This is a very simple strategy, but potentially a very rewarding one if used with the correct discipline. The strategy involves waiting for the 5 EMA and 8 EMA to cross over on the daily chart. chart. If they cross to the upside, it is a buy signal. If they cross to the downside, it is a sell signal. Here is an example of a sell signal on GBP/JPY.
The stop loss is discretionary. First choice is the high or the low (depending on if long or short) of the previous day. If this is too far away and would not give a good risk/reward ratio, a major support or resistance point can be used. Fib lines and trend lines often work very well indeed. For profit taking, use a trailing stop. For GBP/JPY 100 pips works well, for GBP/USD 60 pips, EUR/USD 40pips. It is important not to put the trailing stop too tight or there will be a good chance of even a small spike stopping you out. Its important with this strategy to keep the losses as small as possible and let the profits run as much you can as this is what will give you the edge in the long term.
