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Strategy #1 - Stochastic Oscillator + RSI + Triple EMA: Entering A Trade

The document describes three 5-minute trading strategies. Strategy 1 uses stochastic oscillator, RSI, and triple EMA indicators. Trades are entered when stochastic and RSI provide confirming signals and exited when price closes beyond TEMA in the opposite direction of trend. Strategy 2 uses MACD and MFI indicators. Trades are entered on confirming signals and exited when MACD crosses over. Strategy 3 uses Klinger oscillator, RVI, and 12 period LSMA. Trades are entered on confirming signals from Klinger and RVI and exited when candle closes beyond LSMA. Examples of each strategy are provided on charts.

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gurdev singh
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281 views

Strategy #1 - Stochastic Oscillator + RSI + Triple EMA: Entering A Trade

The document describes three 5-minute trading strategies. Strategy 1 uses stochastic oscillator, RSI, and triple EMA indicators. Trades are entered when stochastic and RSI provide confirming signals and exited when price closes beyond TEMA in the opposite direction of trend. Strategy 2 uses MACD and MFI indicators. Trades are entered on confirming signals and exited when MACD crosses over. Strategy 3 uses Klinger oscillator, RVI, and 12 period LSMA. Trades are entered on confirming signals from Klinger and RVI and exited when candle closes beyond LSMA. Examples of each strategy are provided on charts.

Uploaded by

gurdev singh
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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https://tradingsim.

com/blog/5-minute-bar/
Strategy #1 - Stochastic Oscillator + RSI + Triple EMA
This simple strategy uses a three-pronged approach across two oscillators and an on-chart
moving average indicator.
Entering a Trade
Trade entry signals are generated when the stochastic oscillator and relative strength index
provide confirming signals.

Trade Exit
You should exit the trade once the price closes beyond the TEMA in the opposite direction
of the primary trend.
There are many cases when candles are move partially beyond the TEMA line. We disregard
such exit points and we exit the market when the price fully breaks the TEMA. Have a look
at the example below:
This is the 5-minute chart of General Motors for Sep 9 – 10, 2015. The two instruments at
the bottom of the chart are the Stochastic Oscillator and the RSI. The TEMA is the green
curved line on the chart. The green pairs of circles are the moments when we get both entry
signals.

First, we spot overbought signals from the RSI and the stochastic and we enter the trade
when the stochastic lines have a bearish crossover. We go short and we follow the bearish
activity for 15 full periods, which is relatively a long period of time for a day trader. Good
for us!
We exit the trade once the price closes above the TEMA. This short position generated a
profit of $0.43 (43 cents) per share, which is a decent amount even for advanced trading
strategies.
Later, we receive a few more overbought/oversold signals from the stochastic, but they are
not confirmed by the RSI. Thus, we stay out of the market until the next RSI signal.
Our second trade comes when the RSI enters the oversold area just for a moment. This long
signal is confirmed by the stochastic, so we go long. The bullish move that ensued is minor,
but still in our favor!
We hold this trade for 9 periods before closing the position. We exit the market when a
bigger bearish candle closes below the TEMA with its full body. On the next day, we
manage to identify another long signal from the stochastic and the RSI

Strategy #2 - MACD + MFI

For this next strategy, we will combine the Moving Average Convergence Divergence with
the Money Flow Index. We will enter the market when we receive confirming signals of the
MACD and the MFI.
However, for how long will we hold the trades?
Notice that in this stock trading setup we have no on-chart trading indicator for identifying
exit points.
The reason for this is that the MACD does a pretty good job of this itself. We will simply
exit the market whenever the MACD has a crossover in the opposite direction!
Notice that when using the MACD for exit points, you stay in the market for a longer period
of time.
This is the 5-minute chart of McDonald's for Sep 30, 2015. The two instruments at the
bottom of the chart are the MACD and the Money Flow Index. The green circles indicate
the entry signals we receive from the two indicators. The red circles indicate the moment
when the MACD tells us to get out of the market. Notice that in this example, the exit point
of a position is the entry point of the next one. Thus, the red and the green circles match in
three cases.

In the first case, we have matching bearish entry signals from the MFI and the MACD. This
is what we are waiting for and we short McDonald's. Although there is strong hesitation in
the price movement, no exit signal is provided from the MACD and we hold our position.
Later on, the price moves in our favor and we close the trade when the MACD has a bullish
crossover. We were short for 34 periods and generate a profit of $0.33 (33 cents).

Strategy #3 - Klinger Oscillator + RVI + 12-Period Least


Squares MA
This 5-minute chart strategy involves the Klinger Oscillator and the Relative Vigor index
for setting entry points. We try to match long and short signals with the two os cillators,
which will be an indication to trade the equity. When we get these two signals, we open a
position and we hold it until we see a candle closing beyond the 12-period LSMA.

This is the 5-minute chart of Yahoo for Dec 8, 2015. The two instruments at the bottom are
the RVA and the Klinger. The blue curved line on the chart is the 12-period LSMA. On this
chart, we have four trades. The green circles show the four pairs of signals we get from the
RVA and the Klinger.
First, we get a bullish signal from the Klinger, which is confirmed by the RVA after 4
periods. When we get the confirmation, we go long. We manage to hold the trade for four
candles before we see a bearish candle below the LSMA. We get $0.10 (10 cents) per share
from this trade.
Four periods later, the Klinger and the RVA give us bearish signals at once and we go short.
We get a slight bearish move of four periods before a candle closes below the LSMA. We
generate $0.12 (12 cents) per share more.
The third trade is the most successful one. Six periods after the previous position, we get
matching bullish signal from the Klinger and the RVA. Thus, we go long with Yahoo. We
manage to stay for 9 periods in this trade before a candle closes with its full body below the
12-period LSMA. Notice that at the end of the bullish move, there is another bearish candle,
which closes below the LSMA, but not with its full body. Therefore, we disregard it as an
exit signal. This long position brings us a profit of $0.37 (37 cents) per share.
With the next candle, we get bearish signals from the RVA and the Klinger and we go short
with the closing of the previous long position. We get out of this trade after 5 periods when
a bigger bullish candle closes above the LSMA. This trade generated a profit of only $0.03
(3 cents) per share.

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