Note: This is a system that I’ve stumbled across which REALLY intrigues me because of its simplicity and ingenuity. Not only that, but it has opened my eyes to another type of trade filter, the two-day breakout filter.
Category: Breakout Trend-Following System
Type: 100% Systematic
Timeframe: Daily
- Entry Technique: If today’s low and yesterday’s low is greater than the 20-day EMA, go Long. (and vice-versa if short)
- Filter: The two-day breakout filter (two day’s lows > 20 EMA) is required in order for the breakout to be considered valid. If price pulls back from the 20-day EMA, before two days have closed above, you won´t enter the trade. (and vice-versa if short)
- Initial S/L: 20-day EMA
- Trailing S/L: 20-day EMA
My (sKratch1989) comments:
- The filter is genius. Two-day breakout is a sort of confirmation / filter before entry so that you have confirmation before entry.
- Widen S/L: I would have to test the system, but I would consider widening the S/L. If the 20-day EMA is your entry point, if price falls back to the 20-day EMA, it doesn’t mean your trading view is invalid. Perhaps a better choice would be 20-day EMA – 0.25 ATR or 20-day EMA – 20 pips. Another option is to design some sort of ADX-based stop-loss and combine it with the 20-day EMA.
Uncharted Terretory - SkratchFX 