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Tuesday, April 12, 2011

Trading the tunnel with Equities on the Daily


As I'm sure some of you know I have been working with something of my own version of the tunnel trading system in FX for a little while now.. After seeing the potential for how well it works I became interested in how well it might, or might not, do with equities..

Briefly for anyone who may not know, this system is based on a "tunnel" formed by two EMAs (exponential Moving Averages) the settings for these are 144 and 169 and they form the actual tunnel. I also employ a 13 EMA as a filter and the charts that I will show here also have standard bollinger bands on.

I have actually made 13 equity trades based on these chart settings 7 wins and 3 losses with 3 currently open trades (one symbol was traded twice). But I do not intend to focus much on my actual trades as I took fairly quick, and hence small, profits. This is because I am just now looking into how well this system works, or does not, with equities.

However as a matter of full disclosure here are the trades with entry and exit price..

PM 56.26 - 56.78
SAI 16.38 - 16.94
MO 24.13 - 25.50
EIX 36.07 - 35.92
PCG 46.70 - 45.53
CNP 15.81 - 16.06
FE 37.94 - 37.33
SWY 21.83 - 22.85
TIE 18.68 -
EIX 37.02 - 37.90
RIG 80.35 -
LLY 35.21 - 36.01
BBT 27.57 -

The general idea of trading this is if price is above the tunnel and closes above the 13 EMA then buy. Pretty simple huh?

If price reverses and closes below the tunnel it's best to take the loss and move on to the next trade. Though often price will chop back and forth above and below the tunnel. It remains a valid trade entry as long the two conditions above remain valid. As long as price remains above the 13 EMA one can remain long. A close below is a danger signal that should be taken seriously.

And here are the charts.. I'll let them speak for themselves













I hope you enjoyed this post and will join me in attempting to find low risk high profit entries ;)


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