The trading signal strategy aims to harness various indicators for generating buy and sell signals on short-term charts. A significant part of the strategy is the use of EMA (Exponential Moving Averages) and VWAP (Volume Weighted Average Price) for entry signals. For example, a buy signal is identified when the 9-period EMA crosses above the 21-period EMA, and both are above the VWAP. This combination is crucial for guiding trades in the market's direction.
Another essential component is the ATR (Average True Range), which aids in calculating stop-loss and take-profit levels. By using the ATR, traders can dynamically adjust their risk management according to market volatility. This involves setting stop-losses that multiply the ATR value and take-profits at 1.5 times the stop-loss distance.
The RSI (Relative Strength Index) is also incorporated to identify overbought and oversold conditions. For instance, a buy signal is spotted when the RSI crosses above 30, confirming an upward potential when combined with an EMA crossover. Each of these components is tested on historical and real-time data to ensure that the trading strategy is robust and adaptable.
The strategies
⛳️ Strategy 1: Utilise EMA and VWAP for Entry Signals
- Set up 9-period EMA and 21-period EMA on both 1-minute and 5-minute charts
- Use VWAP as a baseline; trade only in the direction of the VWAP trend
- Identify a buy signal when the 9 EMA crosses above the 21 EMA and both are above the VWAP
- Identify a sell signal when the 9 EMA crosses below the 21 EMA and both are below the VWAP
- Set stop-loss at recent swing low/high based on ATR for volatility consideration
- Determine take profit by measuring the EMA crossover distance and doubling it
- Backtest the strategy on historical data for two weeks
- Utilise demo trading to test strategy for one month
- Refine parameters according to historical volatility if necessary
- Document the results and adjust the strategy as needed
⛳️ Strategy 2: Incorporate ATR for Stop-Loss and Take-Profit Calculations
- Add ATR indicator on 1-minute and 5-minute charts with a 14-period setting
- Calculate average ATR values over the past 14 periods
- Determine dynamic stop-losses by multiplying ATR value with a factor of 2
- Set take-profit to 1.5x the ATR-based stop-loss distance
- Reassess this strategy during periods of high market volatility
- Use ATR value to decide whether to widen or tighten SL and TP targets
- Monitor market conditions daily to adapt trading strategy accordingly
- Test strategy against real-time market conditions with a demo account
- Evaluate the effective risk-reward ratio and its hit-success rate
- Adjust take-profit and stop-loss calculations based on ongoing testing
⛳️ Strategy 3: Utilise RSI for Overbought and Oversold Conditions
- Place RSI indicator on 1-minute and 5-minute charts with 14-period setting
- Set overbought threshold at 70 and oversold threshold at 30
- Look for buy signals when RSI crosses above 30 in conjunction with EMA crossover
- Look for sell signals when RSI crosses below 70 in tandem with EMA crossover
- Validate that RSI signals are in alignment with VWAP direction
- Confirm entry with an additional indicator such as MACD for increased signal accuracy
- Configure alerts for RSI overbought and oversold conditions within the trading platform
- Regularly review RSI settings according to market trends and volatility
- Enhance strategy assessment via RSI divergence to identify potential reversals
- Track success rate and refine RSI thresholds to optimise entries
Bringing accountability to your strategy
It's one thing to have a plan, it's another to stick to it. We hope that the examples above will help you get started with your own strategy, but we also know that it's easy to get lost in the day-to-day effort.
That's why we built Tability: to help you track your progress, keep your team aligned, and make sure you're always moving in the right direction.
Give it a try and see how it can help you bring accountability to your strategy.
