Have you ever used a telescope in your life? As you peek through the lens, you will see things you wouldn’t have picked up with the naked eye. The Pride System is tailor-made for short-term trading. It utilizes the twin concepts of dual time-frame momentum and Exponential Moving Averages Crossover to generate signals that let you flow with the market tide.
Multiple time-frame trading is one of the most widely applied market strategies. The underlying idea is to discern the broader trend on a higher time-frame, and then enter in to trades in the direction of that trend on a shorter time-scale.
This brings us to the next logical question – which two time-frames to select? Clearly, a long-term investor who holds positions for months will find little use for a 15-minute chart. At the same time, an intraday trader whose typical holding period ranges from a few minutes to a couple of hours will derive little advantage by tracking the daily charts.
Underlying Asset: Any major cryptocurrency pair
Chart Type: Candlestick
Time-frames: 15 minutes, 3 minutes
- Stochastic Oscillator (5, 3, 3)
- Exponential Moving Average (5-period)
- Exponential Moving Average (13-period)
Long Entry Rules
- We first zero in on the 15 minute chart to check whether the Stochastic Oscillator is in bullish zone. If the fast Stochastic line is above the slow Stochastic line and rising, we look to initiate only long trades. However, it remains imperative that none of the Stochastic lines crossover in to the overbought territory (> 80).
- We next switch to the 3 minute time-scale, where again the Stochastic needs to be in bullish zone, i.e. fast line above slow line and trending upwards.
- The final confirmation to go long is derived when the 5 period Exponential Moving Average cuts the 13 period Exponential Moving Average from below and continues to maintain a rising trajectory. The initial stop-loss is placed below the low of the prior two bars, with the stop trailed higher as trade starts to move in our favour.
Long Exit Rules
- We exit half of the position when the fast Stochastic line reverses and closes below the slow Stochastic line on the 3 minute chart window.
- We trail stop the remainder of the position, and exit completely if the low of the prior candle bar is breached.
Cryptocurrency Trading Example: BTCUSD
Short Entry Rules
- We first switch to the 15 minute chart to examine whether the Stochastic oscillator is in bearish territory. If the fast Stochastic line is below the slow Stochastic line and falling, we look to initiate only short trades. However, traders need to note that none of the Stochastic lines should have descended in to the oversold zone (<20).
- We next shift to the 3 minute time-scale, where again the Stochastic needs to be in bearish territory, i.e. fast line below slow line and trending downwards.
- The confirmation to go short is received when the 5 period Exponential Moving Average cuts the 13 period Exponential Moving Average from above and continues to maintain a declining trajectory. The initial stop-loss is placed above the high of the prior two bars, with the stop trailed lower as the trade begins to turn profitable.
Short Exit Rules
- We exit half of the position when the fast Stochastic line changes direction and closes above the slow Stochastic line.
- We trail stop the rest of the position, and exit the other half if the high of the preceding bar is taken out.
Cryptocurrency Trading Example: ETHUSD
Pride System Advantages
- When two separate time frames are combined to evaluate a cryptocurrency pair, a trader will easily improve the odds of success for a trade.
- This is because by utilizing two different time frames, a trader is able to look at the “BIGGER PICTURE.” On the short-term chart you may have spotted a strong up move. But as soon as you refer to a larger time frame, you may realize that it is nothing but a minor bounce-back within an otherwise strong down trend.
- Another major benefit of the Pride System is the availability of well-defined entry, exit and stop loss rules. By sticking to these rules, a trader can take impeding emotions of greed and fear out of the trade management process.