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Capturing Profit with Technical Analysis

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STS8 Trading Rules

STS8 Intro - NEXT

STS8 trading template

 

 

Rules for Opening a Long or Closing a short Position

  1. The closing price breaks above the 8 day Exponential Moving Average.
    AND
  2. 2.1 The last pivot is a candle chart bottom reversal pattern.     
    OR
    2.2 There is major or confirmed price support.
    OR
    2.3 The Stop Trail Noise indicator starts moving up. 
    OR
    2.4 The Price Range expert system displays a green buy candle.
    AND
  3. 3.1 The price is close to the low of the BBS band.
    OR
    3.2 The price is close to support of the 50/100/200 simple moving average.
    AND
  4. 4.1 You are expecting an up wave 3.
    OR
    4.2 A wave 2 up to become a wave 1after a series of 123-waves in a down move.
    OR
    4.3 A wave 2 up after a large previous wave 3 down.
    AND
  5. Indicators moving up from low levels preferably with positive divergence.
    AND
  6. Price is close to support or far from resistance.
    AND
  7. The closing price is breaking the last possible downtrend line.
    AND
  8. The stop loss setting to be used limits the risk to a maximum loss of 10% (long position on a daily chart).

Rule 1: Eight period exponential Moving average

Chart breaking average

The first indicator used is an 8 period exponential moving average, the orange dotted line in figure 2.1. The 8 period used is a good performing fast average to detect crossovers with the closing price.

In a standard candle chart like the above figure, a green candle has a closing price above the opening price and a red candle has a closing price below the opening price. A cross above or below the average with a closing price complies to STS8 rule number 1: "the closing price breaks above/below the 8 day Exponential Moving Average".

The first green up arrow is an open buy (close short) signal. Closing prices remain above the average until the first red arrow down. This is a close long (open short) signal.

Now closing prices stay below the average until the second green arrow. We now have a close short (open long) signal. Soon after that we have a second red and green arrow.

This is a good starting rule, but of course not all trades are profitable, especially during flat price moves, the closing price will break the average a lot.

But this is just one STS8 rule. The other rules will help avoiding non profitable trades.

For all the basic techniques, please consult my book “Capturing Profit with Technical Analysis”, published by MarketPlace Books and available HERE

color coded expert chart

We will be color coding the candles by an expert system later on.

An unfilled (white) candle is a green candle in the previous figure (close>open) and a filled candle (green, red or black) is a red candle (close<open) in the previous figure.

We will use the expert color coded chart from here on.

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