Tag: strategies

Tag: strategies

I’m going to rank the best and worst trading strategies I have used in my seven eight years of trading journey. Not only that, I’m also going to rank other best methods, tools, etc. Basically, I’m going to combine my seven eight years of trading experience into one video so you don’t have to waste years of your life just to know what I know now. Please remember not to get offended if I say your favorite strategy is trash. Everything I’m going to say is based on my ten thousand hours of live trading experience and is what I actually found throughout the years. Everyone’s trading journey will be unique!

This is a Tier List. Strategies I’m going to put near the top of the list are good, and near the bottom of the list are bad.

Let’s start with the Fibonacci Strategy. This is when someone takes trades just because the price bounces slightly from Fibonacci price levels. This strategy is pretty much garbage. When I tested it, the data showed that the Fibonacci levels don’t provide any noticeable edge. It never reliably worked for me in the live market, either. Many times, when it worked, the price was actually reacting to normal support resistance areas or just reversing from a random spot. I will put the Fibonacci strategy in the F Tier. On the other hand, it is a good tool to see if the pullback entry is good or late. For example, in an uptrend, if you place the Fibonacci like this, and the long entry point is below the 50 Fibonacci, I see it as a decent entry.

The next one is Ichimoku Cloud. This is one of the best indicators I have used. It looks like a mess, but it solves a lot of problems beginner traders might have. For example, for a trend trader it filters slow or bad markets. It shows where the price is trending. It even gives an entry point. Other than the confusing aspect of the indicator, the Ichimoku Cloud is pretty good. I would put it in the C Tier.

Next is the Stochastic. To be honest, I found that Stochastic and Stochastic RSI indicators give more false entry points. In my trading journey, I haven’t found them that reliable. When I tested the Stochastic strategy 100 times in one of the previous videos, it only got around a break-even win rate. So, I would place it in the E Tier. Also, remember that by clicking on the card that appears at the top right corner, you can watch the detailed video on the strategies I’m mentioning here.

The next one is SuperTrend. This is one of the best indicators I have seen. It shows where the market is trending in one of the clearest ways possible. Its strategy of taking trades when it switches the trend also had a profitable win rate in my testing. Overall, it’s a very good indicator, especially for day trading. I would put it in the C category with Ichimoku Cloud.

The next one is the Fractal Indicator. This just sucks. This indicator basically spams arrows for every small price reversal. You can adjust its setting to identify bigger reversals. But in my experience, it’s not that reliable at that, either. One of the Fractal strategies is taking long trades when the Fractal arrow appears below the candle. But this just doesn’t work. It got one of the worst win rates in my testing series. On the other hand, when we take long trades after the price breaks above the fractal candle like this, the strategy gets a better win rate. But overall, it still sucks. I would put it in the F Tier. There are better indicators than this.

The next on the list is the Alligator. This is one of the most useful indicators I have used. Beginner traders will benefit most from this. It shows not only the trend direction but also the strength of the trend. It even shows when to not do trend trading. I would rate it in the C Tier.

The next one is the Parabolic Sar. This indicator is mainly used for setting good stop-losses. And to be honest, it does its job very well. I would put it in the C Tier.

Money Flow Index is the next one, and let’s just say it doesn’t flow money in the pocket that well. I would place it in E Tier next to Stochastic.

Next is the Golden Cross Strategy. This is one of those ancient strategies that survived different market conditions and for a good reason. It just works, but mostly on the higher timeframes, such as 1 Day. I would say I have found this strategy more reliable on the stock market higher timeframe. Still, it’s not something I would use as the main strategy. So, it goes in the D Tier.

Next is the Breakout Strategy. This has never reliably worked for me. When I tested it, the data said the same thing. It doesn’t work most of the time. Maybe it did many years ago, and maybe it does work in some specific situations, but based on what I saw, I would rate it in the E category.

On the other hand, I found the pullback of the breakout more reliable. The testing data from previous videos also says the same thing. I would put the breakout pullback entry in the C Category.

The next one is Bollinger Bands. This is one of those indicators that are very good, but it is difficult to use. Basically, the Bollinger Bands strategy that worked for me required me to take opposite trades when the price went outside the Bollinger Bands. This doesn’t sound that difficult, but when we actually try in the live market, we quickly realize that the price goes outside the bands a lot. You have to filter a lot of false setups to make this strategy work. So, even if this strategy worked for me, I would not recommend anyone using this as their first strategy. There are better indicators than this. I would put this in the E category.

But many years after I was done with Bollinger Bands, I realized that there is a new Bollinger Bands indicator called Percent B. Instead of appearing with the candles, this indicator shows up separately on the chart. It also has these upper and lower bands. When the price moves outside the normal Bollinger Bands, it can be confusing. On the other hand, Percent B shows the same thing by moving inside its upper and lower bands. I found this way better! I would rate this Bollinger Band indicator in the D category, just above the normal Bollinger Band.

The next one is the CCI indicator strategy. This just sucks. It got one of the worst win rates in my testing. I will put it in the F category next to Fractal.

Let’s see some Moving Average Strategies. The first one is the 9 EMA. I used this when I was trading on smaller timeframes, especially with momentum strategies. I used this to see where the very short-term trend was heading. For example, if the price moved up strongly and stayed above the 9 EMA for a while, I would wait for the price to move below the 9 EMA and stay there for a while. The price above the moving average would confirm a strong buying pressure, and the price below the moving average would confirm a pullback. When the price breaks above the 9 EMA again, I would look for a long entry. This strategy worked for me, especially when combined with candlestick entry patterns. I would put it in the C Tier.

Similar to 9 EMA, I used 21 EMA to see the medium-term trend or momentum. This was also a reliable indicator. I would put it next to the 9 EMA in the C Tier.

On the other hand, 200 EMA was just better than other moving averages. It not only showed the long-term trend, but I also found that it would act as a weak support resistance many times. I also used it to filter range and slow markets. When the price crossed the 200 EMA multiple times, I would see it as a potential range market because that’s how the price behaves in a range. I even made my own 200 EMA called TR EMA, which disappears in the range market. This moving average is one of my most used indicators. I would put it in the B Tier above all the indicators we have ranked so far. It’s that useful!

But what about Simple Moving Averages? I only talked about Exponential Moving Averages because I like how they react to the latest price movements more quickly. I mostly use EMA instead of SMA. If I had to rank SMA, I would put it just below EMA.

The next one is the ATR indicator. I highly recommend this indicator to beginner traders. This is one of those indicators that can be used with any strategy. I use it to see how far I have to set my stop-loss. For example, if I was taking a long trade near a support area. Normally, I would set the stop-loss just below the support. But this stop-loss could easily get triggered because of the market noise. So, to solve this problem, I can add the ATR value to my stop-loss distance. It’s like adding a market noise distance to the stop-loss. Now my stop-loss is far away, and the trade has a higher probability of winning. I would put ATR in the C Tier. I would have rated it higher, but once you gain enough experience, you can tell how far the stop-loss should be on your own.

The next one is the Keltner Channels Strategy. This indicator is similar to Bollinger Bands. But instead of taking reversal trades when the price goes outside the bands, you take trades in the direction of the breakout. Basically, this indicator says the price movement is slow when the price is inside the indicator. When the price breaks out of the indicator, the momentum in that breakout direction is higher. One can take trades when the breakout happens. I tested this strategy 100 times in the previous videos, and it did give a profitable win rate. Overall, this is as good as the indicators of the C Tier. So that’s where I would put it.

Now, let’s look at some price action pattern strategies. The first one is the Double Top and Double Bottom Strategy. This was a reliable strategy in my trading journey. I would put it in the C Tier.

The Head and Shoulders Pattern, is also similarly good. So goes in the C Tier as well!

But Flag Pattern, especially when the Flag looks like an Ascending or Descending Triangle, is one of the best price action pattern strategies I have used. I mainly used them on smaller timeframes to trade momentum. I would put it in the B Tier.

I would rank other Triangle and Price Action Patterns in the D Category.

Also, when it comes to the Trend Lines, I have only found them reliable when they are drawn on a pullback of a trend. Otherwise, they are pretty average. I would put the Pullback trend line in the C tier and other trend lines in the E tier.

Let’s see some Candlestick Pattern Strategies. The first one is the Engulfing Pattern. I would happily put it in the B Tier. It’s one of the best candlestick patterns I have found. If you remember the Trading Rush Free Price Action Series, you will know that hammer and shooting star patterns also show the same story. In other words, they are just like the Engulfing Pattern. I would put them in the B Tier as well.

As for the Doji candle, I would put it in the C Tier. It shows that there is equal buying and selling pressure.

I would put other Candlestick Patterns in the D category.

The next strategy on the list is the Awesome Oscillator. Unfortunately, it’s not that awesome. Its win rate in my testing series was slightly higher than break even. I would put it in the E category.

The next one is the Gap Strategy. This is when you look for a big gap-up or gap-down in the stock market. After that, one can take trades in the gap-open direction or in the gap-fill direction depending on where the price is showing signs of heading. I would add it to the B Category.

The next one is the V-WAP indicator. This is when you wait for the price to bounce from the V-WAP line in the Stock Market. This is one of my favorite indicators, and I would put it in the B Tier.

The next is the RSI indicator. I have found this to be an average indicator with an average win rate. The popular strategy of taking long and short trades when the RSI becomes oversold and overbought, respectively, did work in my testing. I would put RSI in the C Tier.

When it comes to Chart Types, I have found Renko Charts to be the best for drawing support resistance areas. They reduce the market noise and show the reversal points clearly. I would put them in the C Tier.

As for the Heikin Ashi Chart, they are also good at filtering out the market noise. Furthermore, one can even use them to trail the stop-loss. I would put them in the C Category.

As for the Candlestick Charts, these are simply the best. I would put them in the B Tier. They give a lot of information, which can be used to see the interest of other market participants! It is difficult to do that with Heikin Ashi or Renko Charts.

When it comes to Bar chart, I have never found it useful over other charts. I would put it in the E Tier.

Since Trend strategies are where I made the most money, and since trend trading is easier than range trading, I would put Trend Trading in B Tier and Range Trading in C Tier.

The next one on the list is Market Types. I would put Forex Market in the C Tier. This is where I started my trading journey. But this market has a lot of market noise in my experience. Support resistance areas work very well here. But only a few forex pairs are worth trading. The rest have a bad price movement.

I would put the Stock Market in the B Tier because I can trade a wide range of products very easily. The market noise in the Stock Market is less compared to the Forex market. So I can more reliably trade smaller timeframes.

On the other hand, I would put Crypto in the E Tier. Most of the time, it’s movement is trash. I can’t take technical trades when the price movement looks like this. It randomly starts making random moves and then suddenly starts making good, strong moves in one direction. Basically, crypto is volatile. But that’s also its advantage when it comes to long-term investing. For example, I have around two long positions in Crypto. Since Crypto makes big moves, the profit was made much faster than if I had invested that same amount into the stock market. Still, I only have a small portion of my capital in crypto as the risk of losing almost everything is also high. When it comes to normal trading, I don’t see an advantage in trading crypto over the stock market. So, I would still put Crypto in the E Tier.

The next one is the Donchian Channels Strategy. It’s one of the highest win-rate trend strategies I have found. You can learn more about it by clicking on this card. I would put it in the B category.

Similarly, the MACD crossover strategy is one of the best strategies I have found when it comes to identifying the end of pullbacks in a trend. Its Histogram part is also one of the best things out there! You can use it with any other strategy to see the momentum change. I go into much more detail in this video. I would put MACD and its Histogram in the B category.

Okay, so everything I’m going to say next will be very important.

If you noticed, I haven’t added anything in the A and S tiers yet. That’s for 2 reasons:

Number 1. The best trading strategy that I have found the most reliable in taking entries, booking profits, and setting stop-losses is the Horizontal Support Resistance strategy. I have data that says the way I draw support resistance works around 60% of the time. But that’s not the only reason I’m ranking it higher than anything else. You see, most of the strategies and tools I have mentioned so far are automatically calculated on the chart. In other words, MACD, Ichimoku Cloud, Bollinger Bands, Moving Averages, etc, all appear on the chart based on their predetermined formulas. Most of the time, there is less human psychology part in them.

On the other hand, when it comes to strong support resistance areas, the whole reason they work is because most people think in a similar way at the same time. Most people simply believe that if the price has strongly reversed from a price level before, the price has a good potential to do it again.

Horizontal Support Resistance Strategy is the only strategy I have found in my seven eight years of trading journey that is directly based on the psychology of market participants. On top of that, it is even supported by data! So, it’s the only strategy I would put in the A Tier.

Number 2. S Tier trading strategies don’t exist. But you can get to S Tier by gaining enough live market experience.

For example, when I was new to trading, I thought all trading indicators suck. If I had made this tier list before gaining 10 thousand hours of live trading experience, I would have rated every one of them in the F tier. I hated them all because they just didn’t work. But indicators were never the problem. It was beginner me.

At that time, I only had a few hundred hours of live trading experience. I was not experienced enough to filter good vs bad markets. I didn’t know when to use a trend trading strategy, such as MACD, and when to not use it.

Only when I gained enough live market experience I stopped trading like a bot. By that, I mean most trading strategies don’t work in all markets. We have to use trend strategies only in the trending market. Otherwise, we are trading mindlessly like a bot.

The only way to stop trading like a bot is by learning when to not trade. And I learned when to not trade after I gained more live trading experience.

Basically, what I’m trying to say is. Your trading strategy’s outcome in the live market kind of reflects how much experience you have in trading. If you are new and lack experience, your strategies will lack a high win rate as well.

Think of your experience as a multiplier of these strategies. The better you are, the better these strategies are.

If I was to start trading again, I would mainly focus on the S, A, and B Tier Strategies, Tools, etc. Because that’s what I have found to be the best after trading for seven-eight years straight!

That’s all! Now watch this video where I explain the best part of the MACD indicator with a cat!

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4 Day Trading Strategies I have made money with

Post author By Trading Rush
Post date September 10, 2023

this got me out of 90% of traders day trading strategies

Tag: strategies

In my ten thousand hours of trading experience, these are the 4 best day trading strategies that actually worked! I will share them in the order I used them, from the start of my trading journey to now.

Number 4.

For this strategy, I primarily focus on around 5-minute timeframes. The reason is, it’s quick enough to get in and out of trades but slow enough to think, analyze, and calculate position sizes. Now, you might notice that my charts are clean—no MACD, no RSI, no moving averages. That’s because when I used this strategy, I was a pure price action trader; indicators just made things confusing.

Step one: identifying extreme reversal points. You know how when you’re looking at a chart, and some patterns or price points are visible instantly? Well, extreme highs and lows did that for me.

What do I mean by extreme? Picture a V-shape in the price, where the price surges in one direction and then sharply reverses. That point where the price reverses? That’s what I call an extreme reversal point. I’m not talking about ‘W’ shapes or bouncing price action; it’s got to be a sharp, clean V or an inverted V.

Once I identified an extreme reversal point, I’d draw support and resistance lines around it. I would put a horizontal line right at the tip of the wick. For example, let’s say the price went strongly in the upward direction, then formed a shooting star candlestick pattern with a long wick, and then the price moved down. I would place my horizontal line at the extreme high of that wick. That’s my extreme resistance. If it were a V shape right side up, I’d put the line at the extreme low, making it extreme support.

Now that we’ve got our extreme lines, the next step is to wait. I’d wait for the price to approach these lines again.

The idea is simple: Whenever there is a clearly visible reversal point, the probability of the people reacting to it in a similar way can be higher. This happens around 60% of the time according to the data we have found on the Main Trading Rush Channel. If there is a support that looks like a V pattern, many people might see it as potential support when the price comes near it again. This is similar to how stock market participants see a crash bottom as strong support and an all-time high as a good resistance.

As the price comes down near the strong support, people start buying well before the end of the support. But the best support resistance entry in this support area is at the bottom. Furthermore, many other support resistance traders will set their stop-loss just below this support area. So, the breakout of this support line we have drawn is the deciding factor for many. Is the support going to hold the price above it or the price will break through it.

By taking a long trade at the edge of the support, I not only get the best entry price, but if I set the stop-loss just below the support with many other traders, I also get a good reward-risk ratio.

But how do you know when to enter the long trade?

Well, here comes the crucial part—identifying strong price rejection. Imagine the price nearing one of these extreme lines. What I’m looking for is the price to ‘kiss’ that line and then—wham!—a sharp move in the opposite direction. It has to be almost instant! The longer the wick, the stronger the rejection, and that’s my entry point.

I wouldn’t enter the trade immediately after the rejection; I’d only enter after the rejection candle has closed. Why? Because the markets can trick you. Sometimes there’d be a sharp rejection, but before the candle closed, it would reverse, effectively canceling out the initial rejection signal. Also, if the price happens to move too much in the entry direction after the rejection, I would avoid taking the trade. That’s because now the entry price is too far from the extreme support resistance. The risk reward is not worth it!

As soon as I spotted a strong rejection off an extreme support line and the candle closed, I’d go long, setting my stop-loss just below the wick of the rejection candle. My reasoning was simple: that wick represented a strong buying pressure, and if the price goes below it, means that buying pressure wasn’t so strong. For profit targets, back then, I’d aim for a 1-to-1 reward risk ratio. Nowadays, I would recommend using a lower reward risk ratio such as 0.5 to 1. If the price has a lot of room to move in the entry direction, then I would use 1 to 1 reward risk ratio.

For a short setup, it was the same story but in reverse. A strong rejection at an extreme resistance would be my cue to enter a short position, with the stop-loss set just above the wick of the rejection candle.

Number 3.

While I was using the strategy that focused on extreme reversal points, I noticed that there were times when the price would move towards the extreme support or resistance, and then nothing would happen. This was frustrating as it meant a lot of time spent watching the charts without any result. So, to optimize my time and increase my chances of making successful trades, I decided to adapt the strategy. Instead of only looking for extreme reversal points that resemble a V-pattern, I also started scanning for price ranges, where the price is staying within a range for a while and the edges of the range are clearly visible. If the price has been in a range for a while, it’s support and resistance are most likely also visible on multiple timeframes. If many traders can see those support resistance areas, they are just as good as the extreme V shaped reversal areas.

So here is what I did: I opened around 5-minute time frame charts. Just like before, I would draw horizontal lines at the edges or extreme wicks of the support and resistance. Now, if the price comes in at the extreme resistance wick but then crosses it clearly in the upward direction, the previous strategy setup becomes invalid. In this case, I wait for the price to move in the opposite direction, as if it’s carrying out a pullback. As the price comes back towards the breakout resistance, I want to see if there is a price rejection from it. If there is strong rejection, it basically means that the breakout resistance is now acting as support and there is higher buying pressure from it. When I see the higher buying pressure, I enter a long trade and set the stop loss inside the range, below the support.

Similarly, if I was waiting for a price rejection from a strong support and that didn’t happen, and instead the price went down clearly resulting in a breakout of the support, then I wait for the price to move back in the upward direction as if it’s carrying out a pullback. Then, I wait for the price to get strong rejection from that previous support level. If there is strong rejection from the support, it means that support is now acting as a potential resistance. When that happens, I take a short trade only when the candle is closed. I set the stop loss above the breakout, which in this case is above the support level.

It’s important to note that this time, since the support and resistance are not the extreme edges, we can’t set the stop loss right next to them. Before, I was setting the stop loss just after the extreme reversal point and the rejection point, but this time, I have to keep a good enough gap between the line I have drawn as the support or resistance and the area I think is the actual support or resistance. Since we know that support and resistance is an area, not a single line on a chart, we want to make sure that we cover the entire support or resistance while taking this breakout trade.

Number 2.

While both the extreme reversal strategy and breakout pullback were effective, they generated very few entry setups in the market. Waiting for the right moment can take a long time, which might lead to impatience and even cause you to see trading opportunities that are not actually there.

So, I adapted my approach.

This time, when I opened the chart, I selected any time frame between 5 minutes and one day. For this strategy, we are not going to use rejections of the candles that much. So, the time frame doesn’t really matter. But what I used this time was the Bollinger Bands, specifically with the default settings.

But why did I use the Bollinger Bands?

Imagine price as an elastic band. When you stretch an elastic band too far and release it, it snaps back to its original position. Similarly, when the price stretches too far in one direction, it often corrects itself and returns to its average. The Bollinger Bands, with its two bands moving with the price, serve as the boundaries of this ‘elastic band’. When the price becomes volatile, the bands expand, and when the price is slow, they retract.

When the price moved too far above or below these bands, I saw it as the price stretching too much, and thus, it had a higher probability of returning inside the Bollinger Bands.

But it wasn’t as straightforward as just waiting for the price to cross the bands. Even a stretched rubber band doesn’t snap back immediately. So, when the price moved above the upper Bollinger Band, for example, I waited for a strong engulfing or a shooting star pattern to form almost entirely outside the upper Bollinger Band. Then, I took a short entry at the closing price of that candle, and set my stop loss above the highest point of the upward move.

On the other hand, if the price went far below the lower Bollinger Band, I waited for a strong and clear engulfing or hammer pattern. Then, I took a long entry at the closing price of that candlestick pattern and set my stop loss below the lowest point of the downward move.

Since this was kind of a reversal trade and I was only anticipating a smaller correction of the price moving back inside the Bollinger Band, I used a lower reward-risk ratio of around 0.5 to 1 or 1 to 1.

Let me show you on this chart here. See how the price moved above the upper Bollinger Band and then formed a shooting star pattern entirely outside the band? That’s where I would take a short entry at the closing price of the shooting star candle and set my stop loss above the highest point of the upward move. And here, when the price dropped below the lower Bollinger Band and then formed a clear hammer pattern, I would take a long entry at the closing price of the hammer candle and set my stop loss below the lowest point of the downward move.

This strategy was quite different from the previous ones because it did not rely heavily on candle rejections and allowed me to trade on any timeframe. And while it was more of a reversal trade, it helped me increase my trading opportunities and not get too impatient waiting for the perfect setup.

But while this strategy was good and everything, it was a very difficult strategy. Bollinger Bands and Candlestick Pattern combination is one of the most challenging or confusing things I have used. You have to filter a lot of false setups that are caused by market noise and other things. Bollinger Bands also has one of the highest difficultly rating on the Trading Rush Website. So I used this strategy for a brief period in my trading journey.

Number 1.

You know, after dabbling with Bollinger Bands and other indicators, I came back home to price action. I loved looking at a naked chart. It speaks to me more than any of the indicators ever did. Here, I found one of my favorite Price Action strategies that I have used in most of my trading journey. I still use it to this day!

Look at this chart. See the time frame? You could actually use anything between 5 minutes and 1 day. You can go lower than 5 min if you want, because I’m pretty sure I did when I started trading with it. But nowadays I don’t and so I wouldn’t recommend it. What I keep an eye out for is a specific pattern in price action.

Notice here on the chart how the price initially moves upwards, takes a bit of a breather and moves downwards, then kicks up strong, smashing past the previous high? Right after that, it pulls back down but not as much as it shot up. Experienced traders might recognize this as a price action trend pattern.

Once I spot this, I draw an area of support right here, just where the breakout resistance was. This resistance now has the potential to act as support. But how do I confirm it? Ah, I used one of the rules from my previous strategies — the one involving candle rejections and strong candlestick patterns to sense buying pressure.

I zoom in and watch the price approach this newly drawn support. Since the rejection on higher timeframes won’t be easily visible, I used strong engulfing and hammer patterns as the entry point. If the hammer candlestick pattern had a long wick at the bottom, it would indicate strong buying pressure. I recommend watching the Free Price Action Series I have made on the Trading Rush Website to learn all the high win-rate candlestick patterns I have found.

I would enter the trade at the closing price of the strong candlestick pattern that emerged. As for my stop-loss, I would place it just below the support level and the candlestick entry pattern.

For the exit strategy, since this is a trend-following strategy, the probability of the price moving big in the entry direction is higher. So I would aim for a higher reward-to-risk ratio. Such as 1 to 1, 1.5 to 1, or even 2 to 1. Although I rarely go that high these days. Back in the day, I would use whatever reward-risk ratios that fit before the swing high resistance. But nowadays, I stick with 1 to 1 and 1.5 to 1 below the resistance.

Now flip the strategy. If the price is moving down, then pulls up a bit, crashes down again, and takes another breath by pulling up—you see where I’m going with this—I treat it the same way but in reverse. I mark the previous swing low as a potential resistance area. If a shooting star pattern appears or any other reversal pattern, that’s my signal. In this case, I enter a short position at the closing price of the candlestick entry pattern, set a stop loss above the entry candle and above the resistance, and again use a 1 to 1 or 1.5 to 1 reward-to-risk ratio before the swing low support of this trend pattern.

This was a reliable strategy in my trading journey!

Tags day trading, day trading strategy, intraday trading, intraday trading strategies, strategies, trading, trading rush, trading strategies

5 Best Moving Average Strategies

Post author By Trading Rush
Post date May 24, 2023

5 best moving average trading strategies

Tag: strategies

I’m going to share the moving average methods that I have found to be the most useful in my more than 10,000 hours of trading experience.

I’ve been trading for many years, and my go-to tool has always been the moving average, especially the exponential moving average. It’s useful because it responds fast to price changes, which is important when I’m dealing with shorter time frames where prices move quickly.

I am not saying that a simple moving average is bad. In the ‘5 Best Moving Average Strategies’ I’m going to show next, you can also use a simple moving average if you like it more. Also, all these strategies are not just entry strategies. Well, mainly because the moving average is not a great indicator for taking entries. There are some good moving average strategies, like when we tested its popular crossover entry strategy on the main channel, the win rate moving average got was good. But you can do much better things with the moving averages than just taking entries. So instead of just entry strategies, I’m going to share the moving average methods that I have found to be the most useful in my more than 10,000 hours of trading experience.

Number 1.

In our first strategy, we’ll transform the big disadvantage of the moving average into an advantage. The moving average takes the data from a specified number of previous candles. For example, if you consider a 9-period moving average, it will gather data from the last 9 candles and calculate an average.

Now, imagine a scenario where a big candle is formed on the 10th candle, and the price moves sharply in one direction. Since the moving average calculation uses data from the past 9 candles to determine an average, it won’t account for this sudden large candle immediately. In simpler words, it doesn’t react swiftly, as it tends to moderate the effect of the previous 9 candles.

This characteristic of the moving average is often referred to as ‘lagging’ in trading. You may have heard traders say that certain indicators lag. In this context, the moving average is considered one of the most lagging indicators. If you use a longer moving average, like 50, 100, or 200, the lagging effect increases. The longer the indicator, the greater the lag. However, we’ll turn this lag, or disadvantage, into an advantage.

As a beginner trader, I found it challenging to identify a range-bound market, and many new traders face this issue. Let’s look at a chart of a range-bound market. Here, the price was trending, rising from a lower point. Afterwards, it started fluctuating around the same level, creating similar highs and lows. If we connect these highs and these lows, we can identify resistance and support levels, respectively. This could be done manually, but if we use the Moving Average, particularly the 200 Moving Average, it will be more apparent.

In a range-bound market, you’ll notice that the price crosses the Moving Average repeatedly. Contrast this with a trending market, where the price was consistently above the Moving Average. Once the market turned range-bound, the price began to cross the Moving Average frequently. This happens because the indicator, which takes into account many past candles to calculate its value, remains relatively flat as it doesn’t react quickly.

These two elements – the price crossing the Moving Average repeatedly, and the flatness of the Moving Average – form the basis of a range market filter strategy. Using this method, I’ve successfully identified many range-bound markets. That concludes our first strategy. Now, let’s proceed to the second one.

Number 2.

One common problem that beginner traders face is understanding how to identify momentum. Everyone suggests looking for price momentum before making a trade, but recognizing momentum can be somewhat challenging for beginners. One approach I used to overcome this issue involves using these 3 moving averages, the 9-period Moving Average, 20-period Moving Average, and the 50-period moving average.

If you observe these three moving averages during a trend, you will notice that the 9-period Moving Average is on top, followed by the 20-period Moving Average, and then the 50-period moving average at the bottom in an uptrend. In a downtrend, this order is reversed: the 50-period moving average is on top, followed by the 20-period Moving Average, and then the 9-period Moving Average at the bottom.

Usually, we use a single moving average to identify the trend, but here we’re determining which side has more momentum. For example, if we see a pattern of 9, 20, and 50 in an uptrend, we can infer that the uptrend is strong. If the pattern is 20, 9, and 50 in an uptrend, the uptrend might be considered somewhat weak. An even weaker uptrend would be indicated by a pattern of 50, 20, and 9.

In a downtrend, if the pattern is different from the 50, 20, 9 sequence, say, for example, 50, 9, 20, we could say the momentum is weak. A 9, 20, 50 pattern is not that good in a downtrend. We want to see more 50, 20, 9 pattern in a downtrend.

Another indicator of strong momentum is when these three moving averages move further apart from each other. For example, in this chart, the price moved upward, and at the same time, the three moving averages moved away from each other. And in areas where the price momentum is low, these three moving averages converge or get closer to each other. So, you can determine momentum based on the width and narrowness of these moving averages. If the moving averages are wide apart, the momentum is strong, while a narrow gap indicates low momentum.

Moreover, keep in mind that the pattern of 9, 20, and 50 Moving Averages won’t last for an extended period. It lasts for a while, then transforms into something else, indicating that the market is slowing down. Although this triple moving average technique is not a foolproof indicator, if you’re having trouble identifying the momentum strength, it can provide an extra layer of assistance. With that explained, let’s now move on to the third strategy.

Number 3.

The third strategy was one of my favorites when I transitioned to the stock market. Upon entering the stock market, I was trading in shorter time frames, mostly less than five minutes. In such time frames, it’s crucial to trade with a focus on momentum, as other indicators and strategies aren’t as effective. However, as a beginner trader, identifying momentum was a bit challenging due to the good amount of ‘market noise’.

To resolve this issue, I began using the 9-period moving average. Let’s consider this chart, for example. As you can see, the price opened lower than the last close, and as soon as it opened, it began to drop. The downward momentum was strong, as evidenced by the price remaining consistently below the 9-period moving average throughout this decline. As soon as the downward momentum ended, the price moved above the 9-period moving average and stayed there as long as the upward momentum was strong.

This strategy was greatly beneficial to me because I was able to observe that if the price stayed on one side of the 9-period moving average for an extended period, and then started to trend in the opposite direction, it was a good signal for me to prepare for a short entry.

With more experience, I’ve now learned how to trace momentum without relying on the moving average. Therefore, I no longer use the 9-period moving average as much as I used to. However, this strategy can be very beneficial for beginners, especially if you’re encountering challenges similar to those I faced when I was starting out.

Number 4.

Now, let’s talk about another strategy I used when I was more into swing trading, especially when I saw the price had a lot of room to move in the entry direction.

Take a look at this chart. Here, the price moved down and then made a good reversal in the upward direction. Then it made another downward swing, but this swing was not able to cross the previous swing low. You will notice that, now, a double bottom price pattern is formed. This is a good sign of a good support area.

Some traders prefer to wait until the price breaks below this support area before making a trade. Let’s say you took a short trade on the breakout. You want to catch as much profit as possible because there is no other support nearby. The price has a lot of room to move in the entry direction. But the truth is, no one can tell because nobody can predict the future. The price can reverse early. So the question arises, how long will the price continue to move in the direction of the breakout?

That’s where a longer-term moving average, like the 50 or 200-period moving average, comes in handy. If you set your stop loss above the moving average, your trade might look something like this:

Imagine this red line is your stop loss line. Then, you can simply move and trail the stop-loss lower as the moving average goes lower. When the downward momentum is lost, the price will cross above the moving average and will automatically book the profit.

In my experience, the 50 or 200-period moving average works well for swing trading. If you aim to track price movements in day trading, shorter periods like the 9-period or 21-period moving averages might be better choices. The philosophy here is to enter and exit trades quickly.

Extra Strategy:

Before diving into the fifth moving average strategy, I’d like to introduce an additional moving average strategy. This will be particularly advantageous for beginner traders.

To start, set up a normal moving average on your chart, a 20-day moving average, for example. Then add another moving average a few per cent above this moving average. For instance, you could add another 20-period moving average 5% above the normal 20-day moving average. On the other side, place another 20-period moving average 5% below the normal 20-day moving average. This setup will create a channel-like structure which will allow you to apply several trading strategies.

One common issue for beginners is identifying whether a trend is getting stronger or weaker. If you want a trend strategy to be effective, it’s very important for the strength of that trend to be strong. With this moving average setup, you can do just that. If the price rises above the upper moving average, it indicates strong upward momentum. If there’s an upward trend, you could then more confidently say that the trend’s momentum is strong. Whenever the price gives a pullback, one can consider entering in the upward direction.

For a downward trend, simply apply the reverse logic. When the price breaks below the channel, it suggests that the strength of the downward trend is still strong.

Let’s now proceed to the second method. If you’re a trend trader, you may prefer trading pullbacks. However, identifying good pullbacks from bad pullbacks can be challenging. With this moving average channel structure, it’s easier to do that. If the price rises above the upper channel, we know that indicates that the strength is good. But if the price falls below the lower channel in an uptrend, it can suggest that the pullback is good or big enough. Near this breakout, one can look for long entries. I would use an indicator such as MACD for the entry point.

In a downtrend, if the price breaks above the upper band, it indicates that the pullback is good, and you can then take an entry in the downward direction.

The third method is for scenarios where the market is ranging. Some traders wait for the price to move outside these moving average channels. If the price breaks above the upper band, they go short in the range market. And, if the price breaks below the lower band, they go long in the range market. In my experience, this method is not very effective for range trading. In my experience, drawing support and resistance levels manually and then trading based on those is better.

This three moving average setup I just described is better known as “the moving average envelope”. To set this up, you won’t need to write any percentage code. You can search for a moving average envelope on TradingView or any other charting platform. On TradingView you will find different versions of this indicator from users and from TradingView. The one I used was TradingView’s in-built indicator called “Envelope.”

One important point to note is that this envelope appears differently in different time frames. For example, it looks wider on smaller timeframes. But on larger time frames, the envelope’s size becomes smaller as the percentage remains constant. So, if you wish to use this envelope, you’ll need to adjust it for each time frame from the settings, which is kind of a small disadvantage in my opinion. That’s why I’ve included it as an extra strategy.

Otherwise, it’s an effective way to identify the strength of trends and pullbacks, and it can be especially useful for beginners.

Number 5.

On this chart, watch how the price interacts with these levels. In a downtrend, the 200-period moving average acts like a barrier. The price drops, then climbs until it hits the 200-period moving average and starts to drop again.

One of the strategies I use the most is to sell short on downward momentum whenever the price pulls back to the 200-period moving average resistance. I’ve been doing this from the start. I believe it’s the best moving average strategy.

You might be wondering if taking a short trade without any indicator is a good idea if the price comes near a 200-period moving average resistance like this. I wouldn’t recommend that for most scenarios. From what I’ve seen, this moving average support and resistance strategy, especially on higher timeframes, works better when used with a confirmation strategy, like the MACD or another momentum strategy.

These indicators can help you spot a change in momentum when the price is near the moving average. For example, if the price forms a lower high lower low pattern downtrend pattern, then goes up to the resistance of the 200-period moving average, and the MACD shows a short crossover or the RSI leaves the overbought zone, one can take a short trade. That’s what I do.

Take a look at this chart. It shows that as soon as the uptrend started, the moving average began acting as a support level. Whenever the price fell, it tended to bounce back near the moving average.

But keep in mind, the price doesn’t always bounce back near the moving average. The moving average support and resistance levels are more like zones than exact lines. Not everyone will jump into a trade as soon as the price hits the moving average. If there’s a strong demand for buying, the price might start to bounce back before it even reaches the moving average.

In this example, notice how the price bounced back four times in the direction of the uptrend and only hit the moving average once. The other times, it rebounded before reaching the moving average.

From my experience, the 200-period moving average has proven to be the most helpful for support resistance. Sure, you can try other moving averages as well if you like them more. Here’s a 50-period moving average instead. You can see here a strong downward trend with lower upward swings. The price faced resistance at the 50-period moving average. However, don’t also think that the price will always find support or resistance at the 50 or 200 moving averages.

If the trend is moving fast, a smaller moving average might be a good choice, such as a 9-period moving average. But, as I’ve mentioned before, in my experience, the 200-period moving average tends to be more trustworthy. It generally shows bigger upward swings, giving more room for the price to move in the direction of your trade.

If you’re not sure whether to go with a small or large moving average, some traders use multiple moving averages. For example, you could use both a 50-period and a bigger moving average like the 100-period. If that’s still too confusing, you can use three or four moving averages of different sizes, as shown on the chart.

You can work out which moving average the price is following as support and resistance. For example, in this chart, the price followed the 50-period moving average as support and resistance, and then later, it followed the 200-period moving average.

However, if you put too many moving averages on your chart, things can get a little confusing. To keep your charts tidy and make it easier to analyze price action, you might want to stick to just one or two moving averages at a time.

Remember how we used three moving averages to spot momentum and range markets a few minutes ago? In the same way, you can use a longer period moving average to identify long-term momentum and major price changes. In this chart, the momentum was strong, and all the moving averages were far apart, with the 50-period moving average at the bottom, then the 100-period, and finally the 200-period at the top. This shows a strong downward trend pattern, just like what we’ve talked about before.

When the moving averages started to move closer together and the price started crossing them, it signaled a potential range or a slow movement market. So, you can also use bigger moving averages to filter out long-term movements like this.

So, there you have it. These were the five best moving average strategies or methods that I have found to be the most useful in my 10,000 hours of trading experience.

Tags 5, average, best, ema, moving, moving average, moving average strategies, sma, strategies, strategy, top, trading, trading strategies

All Videos Trading Strategies Trading Strategies Tested 100 Times Uncategorized

I took 300 Trades in Range and found this?

Post author By Trading Rush
Post date February 27, 2023

range market

Tag: strategies

If I showed you these 3 trade setups in a sideways market, which one would you say has the highest probability of making money? If the market moves sideways for the next 6 months, do you know which entry strategy is more likely to work? Ash asked a similar question, so I took 300 trades in this video and found that one of these entry strategies has a way higher win rate than the other.

When the price is making similar swing highs and lows like this, it’s called a sideways or range market. In fact, as we have seen after taking 26000 trades in a previous video, this happens more than 70% of the time. So knowing the highest win rate range market strategy is more important than one might think.

So to find which entry strategy works well, first, I made a list of most commonly recommended range market strategies on the internet. And almost everywhere I looked, these three strategies were always mentioned: MACD, RSI, and Bollinger Bands. To find out which is the best strategy out of these 3, and what are the win rates of these strategies in the sideways market, I took 100 trades with each of them and tracked the performances.

First, I identified the range market by looking at the recent swing highs and swing lows. If the price started to reverse from around the same swing high or low like this, the start of the range market was pretty much confirmed. Furthermore, I considered the price to be still ranging as long as it didn’t give a clear breakout like this.

When the price was near the edges of the range, I looked at MACD, RSI and Bollinger Bands indicators for an entry signal. Obviously, if the price was near the top of the range, I looked for short entry signals, and when the price was near the bottom of the range, I only looked for long entries.

But then I faced 2 main problems.

You see, Bollinger Bands is a difficult strategy. One of the popular ways to take a long entry is to wait for the price to go below the lower Bollinger Band, and then wait for it to cross back inside. But this can make things a little biased. Just look at this example I found on the internet. They haven’t even followed their own entry rules here. To solve this problem, I used the Percent B indicator instead.

This makes things much easier because if the price goes below the lower Bollinger band, the Percent B indicator will also go below its lower band. And when the price starts reversing in the upward direction, the Percent B line will also start moving in the upward direction. So an easily identifiable long entry can be taken when the Bollinger Bands % indicator crosses above its lower band. A short entry is when the Percent B line crosses below its upper band.

The second problem was that while testing these 3 strategies at the same place, a high reward-risk ratio profit target of some of them was going outside the range. So to solve this problem and to make sure the profit target stays inside the range of all strategies at all times, I used a 0.5 to 1 reward-risk ratio. Keep this in mind when you see the win rate next.

With RSI, I took a long trade when the RSI line crossed above its simple moving average. And I took a short trade when the RSI crossed below its simple moving average. To make sure the entry was good and not late, I only took short trades if the short crossover was above the 50 line. And only took the long trade if the long crossover was below the 50 RSI line.

With MACD, I took long trades when the MACD line crossed above its signal line only if the crossover happened below the zero line. I took short trades when the MACD line crossed below the signal line only if the crossover happened above the zero line.

In all of these setups, the stop-loss was set just out of the range.

After taking 300 trades in the sideways markets with these 3 trading strategies, the results showed that MACD gives the entries late out of the three. Bollinger Bands Percent was the fastest one to give the entry. But fast is not always good. Bollinger Bands’ fast entries led to many false signals. When it came to more trading opportunities, RSI took the lead, while Bollinger Bands gave the least amount of entries.

The results showed that Bollinger Bands straight-up lost money in the same market structure. The RSI was good enough and profitable. And yes, as regular viewers of the channel probably guessed, MACD was the best strategy for finding entries in a sideways market. Even though the MACD entries were late compared to others, they were more reliable. MACD had the highest win rate at 78%. RSI had a win rate of 70%, and Bollinger Bands had a win rate of 60%. Remember that the reward-risk ratio was 0.5 to 1. So the breakeven win rate is around 67%. Now you know what to use to find entries in the range market. That’s all!

Tags 100 times, best, indicator, indicators, range, range market, sideways, strategies, strategy, tested, trading, win rate

I tested AI Trading Strategies 100 Times

Post author By Trading Rush
Post date February 12, 2023

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