Forex
Money Bounce is a trend following system based on set of moving
averages and the price oscillator.
The
Exponential Moving Averages are:
• 20
EMA (Lime Green)
• 50
EMA (Orange)
• 100
EMA (Red)
The
Price Oscillator is a histogram version of a moving average
crossover. It tells us the relation between 2 moving averages as they
would appear on the chart. The settings for the Price Oscillator are:
• 5
EMA
• 13
EMA
When
looking for long trades, we need the moving averages to be in
ascending order:
• 20
EMA
• 50
EMA
• 100 EMA
• 100 EMA
When
looking for short trades, we need the moving averages to be in
descending order:
• 100
EMA
• 50
EMA
• 20 EMA
• 20 EMA
The
Price Oscillator is what gives us our trade signals.
A
green bar is a long signal.
A
red bar is a short signal.
It's really important to understand that we do NOT take a trade on every red or green bar that comes our way. The Price Oscillator works hand in hand with the Moving Averages. It's better stated that green bars are "potential" buy signals and red bars are "potential" sell signals.
It's really important to understand that we do NOT take a trade on every red or green bar that comes our way. The Price Oscillator works hand in hand with the Moving Averages. It's better stated that green bars are "potential" buy signals and red bars are "potential" sell signals.
We
will be looking for a red or a green bar after a specific event.
We
will first get a trade SETUP using the moving averages and then we
get a trade SIGNAL using the Price Oscillator.
Long
Trade Requirement
• The
moving Averages must be in ascending order:
20
EMA
50
EMA
100
EMA
• Price
must be above the 20 EMA
Setup
• Price
must drop down and touch the 20 EMA.
• Price
can drop below it or touch it exactly. It's OK to have candles close
below the 20 EMA Signal
• Candle
must close above the 20 EMA.
• The
Price Oscillator must turn green.
Stop
Loss
• Place
initial stop loss below the most recent swing low.
Target
• Place
target same distance as stop loss.
• Place
target 2x the stop loss.
Short
Trade Requirement
• The
moving Averages must be in descending order:
100
EMA
50
EMA
20
EMA
• Price
must be below the 20 EMA
Setup
• Price
must rise up and touch the 20 EMA.
• Price
can climb above it or touch it exactly. It's OK to have candles close
above the 20
EMA
Signal
• Candle
must close below the 20 EMA.
• The
Price Oscillator must turn red.
Stop
Loss
• Place
initial stop loss above the most recent swing high.
Target
• Place
target same distance as stop loss.
• Place
target 2x the stop loss.
When
We Don't Trade
There
are periods of time when it's not a good time to trade. The Moving
Averages will tell us when the market might not be in the best shape
to trade. When the Moving Averages are not in order.
There
are two possibilities for out-of-order Moving Averages:
1.
When the 100 EMA is in between the 20 and the 50 EMAs.
This
is usually a transitional phase as a trend moves from one direction
to another. It's short lived and is only a few candles in duration.
2.
When the 20 EMA is in between the 50 and the 100 EMAs.
When
the 20 EMA is caught up between the 50 and 100, the market will be
range-bound and caught up in between the averages. It will often
bounce back and forth from the 50 EMA to the 100 EMA.
When
the Moving Averages are squashed together.
There
will be times when the Moving Averages are moving closely together.
They could still be in the correct order for a trending market, but
if they don't have any real separation in between the lines, it's
because the market is moving sideways. A sideways moving market won't
make you any money. It is undecided as to what it wants to do and
will chop back and forth until it finally picks a direction to go. A
series of squashed Moving Averages will move in and out of trending
order. It's best to stay away from this market until the Moving
Averages separate and the market starts to clearly travel in one
direction.
Short
trades.
In
the image below you can see several trading opportunities. Of course,
you would not have been able to catch every pip on each trade, but
there were 5 trades in a short span of time. 4 trades were profitable
and 1 trade was a loser.There was a total of 95 pips of movement in
your favor, and 8 pips against you. At most you could have bagged a
total of 87 pips.
Long
Trades.
In
the image below, you can see there are several long trade
opportunities. Trades number 3,
4,
and 5 all give us two opportunities to go long if we missed the first
signal.
Assuming
that in the cases where we are giving a second chance to take the
trade, we take the first one, we could get 6 trades in total.
2
of the trades were losers and the other 4 were winners.
In
total, the market moved for a total of 435 pips in our favor. The
total of the 2 losing trades was a mere 61 pips.
Conclusion
The
FX Money Bounce is an incredibly simple system to learn, and once you
get a trend lined up, you will find dozens of profitable trades.
The
nice thing about this system is that the stops can be very small.
This allows for us to easily hit 2:1 profit targets over and over.
It's
important to note that when the market closes outside the 20 EMA, the
Price Oscillator doesn't have to change color on that very candle.
You can have the right colored histogram bars already printing. As
long as you have the bounce off the 20 EMA, a close in the trend
direction, and the right color bar, you are good to go.
The
FX Money Bounce works on all time frames and across all currency
pairs. Try this system out, see what power lies inside of a trend,
and start extracting pips immediately.
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