120 EMA SMI Breakout Forex Trading Strategy

A well-combined simple moving average indicator alongside price action trading is the core of this trading strategy.

The 120 EMA SMI Breakout forex trading strategy is quite a reliable trading system that will drag in consistent profits into your trading account if used correctly (learn the rules below).

If you do a bit of back testing on your demo account, you’ll see things for yourself.

Chart Setup

MetaTrader4 Indicators: SMI.ex4 (Input Variable modified; Period_Q=18, Period_R=24, Period_S=21, Signal=21), 120 SMA.ex4, Trendline.ex4

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day

Recommended Trading Sessions: Any

Currency Pairs: Any pair except exotics

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Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Initiate a buy order if the following indicator or chart pattern gets displayed:

  1. If price breaks above the falling/descending trendline as seen on Fig. 1.0, it is an indication of upward price pressures, hence a buy signal is advised.
  2. If price closes above the red line of the 120 SMA, it is an indication that price is being pushed higher i.e. a signal to buy the designated currency pair.
  3. If the red line of the SMI custom indicator breaks above the 0.00 signal level as shown on Fig. 1.0, the sentiment in the market is said to be bullish i.e. a signal to buy the currency pair of focus.

Stop Loss for Buy Entry: Place stop loss below support.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following rules or conditions takes precedence:

  1. From the point where price broke above the descending/falling trendline to trigger a buy signal, if price falls below this level, it is an indication of weaning bulls power, hence a signal to exit or take profit at once.
  2. If price closes below the red line of the 120 SMA indicator, it is a trigger to exit or take profit at once.
  3. If the red line of the SMI custom indicator break below the 0.00 signal level as shown on Fig. 1.0, an exit or take profit is advised.

Sell Entry Rules

Enter a sell order if the following holds sway:

  1. If price breaks below the rising/ascending trendline as seen on Fig. 1.1, it is an indication of downward price pressures, hence a trigger to sell the asset of focus.
  2. If price closes below the red line of the 120 SMA, the sentiment in the market is said to be tilting in favor of the bears, hence a signal to sell the currency pair of interest.
  3. If the red line of the SMI custom indicator breaks below the 0.00 signal level as seen on Fig. 1.1, price is said to be pushed lower i.e. a trigger sell the designated forex pair.

Stop Loss for Sell Entry: Place stop loss above resistance.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following takes center stage:

  1. From the point where price broke below the ascending/rising trendline to trigger a sell signal, if price rises above this level, it is an indication of halting bears power, hence a signal to exit or take profit at once.
  2. If price closes above the red line of the 120 SMA indicator, it is a trigger to exit or take profit at once.
  3. If the red line of the SMI custom indicator break above the 0.00 signal level as shown on Fig. 1.1, an exit or take profit is recommended.

Sell Trade Example

Fig. 1.1

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About The Trading Indicators

The 120 EMA is an exponential moving average that has its period set at 120 and reduces the lag by adding more weight to recent price.

A trend line is a negative or positive slope that is formed by connecting two or more high or low points respectively.

The SMI also known as Stochastic Momentum is a custom MT4 indicator that computes two lines, the SMI data line and the SMI indicator line.

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