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Interesting question. This is a public policy debate. Same question, but from a personal ethics viewpoint could be: "Should someone who pays no federal income tax vote?"

It's a 1m EUR/USD spot chart, for yesterday, with a 34EMA. Here's another setup, from just a few minutes ago, same instrument and EMA.

Apologies, here's the picture!

You may want to consider taking only trades where the candlestick pattern is a hammer that has pierced the EMA. That's going to limit the number of signals you'll get during the day to about 2 or 3 in the 1m DAX and another 2 or 3 (on average) in the 1m EUR.

No, I use a 34EMA, which I'm still testing. General impressions so far is that I would probably be better off going back to the 20EMA and the 50SMA. There's more opportunity, although the moves aren't as great as the moves off the 34EMA. From a risk/reward perspective, the 34EMA is perhaps better but only if you do stick to your target. If you don't, --and I do have trouble with that--, you'd be (and I'd be) better off going for slightly smaller but more frequent moves off the 20EMA.

Entering long with a stop, I've been placing my initial stop a tick below the low of the signal (candlestick pattern) candle, then, upon the close of the entry candle (which drags me into the market), I tightened the stop to a tick below the entry candle. So far my impression is that this is unnecessary and would be easier, faster and less error-prone in a one minute timeframe to put the stop directly a tick below the low of the entry bar. What's your experience? Any advice on this? Thanks in advance!

If you ask your platform to alert you when price touches the moving average you might be able to trade multiple instruments in 5m or higher. Alternatively, you can trade off a 3m or 1m chart (or charts). I found that trading off a 5m chart isn't suitable for my temperament. I need more action that it provides, so I started trading off a 1m chart. At first I found it challenging, but got used to it and, months later, I settled for 2 instruments in 1m (EUR and DAX). That helps me keep focus and not get bored.

Pat, a quick tip. There was a time when I needed hard rules to determine if the current move is coming to an end. What helped me is this: if the last leg of the move is shorter than the previous one, momentum is slowing down.

Very good points. Katz and McCormick's research shows that a limit order appears to work best when entering with the trend, immediately after a moving average crossover. Again, this needs to be taken with a grain of salt (by discretionary traders) because their test was, naturally, automated. Of the two entry strategies (with-trend at the MA crossover and countertrend when price bounces off an MA), tested with both limit and stop entries, they concluded that entering with a stop when price bounces off a MA was the best performing. This appears to confirm the outcome of my rather more modest (and discretionary) efforts to test this entry. The book admits that the way the tests were carried out was a bit rudimentary and a more sophisticated entry (candlesticks?) could improve results further.

I've come across two books that discuss this pattern from different angles. The first is "Winning the trading game", by Noble Drakoln, 2008. Drakoln says he uses the 9EMA, the 20SMA and the 50SMA to trade off a daily chart. When price pulls back to any of these levels, he waits for two to four bars for an appropriate candlestick to setup, then enters the market "immediately". He discusses other ways of trading the moving averages as well. The other one is "The encyclopedia of trading strategies", by Katz and McCormick, 2000, where the authors focus on automated testing of entries when price bounces off moving averages on daily charts. Take this with a grain of salt, but the outcome of their research is that, in sample, the optimal entry is with a stop. Out-of-sample, the limit order performed best. There is a considerable amount of detail in this book, which lends credence to the author's research. As an explanation of why a stop entry performs better in their tests, they speculate that optimal entries appear to have both a counter-trend element (entering against the pullback) and a with-trend element (entering with a stop).

Thanks for this, JMC. I've been trying out recently entering with a limit order, with a stop order a tick above the high or a reversal candlestick and at market at the close of a reversal candlestick. I can't comment on the last one because I'm still "forward testing" it. However, in regards to the first two, I've found that the optimal way to manage the trade immediately after entering is around these lines: 1. Upon entering long with a limit order, tighten the stop to a tick below the newly formed low as the market starts to move in favour of the trade 2. Upon entering with a buy stop order, tighten the stop loss to a tick below the entry bar at its close I've found that although, as you mentioned, the risk initially is higher entering with a stop, the average loss is smaller if the stop loss is tightened as above.

More frequently than not, I get stopped out on my way to the target, with a profit about twice the risk. Because of this, the rationale behind how I set the target as well as its accuracy may not be as relevant as I'd like to think. Any arbitrary target will probably do, provided that it is far enough, we protect profits on the way there and the win/loss ratio adds up. Sometimes I find it easier to stick to the target when I'm not sure if that particular support or resistance level is accurately drawn. This may be because I stop thinking that the rationale for the target is correct and price should be attracted to it. I just accept that I may get stopped out for a profit and I'm less likely to exit at market. Sometimes these are my most profitable trades.

For whatever that's worth, I've recently back tested this in the EUR/USD and the DAX. The outcome is that the probability of success appears to be marginally lower but the potential profits wouldn't be, on average, different from trades where the entire body of the signal bar is below the EMA. This wouldn't deter me from taking these trades. However, I don't take them because they add a degree of ambiguity: how far above the EMA is OK? I find it easier and less stressful to look for the simpler, "clean" version of the setup --the signal bar opens below the EMA, pierces it and closes below it.

If I catch an intraday trend reversal (failed retest of a high or low after the break of a trend line) I'm more likely to trail the stop. If I entered on a pullback to the EMA I use a fixed target. For fixed targets I use horizontal lines of support or resistance, which I draw in a one hour chart by loading 3 months worth of one hour data, zooming out until I can barely tell a bar from the next and identifying trading ranges that turned into reversal points. Then I draw a horizontal line, sometimes on the higher boundaries, sometimes on the lower ones, depending on how price behaved around that price on different days. I place a limit order to take profits at the first horizontal support or resistance line that is more than three times the size of the risk away. In the EUR/USD 1m with a 34EMA this is generally between 30 and 40 points, with a risk of 7 points. In the DAX 1m is about 20 points with a risk of 5 or 6 points. I protect profits as price moves towards my target. I move the stop to break even once price has moved in my favour the size of the initial risk, and I move the stop to protect profits about the size of the initial risk once paper profits are twice that. I have found that my returns are better when I stick religiously to the target and don't get out early because I thought I saw a loss of momentum.

Thanks for this, Josh. I actually didn't know it was a number if the Fibonacci series. A friend of mine trades oil here in London for BP and he uses the 34 EMA. I tried it out and seems to fit the EUR/USD well in 1m. I personally don't think it would make any difference to trade the 34, 35 or 36. The difference is minimal most of the time and it would probably not make a difference to the size of the stop loss I use.

Afternoon trades, EUR/USD spot, 1m.

I got used to trading the 20 and the 50 EMA. 34 is about mid way between them, so you can catch the action of both and is simpler to have a single EMA. I put a limit order to exit at the next level of recent support or resistance and let the trade run until I got a profit of about 20 pips (3 times larger than the risk), then I start looking for signs of weakness. Not very original, I'm afraid. I do leave profits on the table. I exited the short trade this morning at market at +23 pips because volatility started to contract and there was a pause in the move. I later realised, looking at the big picture in 1m, that I exited just as the market was breaking the neckline of a massive head and shoulders pattern. The move was bound to go much further, but I didn't see it at the time.

This morning's trades. EUR/USD spot, 1m, 34EMA.

4. Use a larger period for the EMA (50, 100?) 5. Take only trades where there's no support or resistance (trend lines, pivot levels, 200 SMA, yesterday's high / low) between the entry point and the target

Ideas for filters, Phoenix. 1. Take only the signals where there is a confluence of support (for longs) or resistance (for shorts) areas. For example, if price is bouncing off the EMA AND yesterday's low, or any pivot level or a trend line 2. Take only the signals that follow an A-B-C up or down. Notice that this won't stop you from taking trend reversals. In many cases the reaction that follows the highest high in a trend is made up of an A-B-C and the B correction happens before the crossing of the EMA 3. Take only long trades if price is above the EMA in the higher timeframe

JMC, do you use volume? and do you use the Bollinger Bands for targets or for entries in range bound days? Thanks!

Would it make sense to split the axioms by type of technical trading? I imagine that there may be different axioms for swing trading off daily charts than for intraday 'swing' trading (riding pullbacks and rallies), intraday momentum (going for a single leg or momentum move up or down), or scalping / order flow trading.

By climax I only mean a large range expansion bar or two. Discretion plays a role in determining whether a large range expansion close to the target is enough reason to exit, naturally.

Exits. I prefer to enter long with a buy stop a tick above the signal bar and place my stop loss a tick below the low of the entry bar. I like to target a 'measured move'. In an uptrend, if the swing point at the EMA is C, and the swing that starts the retracement is B, I place a limit order to take profits at a distance equal to that between A to B, that is, the length of the last leg of the trend. I exit at market if there is a price climax on the way to my target. Any other ideas for exits?