The Extreme TMA System strategy
Extreme TMA System trading strategy is suitable for any currency pairs, the recommended timeframe is M15.
The market is like a pendulum, constantly swinging back and forth. It is always striving to form an average price, but it never succeeds, constantly reaching that level, turning around, trying to reach it again, and never striking a balance. This system is designed to take advantage of these pendulum swings. It is a compendium of my understanding of the market in its simplest form.
Indicators of the Extreme TMA System trading strategy
The principles of the system are quite simple. The first indicator is smoothed TMAwhich shows us the average path that price is following. The indicator reflects past price movements, with which we try to determine the future based on recent history. It is corrected by redrawing. The indicator consists of two outer limits of price movement.
Our second indicator is TMA Slope. It shows us the relative change in the slope of the center line compared to previous candles. The indicator determines the direction of our possible trade, it can also be used to trace divergences with the price. For instance, if the price is rising and our indicator is falling, it is most likely predictive of a price decline in the near future. The stronger the decline of the indicator, the more likely the price will fall. We can reverse the same concept. If the price is falling and the indicator is rising - there is a high probability that the price will go up. In addition, we will use this indicator on exits, as detailed below.
The third and final indicator is MA Crossover Histogramwhich is a visual guide to help us analyze the direction of price movement. Blue bars indicate bullish price behavior and red bars indicate bearish price behavior.
Rules for opening a position in the Extreme TMA System trading strategy
1) First, we trending using the TMA Slope indicator. If the TMA is in the range of -0.50 to 0.50 we can open trades in either direction. The TMA is considered to be bullish if it is above 0.51. In that case we open long positions ONLY. A bearish TMA is (below -0.51). In this case we open ONLY short positions.
2) Once we have determined the direction of the trade, we look at the TMA and wait for the price to cross one of the two outer limits of the range. The upper limit for a short order, the lower one for a long order. As a rule, the price moves within the range boundaries, so such trades are relatively reliable.
3) Now we only look at the TMA Slope Indicator. We open only long positions if the indicator values are increasing, and only short positions if they are decreasing. The greater the angle of the decline or rise, the stronger the signal.
4) Finally, we only open short positions if the price is above the upper TMA boundary and tests the resistance level which is above the upper TMA boundary. We only open long positions if price is below the lower TMA boundary and tests the support level, which is below the lower TMA boundary. The further the price is from the limits of the range, the stronger the signal.
There are two ways to open a position in Extreme TMA System trading strategy, depending on your risk tolerance:
1) Without a hard stop loss. If you are not using a hard stop loss (30 pips to entry level or less), after meeting the 4 conditions described above, place an order after price has touched (tested) at least once the support/resistance level.
2) With a hard stop loss. If you are using a hard stop loss (30 pips to entry level or less), then you need to apply the correct EA to the chart from those in the folder. 5 x 5 Buy EA is designed for long trades. 5 x 5 Sell EA is for short trades. Note that using these EAs will reduce your profit by a few pips, but your risk will be less.
5 x 5 EA will trigger an order when the price recalculates the 5 period smoothed and 5 period shifted moving average (white line on the chart). When EA automatically brings the order to execution, it automatically stops working. That is you enter only once and in one direction. Once the EA has stopped working, you will see a notification about it in the upper left part of the screen, you can remove it from the chart and go to the exit strategy.
Rules for closing a position in the Extreme TMA System trading strategy
A very conservative way out. We close the position when the RA touches the center line of the TMA.
Conservative. We close ½ position when the RA touches the center line. We close the other half of the position when the price touches the opposite TMA line, OR when the TMA Slope closes the bar formed in the opposite direction to our trend.
Aggressive. When the RA touches the opposite edge of the range OR when the TMA Slope indicator closes the bar formed in the opposite direction to our trend, use a trailing stop above the maximum of the previous candle for a short position and below the previous candle for a long position. We work with a trailing stop, until the position is stopped.
Examples of the Extreme TMA System strategy
Extreme TMA System strategy is very simple in its basis, its rules are easy to trade by.