The double moving average bounce trading system is a variation of the original moving average bounce trading system. The variation still uses a short term timeframe (such as a five minute chart), but now uses two exponential moving averages. The second exponential moving average is used as a filter for the direction of the trade, so that the trading system only includes trades in the longer term direction of the market.
As with the original moving average bounce, the default settings use a 1 to 5 minute bar chart, but use two shorter exponential moving averages, instead of one longer average. Both exponential moving averages are based upon the typical price (HLC average), with the longer average being a 20 to 30 bar average, and the shorter average being a 10 to 20 bar average. Both the chart timeframe, and the exponential moving average lengths, should be adjusted to suit different markets.
The tutorial steps show the EUR futures market, but exactly the same steps should be used on whichever markets you are trading with this trading system. The trade shown in the tutorial is a short trade, using 1 contract, with a target of 50 ticks, and a stop loss of 20 ticks.
