Strategy Sidus Method
Trend trading requires the trader to be able to clearly determine the trend in the market, however, knowledge of one direction in practice is not enough.
The fact is that the presence of a global trend does not guarantee you sustainable movement, since any global trend consists of micro trends.
Moreover, a change in microtrends, as a rule, is accompanied by a kind of accumulation and inhibition of prices, during which it is unknown which category of traders will be in the majority and push the market.
That is why price exit from consolidation in the direction of the global trend is one of the strongest signals of any trend strategy on Forex, since the price very quickly reaches its goal.
Initially, the strategy was applied on hourly charts of the EUR/USD and GBP/USD currency pairs, but due to the fact that the tactic is based on simple moving averages, you can apply the strategy to any instrument you choose.
Since market contractions and consolidations are typical for any currency pairs and time frames, the strategy can safely be called universal.
Preparing a Strategy Sidus Method
The Sidus Method trading strategy consists of four moving averages with different periods, so you can easily recreate the strategy in any trading terminal, including mobile versions, which also have the ability to add moving averages.
To begin, add 18- and 28-period exponential moving averages to the chart and color them red.
Next, add 5- and 8-period exponential moving averages to the chart and assign them different colors.
If you trade using the popular MT4 platform, we've prepared a template especially for you. Once launched and installed, all indicators will appear on the chart automatically. To get started, download the strategy template at the end of this article.
You will then need to launch the terminal data directory through the file menu in your platform.
After launching the catalog, a list of the platform's system folders will appear on your screen. Among them, find a folder called Template and drop the template into it.
Once all folders in the catalog are closed, restart your platform. Then, open the additional menu directly on the chart and find "Sidus Method" in the template list. After launching the template, you'll see a chart like this:
Brief Strategy Overview. Signals:
18- and 28-period moving averages act as a kind of trend channel, and trading is focused on breaking through it.
It's worth noting that when the lines begin to converge and practically merge into one, the market is entering a consolidation phase, and trading is focused on breaking through this channel. So, let's take a closer look at the signals.
Buy signal:
1) 18- and 28-period moving averages are as close as possible to each other.
2) 5- and 8-period moving averages break through the 18- and 28-period moving averages from the bottom up.
Position entry occurs strictly on a closed candle. It's crucial that the 5-period moving average is above the 8-period moving average or breaks through it from the bottom up at the moment of the narrowed channel breakout.
A stop order should be placed at the local minimum, with the position exited when the channel lines with the 18- and 28-period moving averages converge again, or the 5- and 8-period moving averages cross the channel downwards. See below for more details:
Sell signal:
1) The 18- and 28-period moving averages are extremely close to each other.
2) The 5- and 8-period moving averages are breaking through the 18- and 28-period moving averages from top to bottom.
As with a buy position, a sell entry occurs only after the signal candle closes.
It is very important to limit risks by setting a stop order at the local high and exiting the position when the moving averages narrow again or when an opposite signal appears. See below for more details:
In conclusion, it's worth noting that the Sidus Method strategy allows you to capture major trend movements.
However, as with any trend-following tactic, it generates a large number of false signals during flat periods, as well as large stop orders due to slight signal lags.
Download the Sidus Method strategy template.
