Camelbak Trading Strategy
@DavidTraderSignalsThe Camelback trading strategy finds shallow pullbacks in strong trends for quick profits. Learn how to improve this simple trading strategy.
The Camelback trading technique is taken from Joe Ross's trading manual. It uses a moving average channel and an exponential moving average to keep traders on the right side of the market.
Trading Rules
1.Long Trading Strategy
•The price is above the 40-period moving average of the bar highs
•The slope of the 15-period exponential moving average is not flat or negative
•Wait for the bar with a lower minimum (signal bar)
•Buy one tick above the signal band
2.Short Trading Strategy
•The price is below the 40-period moving average of the bar lows
•The slope of the 15-period exponential moving average is not flat or positive
•Wait for the bar with a higher maximum (signal bar)
•Sell one tick below the signal band
Camelback Trading Examples
3.A winning trade is a bullish setup
This daily chart shows a long Camelbak trading setup after a strong upward movement.
•The price rose above the 40-period moving average channel and went far beyond it. Seven consecutive bullish bars indicate an obvious upward momentum.
•The exponential moving average should keep us out of the sideways market. It's going up, as expected.
•The signal bar was also a bullish reversal bar and gave us a great entry into a long trade.
4.A losing trade is a bearish setup
This is a weekly schedule. It shows a Camelbak trading setup that has failed for two weeks.
•The price dropped below the channel with a strong momentum.
•However, there was an obvious wide band, which was a sign of sudden and exhausting movements.
•After the bullish inner bar, the bearish pin bar opened a short trade. Although the bearish pin bar looked good, we lost on this trade.
5.Conclusion
The Camelback trading method tries to find trending markets using two tools: a 40-period moving average channel and a 15-period exponential moving average.
Moving average channels are useful in order not to exit the sideways market. They turn a simple moving average into a support and resistance zone.
A 15-period exponential moving average will prevent trades when there is a slightly deeper pullback. Consequently, this trading strategy looks for shallow pullbacks in strong trends.
The difficulty of trading on shallow pullbacks in strong trends is to distinguish strong trends from climatic movements. Climate movements are signs of exhaustion, and it will be difficult for the price to continue the trend without a significant pullback.
Buying a shallow pullback after a climatic bullish movement is a low probability deal. The same goes for selling a shallow pullback after a bearish climax.
How to avoid climate change?
Avoid bars with high volume. While impulsive movements should have an increasing volume, an extremely high volume is a sign of menopausal movements. Also, keep an eye on the expansion of the bar range. At the climax, the range of the bar tends to expand.