The “Quiet River” Strategy - Scalping without the Hassle

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Hello, dear friends Forex traders. Today we talk about a strategy called “Quiet River”. This is a simple, clear and calm Scalping system, designed to capture small targets at short time transactions. At the same time using a “trick” to increase profits.

One of the features of the strategy - not quite the standard use of moving averages. As a general rule, to enter the market we use the intersection of moving averages, but here, they are used in a different way.

TS Features

Main idea

As it is known, all indicators are lagging to some extent. But instead of complaining about the next market fraud, we will try to reverse this disadvantage in our favor.

Once we know that moving averages are late, then we can use the indicator as a smoother (fewer zigzags) representation of the trend, so to speak, the “calm indicator.”

In the strategy entries on the rebound of moving averages are used but in the case of maintaining the trend. To do this, you should distinguish two types of price “flows”. For example, in this case, we are dealing with a steady flow, reminiscent of the riverbed. Moving averages virtually don‘t overlap, and have a distinct direction, in this case - downwards.

Further, in contrast, a very turbulent river shows up. Averages all the time cross and don‘t have a clear direction. Thus, we can use the average as the trend market model.

Strategy rules

So, we need a chart with the M5 timeframe and two exponential moving averages - with a period of 50 and 20.

Both averages must have a clear direction - up or down, and should not intersect often. Visually, it should look like a river.

Then, wait for price correction until 20 or 50 average. At the same time, the price should not linger long in the river bed. That is, there should be no more than 3 consecutive closings between the two averages - within the “river”. If you have 4 and more of them – skip the entry. Here, for example, we have already 6 consecutive closings, so we don‘t consider such a deal.

Not later than after the third candle, the price should close behind the 20 average - at the close of the candle enter a trade.

Set the Stop-loss order behind the local peak. We will close profit in two stages. To do this, at the same time open two orders with the same volume and the same Stop-loss. Take profit of the first order will be equal to the Stop-loss. The second order will have no take profit. Stop-loss of the second order will be moved with the formation of new local extremes.

Thus, from the first order, we get a small scalper profit. The second order we reserve hoping to grab a large chunk of the trend, and sometimes it is even justified because one such profit can cover multiple loss-making transactions.

Entry to BUY:

  1. The price is above the 20th and 50th EMA.
  2. The 20th EMA is above the 50th.
  3. Both averages are directed upwards.
  4. Averages should not frequently cross. The 20th EMA above the 50th forms the river.
  5. The price corrects and touches the 20th or 50th EMA.
  6. The river does not let the price in. No more than 3 consecutive candles closed below the 20th EMA.
  7. The candle closed above the 20th EMA - entry signal.

Entry to SELL:

  1. The price is below the 20th and 50th EMA.
  2. The 20th EMA is below the 50th.
  3. Both the averages are directed downwards.
  4. Averages should not overlap frequently. The 20th EMA is below the 50th and forms a river.
  5. The price corrects and touches the 20th or 50th EMA.
  6. The river does not let the price in. No more than 3 consecutive candles closed above the 20th EMA.
  7. The candle closed below the 20th EMA - entry signal.

An important rule – if a characteristic „river“ is not formed on the chart, it is not worth entering the market. For example, moving average crossed a candle and seemingly, it is necessary to enter the position. However, this is exactly the case when it is not worth to enter the market. Averages are too close to each other and often overlap, that is, better stay away from it.

Examples

An example of an uptrend. Price closed below the MA20 and then bounced back closing above the average on the next candle. At the close of the candle, enter the purchase. Set the stop loss for the local minimum.

The first order is closed by taking profit with +10 points. Move stop loss of the second order once a new low just above the previous one is formed. Here, unfortunately, stop loss triggered too early, and the second order was closed in +3 points (excluding the spread).

An example of sale - price bounced after the first closed candle inside the “river”. In this case, the first take profit came quite small - +5 points. But on the second order, we have received a very decent profit in +25 points.

Money Management

Always do not forget about the risks. For a given trading system adhere to the position of 1-2% of the deposit amount in one trade. The amount is easily calculated using a special calculator.

Conclusion

The strategy is very simple. Importantly, do not forget that if the price for a long time held above the MA20 high, that is, inside the “river”, we do not enter the position. The maximum is 3 consecutive closings. Try to take trendy pairs, as the strategy itself is trendy and the flat instruments will work worse. And, of course, do not be afraid to change the strategy for yourself, adding/removing something - is a sign of the Forex trader development.

Take care, Michael

ForexTraderPortal.com

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