This is a simple trading system that can be coded into EA easily. The purpose of this trading system is to help catch a trend as soon as it is forming. The simplicity of this trading system can also be experienced by beginners. Of course, test on the demo carefully before "downloading" on the real account.

The reason for the name of this trading system is 5 - 5 because it uses only 2 indicators with 5-period parameters, is RSI (Relative Strength Index) and SMA (Simple Moving Average). Specifically, it will be RSI (5) and SMA (5).

Why use SMA?

Moving Average is the most popular technical indicator in the world today. MA facilitates trend identification. Basically, the price above the MA is an uptrend, and the price below the MA is a downtrend.

Why use RSI?

RSI is a momentum indicator that can help identify trends and trends' strengths. Read more at the RSI Classroom

So how to combine SMA and RSI?

Buy signal
  • The price cut up the SMA and closed near the top of the candlestick, at the same time the candle should be a big candle, indicating the strong buying power of the bulls.
  • The RSI should be above 50 or just cut the 50 levels at the same time as candles. Note if the RSI is above 70 then don't buy anymore because it's overbought.
  • Place Buy Stop on the top of the candlestick that just crossed the SMA
  • Stop loss at the bottom of that candle, adding 2 pips
  • Take profit as you like. Can be trailing or leaning against resistance levels

Sell signal
  • The price cut down to the SMA and closed near the bottom of the candlestick, and the candle should be a big candle, indicating strong selling power.
  • The RSI should be below 50 or just cut the 50 levels at the same time as candles. Note that if the RSI falls below 30, then stop selling because it is in the oversold zone.
  • Place Sell Stop below the bottom of the candlestick that just crossed the SMA
  • Stop loss at the top of that candle, adding 2 pips
  • Take profit as you like. It can be trailing or relying on support levels.

Advantages of this approach:
  • Simple. See now.
  • Catching the trend early, if you will, you will be able to eat the newly born trend, which is very delicious
Defect:
  • Sideway is easy to die
  • If the long MA break candle should not be traded, the stop loss will be far, leading to if there is no optimal profit-taking, the risk will be great and the result is an unfavorable reward/risk ratio.
Note:
  • Should try first on demo before trading real
  • For real trade, trade small volume first
  • Should incorporate more knowledge about candles, support, and resistance to help optimize entry.
  • This article is for reference only. Brothers using it can be risky, so please consider it when using it.