| Many top financial experts are suggesting that the | | | | opposite direction, or simply when you have achieved |
| current stock market is basically a trader's market | | | | your profit targets. |
| rather than an investor's market. So with that in mind | | | | Of course this system is not perfect by any means |
| I thought I would share with you an effective share | | | | but in a strong trending market it can be used to |
| trading strategy that I sometimes use to trade | | | | capture some really big moves. If you really want to |
| shares. | | | | improve the success rate of this simply strategy, you |
| It basically involves a combination of exponential | | | | can use the longer term charts to show you the |
| moving averages (EMAs) and the parabolic SAR | | | | overall trend and only trade the signals that are |
| indicator. The parabolic SAR uses the default settings | | | | generated in the same direction as this long-term |
| and the EMAs I use are basically the 5, 20, 50 and | | | | trend. |
| 200 period ones, although the latter two are just | | | | For instance if you use this system to generate |
| there for general guidance. | | | | trading positions on the daily chart for a given share, |
| The trigger for a potential set-up comes when the | | | | you could improve your success rate by looking at |
| EMA (5) crosses the EMA (20) with the parabolic | | | | the weekly and monthly charts. If they are both |
| SAR being triggered at the same time. These should | | | | showing either an upwards or a downwards trend, |
| both correspond with each other so if the EMA (5) | | | | then you should only be trading in this direction on |
| crosses upwards through the EMA (20), then the | | | | the daily chart. By doing this you will eliminate a lot of |
| parabolic SAR should change to a buy signal as well | | | | the counter-moves which often fizzle out fairly |
| at roughly the same time. | | | | quickly. |
| As regards entry and exit points, you can enter | | | | Overall this simple strategy is one that I continue to |
| straight away or at the close of the current bar but I | | | | use on a regular basis to trade those strong trending |
| personally prefer to wait for a slight pull-back to the | | | | shares and it tends to work fairly well. In this market |
| EMA (5) in order to get a good entry point. You can | | | | you need to be able to trade shares both long and |
| exit the trade when the parabolic SAR changes signal | | | | short and this strategy will allow you to do just that. |
| again, when the EMAs cross back again in the | | | | |