Perfect Order Forex Trading Strategy
First, what is perfect order? Perfect order is defined to take place when the moving averages are stacked in a sequential order on the chart. For example, in case of an uptrend, perfect order will take place when the 10 Day SMA is above the 20 day SMA that is above the 50 day SMA that is above the 100 day SMA which should be above the 200 day SMA.
Similarly, the 200 day SMA should be above the 100 day SMA that should be above the 50 day SMA which should be above the 20 day SMA that should be above the 10 day SMA in case of a downtrend.
Perfect Order of these moving averages only takes place in case of a strongly trending market. However, perfect order is not observed often but when it is, it means that the trend in the market is strong and it has got momentum behind it. When you find perfect order on the chart, you can trade it with the following guidelines:
First there should perfect order between the 10 day SMA, 20 day SMA and the 50 day SMA.
ADX should be greater than 20 and trending upward.
When the perfect order takes place, wait for five candles or bars for the perfect order to hold before you enter into a trade.
Stop loss for the long trade should be placed on the low of the day when the crossover takes place.
In case of a short trade, place the stop loss on the high of the day when the initial crossover takes place.
Exit the trade when the perfect order breaks and no longer holds.
The ADX is used to optimize the perfect order trading strategy. It should be greater than 20 and trending up. ADX resides vertically either above or below the bar or candlestick chart. This indicator is used to measure the strength of the current trend.
In a strong trend, ADX has high readings and in a weak trend, ADX has low reading. An increasing ADX reading indicates the trend is growing in strength while a decreasing ADX reading indicates that the trend is becoming weak.
Article Source: FxTradingStock.com
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by: Ahmad Hassam
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Word Count: 365
Date: Sat, 22 Jan 2011
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