2 Moving Averages | Trend Following

This trading strategy employs two moving averages (a slow MA and a fast MA) to determine market trend direction, and uses the Parabolic SAR as an additional filter for trade entries and exits. Trades are entered when the trend is confirmed, and exited in the opposite condition or when the trade hits the stop loss, which is dynamically calculated using ATR (Average True Range).

To trade this strategy manually on TradingView:

• Choose two moving averages and set them up: a slow one (e.g., SMA 160) and a fast one (e.g., SMA 40).
• Identify a trend by checking if the fast MA is above (for a bullish trend) or below (for a bearish trend) the slow MA.
• Use Parabolic SAR with specified settings (start=0.02, increment=0.02, maximum=0.2) as a confirmation filter: a bullish signal when price is above Parabolic SAR and bearish when below.
• Calculate the ATR (14 periods by default) for managing risk and setting dynamic stop losses (2x ATR for long positions and 2x ATR for short positions).
• Enter a long position if the trend is bullish and the Parabolic SAR confirms; similarly, enter short if the trend is bearish and SAR confirms.
• Exit a position when the trend reverses or if the stop loss based on ATR is hit.

Enhancing the 2 Moving Averages | Trend Following strategy in a manual trading context involves refining its components and applying discretionary adjustments based on market conditions. Here is a concise plan to improve it:

• Optimize Moving Average Parameters: Experiment with different types and lengths of moving averages to adapt to varying market phases, such as using shorter periods during high volatility and longer periods in stable markets.
• Adjust Parabolic SAR Settings: Fine-tuning the Parabolic SAR's start, increment, and maximum parameters can make the indicator more responsive or smoother, depending on market noise and trend strength.
• Incorporate Volume Filters: Add a volume filter to confirm the strength of the trend. Entry signals can be made more reliable by requiring a certain increase in volume to coincide with the trend confirmation.
• Implement Multiple Time Frame Analysis: Validate entry signals by employing a higher time frame for trend confirmation, ensuring alignment with the broader market movement.
• Diversify with Additional Indicators: Introduce complementary indicators such as RSI or MACD for divergence confirmations. Entry or exit signals can be judged against momentum readings for an extra layer of validation.
• Dynamic Risk Management: Modify the ATR multiplier for stops based on the current market environment, using a smaller multiplier in low-volatility markets and a larger one when volatility is high.
• Economic Calendar Consultation: Encourage routine checks of the economic calendar to avoid entering trades before major news releases, which can cause significant price spikes and erode the integrity of trend-following signals.
• Journaling and Review: Keep a diligent record of trades and review them to understand which setups are most effective. Use this analysis to make informed adjustments to the strategy parameters.
• Manual Discretion: Permit space for manual override based on trader experience, allowing for the skipping of trade setups that appear weak or dubious despite meeting technical criteria, and the ability to take profits or cut losses earlier based on evolving price action.

To summarize, these enhancements focus on responsive adaptation of the strategy's core components to different market conditions, employing confirmatory tactics for stronger signals, and leveraging trader discretion for better decision-making.

This strategy is tailored for traders who favor a trend-following approach and are comfortable with technical analysis. It's particularly suitable for:

• Traders with a focus on medium to long-term trends, given the moving averages' ability to smooth out short-term fluctuations and highlight more sustained directional moves.
• Those who appreciate customizability in their trading tools and wish to tweak parameters to align with their risk tolerance and trading objectives.
• Systematic traders looking for a structured framework to make trading decisions, reducing the influence of emotions through clearly defined entry and exit points.

The trading style embraced here is methodical and disciplined, with an emphasis on robust risk management and the capacity to adapt to various market environments through user-defined settings. It's less suited for day traders or scalpers due to the slower-moving nature of the indicators used.

• Strategy Essence: A systems-based trend-following strategy using two moving averages and Parabolic SAR.
• How it Works: Bullish and bearish trends are identified through MA crossovers along with Parabolic SAR confirmation.
• Automation: Capable of full automation on TradingView, including backtesting with user-defined settings.
• Manual Trading: Allows for discretionary interventions, such as adapting to volatility or overriding signals based on experience.
• Optimization: Fine-tune parameters like MA lengths and Parabolic SAR values to suit various market conditions.
• Additional Indicators: Integrate other technical tools like RSI or MACD for confirmatory signals and divergence checks.
• Risk Management: Utilizes ATR for stop-loss placement, allowing dynamic adjustments based on market volatility.
• Trader Profile: Best for technical traders interested in medium to long-term positions, not ideal for scalpers.