From the July 01, 2012 issue of Futures Magazine • Subscribe!

Capturing trends in forex

Strategy details

Type: Directional swing trade technique

Time frame: Four-hour charts

Indicator one: 20-period EMA

Indicator two: 20-period CCI

Markets: GBP/USD, EUR/USD, USD/CAD, USD/CHF, AUD/USD, NZD/USD, EUR/GBP, GBP/JPY

Buy rule: In an uptrend, buy when the CCI is below –100 (oversold) and price has touched (or threatened to break below) the EMA, which would be acting as support.

Sell rule: In a downtrend, sell when the CCI is above +100 (overbought) and price has touched (or threatened to break above) the EMA, which would be acting as resistance.

Stop loss: 100 pips

Profit target: 300 pips

Position sizing: 0.01 lots for each $1,000 (making it 0.1 lots for each $10,000) or 0.1 lots for each 10,000 cents in a cent account (making it 1.0 lots for each 100,000 cents). 

Risk per trade: 1%

Risk-to-reward ratio: 1:3

Breakeven: Move your stop loss to breakeven after you have gained 100 pips or more.

Trailing stop: You may apply a custom-set trailing stop of 100 pips after you have gained about 200 pips or more.

Exit rule: Exit when the initial stop, breakeven stop, trailing stop or profit target is hit.

Maximum signals/week: As an additional risk control measure, refrain from taking more than 10 trades with this strategy during one week.

Mustapha Azeez is a professional forex trader, strategist, fund manager, researcher and coach. He is a senior analyst at FX Instructor LLC. Email him at amustapha@fxinstructor.com.

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