Looking for a simple trading strategy? I love new strategies and I’ve found another one for you: The 9/30 moving average setup.
Always try a new trading strategy on a demo account first.
Set indicators for the 9/30 trading strategy
For this trading strategy you need 2 moving averages as your main indicators:
- 9-period Exponential Moving Average (EMA)
- 30-period Weighted Moving Average (WMA)
How to add them to your chart depends on which platform you use. Give them both a different color. In this example I made the 9 EMA blue and the 30 EMA red, but you can use any color.
After you’ve done this you will see the moving averages on your chart, like this:
Rules for this trading strategy
The chart is now set, so we’re ready to make some bad ass trades! Below are the trading rules for this 9/30 MA strategy, explaining when to buy (long) and sell (short).
- The 9 EMA must be above 30 WMA
- Wait until a candle closes below the 9 EMA
- Place a buy order above the high of the candle that closes below 9 EMA
- The 9 EMA must be below 30 WMA
- Wait until a candle closes above 9 EMA
- Place a saell order below the low of the candle that closes above 9 EMA
Winning long trade (buy)
Below is an example of a winning long trade with this strategy.
Above you see a chart of Facebook. The 9 EMA (blue) is above the 30 WMA (red). The arrow points to the candle that closes below the 9 EMA. I place my buy order just above the high of that candle (red line) and it is triggered by the next candle.
After the buy order is hit the price of Facebook rises and gives us a nice profit.
Winning short trade (selling)
Below is an example of a winning short trade with this strategy.
Above you see a chart of gold. The 9 EMA (blue) is below 30 WMA (red). In this downtrend I had three chances for an entry . Where you see the red arrows, the candles close above the 9 EMA. You place your sell orders (shorts) below the lows of those candles (small red horizontal lines).
With all three entries you would have made a nice profit as price continued to fall.
Stops and targets
I hope that the entries (where you buy or sell) from this 9/30 trading strategy are clear. But where do you get out?
I always place my stop loss below the last low and with this strategy I would even put it under (when buying) or above (when selling) the moving averages.
With a short trade (selling) this works the same but the other way around.
I prefer to set my profit target at a risk to reward ratio of 1: 2 of my stop loss. So if my stop loss is $50 below my entry, I want to make a minimum of $100 profit. That way I only have to win 4 out of 10 trades to make steady profit. 🙂
But you can also take a profit manually. For example if the moving averages cross back again.
Tips for the 9/30 trading strategy
Finally, I want to give you some useful tips that you can keep in mind when you start using this trading strategy.
- First practice on a demo account
- The deeper the candle above or below the moving average closes, the stronger the signal
- Signal is also stronger just after a crossing of the moving averages
- Can be used on all time frames, but the higher the time frame, the more reliable the signals and the less noise
What you actually do with this strategy is trading the pullbacks of a trend. The stronger the pullback, the stronger the trend usually continues.
That’s it… now go and practice it on your demo account!
Let me know what your results are with the 9/30 MA trading strategy.