SMA Tunnel Strategy - Basic Rules

The SMA Tunnel strategy is the Forex trading method, which is positioned as a high yield system. It was repeatedly tested by traders on real and demo accounts. Within proper application, this system is able to provide up to 300% of profit.

This strategy is extremely simple. A high level of profit is achieved through the right parameters of technical tools. The system is classified as a trend one, and was made for trading pairs with extremely high volatility (GBP/USD, EUR/USD, EUR/JPY). We recommend using it on the M30 timeframe.

Fundamentals of SMA Tunnel Strategy

This method is based on two moving averages, which form a channel of parallel lines on the price chart. Adding a moving average to the chart, you need to select the Simple method, build it by the highs of the price (High), with zero shift.

Also on the Levels tab, you need to set the additional levels that are based on the Fibonacci sequence (15, 89, 144, 233, etc.) The 15 mark will be used as a false signal filter; the remaining levels will be useful for tracking the open trades and fixing profit.

Note

Pay attention to the way how your Forex broker displays the currency quotes. If you see five decimal places, it means that you need to add zero to each one of the Fibonacci numbers. In this article, we will consider four-digit quotes.

The second moving average is also constructed using the Simple method, with a zero shift and a period of 233. However, unlike the first one, it won’t be based on price peaks but on lows. For this MA, you also need to add the Fibonacci levels, but with a minus sign. Thus, they will be displayed below the MA curve.

Trading on the SMA Tunnel system

Consider the trading process in more detail. Suppose the price chart broke through the level of 15 of the first moving average. Wait until the candlestick closes above this mark, and enter the market. In this case, you need to open three purchase orders, with equal amounts of lot. If your deposit is less than $100, we recommend using a lot equal to 0.01.

• Take Profit of the first order is set at 89;
• Take Profit of the second order is set at 144;
• Take Profit of the third position is set at 233.

Stop Losses of all orders will be located at a distance of 15 pips from the second moving average, as shown on the figure.

All the positions should be tracked by a trailing stop. As soon as you see that the chart of the asset price broke through the level of the first Take Profit, you must move the Stop Loss to the breakeven zone, so you could avoid losses.

Further, every time the price crosses the next level of Take Profit, the Stop Loss moves in the same direction. This method of risk management allows not only to avoid losses, but also to effectively accumulate profit.

You should open the orders for sale in the opposite way: in this case you set the Take Profit orders at the levels of -89, -144 and -233. Stop Loss is set at a distance of 15 pips from the first moving average.

Test Results

This strategy was tested in strict accordance with all the rules listed above. The only parameter that was changed is the amount of lots. With the deposit of $1000, the volume of the first order was 0.1, volume of the second one - 0.2, and for the third one - 0.3.

The strategy has been tested for 12 months on the EUR/JPY currency pair. The trading results are presented on the picture below:

Within the SMA Tunnel system, we managed to make 80 deals with a total profit of more than 300%. The maximum drawdown was 46%. This is quite an impressive figure, but it was not critical for the deposit.

Summary

The SMA Tunnel system is a simple and flexible strategy that allows you to get a really high level of profit. The main advantage of this technique is the simplest trading algorithm, which can be mastered even by a beginner.