This trading system which you are going to learn here is called the Cowabunga Forex Trading System.

What the cowabunga trading system is a trend trading system. So what this forex trading system does is use the 4hr timeframe as for identifying the main trend and then trade entries are taken in the 15 minute charts.

So here’s how it works:

• if the price in the 4hr charts are trending up, then only buy trades will be taken in the 15 minute charts
• if the price in 4 hr charts are trending down, then only sell trades will be taken in the 15 minute charts.

So by looking at the main trend and trading in the direction of the main trend, you will have a better chance of getting a winning trade.

Sound’s simple right?

Well, not really…I’ll have to show you how you actually use the cowabunga system, its application and all the things you need.

 

Main Trend 4 HR Timeframe

As mentioned, you need to identify the main trend in the 4hr timeframe. So the 4hr Chart settings you need and the indicators you need are these:

• 5 exponential moving average applied to the close
• 10 exponential moving average applied to the close
• stochastic indicator( settings: 10,3,3)
• RSI (9)

 

15 Minute Timeframe

You make your trade entries in the 15 minute timeframe. This is what you require on the 15 minute chart:

• 5 exponential moving average applied to the close
• 10 exponential moving average applied to the close
• stochastic indicator( settings: 10,3,3)
• RSI (9)
• MACD (12,26,9) (exponential histogram)-you have to make sure the histogram displays the difference between the two lines.

Note here that the only additional thing here in the 15 minute timeframe is the MACD.

 

Buy (Long) Trades Rules

1. 5 exponential moving average must cross the 10 exponential moving average
2. check that the RSI must be greater than 50
3. check that the stochastic is headed up and must not be in the overbought region
4. check that the MACD histogram either in the negative territory and starts to increase or is in negative  going to positive.

 

Sell (Short) Trade Rules

1. 5 ema must corss 10ema downwards
2. check to make sure RSI is less than 50
3. stochastic indicator must be headed down and not in oversold region.
4. MACD histogram must go from positive to negative or be in positive and start to increase in value.

 

Stop Loss Placement

• use most recent swing low for long trades
• use most recent swing high for short trades

 

Where To Exit A Trade

A few options:

• exit your trades at 50 or 00 levels. What is that? Well, it simply means that any price that ends with 50 or 00, that’s where you exit your trade. For example 2650 and 2700 are 50 and 00 levels respectively.
• or you can use a previous swing high level as a take profit target level for your long trade
• or you can use a previous swing low as a take profit target level for your short trades.

For traders that want a little faster action, this 5 minute Stochastic/Supertrend strategy is one to consider.

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