The Forex Profit System

The Forex Profit System is a trend following strategy that uses only 2 types of technical indicators, i.e. the Parabolic SAR and the Exponential Moving Average (EMA). These indicators will indicate the direction of the market as well as be used for determining entry and exit points.

Here is how it works:

CHART SETUP

1. Setup a H1 USD/CHF chart. This is my favorite currency pair to trade because it swings up and down the most. You can choose any major pairs that you prefer as long as they have high volatility.
   
2. Insert the Parabolic SAR indicator and set 0.02 and 0.2 for its acceleration factor and constant respectively.
   
3. Insert 3 Exponential Moving Averages, i.e. EMA 10, EMA 25 and EMA 50, all with closing prices.

ENTRY
A trading opportunity arises when the EMA 10 crosses both the EMA 25 and EMA 50.

If it crosses up from the bottom, a BUY entry should be made. Conversely, if it crosses down from the top, then a SELL entry should be made.

In addition, ensure that the Parabolic SAR is at the bottom of the price before a BUY entry is placed and at the top of the price when a SELL entry is placed.

In the chart below, notice that I placed a SELL entry as the EMA 10 (green) crosses both the EMA 25 (red) and EMA 50 (blue) from the top. In addition, the Parabolic SAR is at the top of the price when the entry was placed.

Important: If you are trading the hourly charts like in the above example, make sure that the Parabolic SAR on the M15 chart is in the same direction. Never trade against the M15 Parabolic SAR!

EXIT
The ideal time to exit the trade is when price crosses over all 3 EMAs on the chart. In the chart above, I exited the trade when price crossed over all the 3 EMAs after approximately a week. This trade generated over 140 pips profit!

STOP LOSS
The initial stop loss for the trade should be set at the most recent swing low (for BUY entry) or swing high (for SELL entry). When price moves in your direction, the stop loss should be moved to near the 50 EMA accordingly.

In the chart above, I have set my initial stop loss at the most recent swing high. I would then move my stop loss lower to be close to the EMA 50 as price gets lower. This way, if price subsequently moves against you, you would have locked in some profits.

This strategy should be used on higher time frames, i.e. H1 and above, as on lower time frames price will sometimes ‘whipsaw’ back and forth, causing trades to be stopped out early.