When the first target is hit we have to manually move our stop up to break even on the second position.
Risk only two percent of your trading account of each trade.
Each position will then only be 1%.