The EDGE

This is a very powerful setup that we can follow with just 2 indicators present on all platforms :

a moving average ( the line we want to trade )
a Donchian Channel ( use to define the Logic State )

This setups has 3 possible States :

Looking for a Long ( when the market is trending up )
Looking for a Short ( when the market is trending down )
Neutral ( when market is sideways or consolidating )

The logic State is as follows :

When the lower line of the donchian goes above the mobing average the system starts looking for a Long :

When the upper line of the Donchian goes below the moving average, the system starts looking for a Short :

Then we have multiple options to define an entry using different bar patterns.

Example :

Setup #1 ( Classic )

the logic is looking for a long
the current bar low is equal or lower than the moving average
the previous bar low is higher than the moving average

Setup #2 ( Advanced )

the logic is looking for a long
the current low is higher than the moving average
the previous low was equal or lower than the moving average

As we can see, the setup #1 ( Classic ) is riskier than the setup #2 ( Advanced ), because the Classic enters the market as soon it touches the entry line, instead, the Advanced waits for the market to advance in the direction of the trade, but of course, it enters later.

Another option is using limit orders, but this option will be analyzed on a future post & video.

So, we have a logic to define what are we searching for.

Then, 2 trades setups to be used to define an entry.

We can also add filters, as follows :

Bar Color in agrement : take longs only if the bar is green and shorts only when it is red
Close in agrement : take longs when the close is above the entry line, and shorts when it is below

So, looking at the previous example, where we have 2 Signals :

Both Classic & Advanced have Close in Agrement, but only the Advanced has Color in agreement.

This other example show a Classic Short Entry (1st red triangle from the left) where the color is not in agreement and the Close is also not in agreement

The Advanced entry ( 2nd red triangle ) has both filters in agrement.

As we can see the EDGE is flexible and can be configured in multiple way, so not only the moving average period and donchian channel size are important, but also the extra filters that we can add, like the color and close agreements.

Not to mention the repeat filter option ;

take all the signals ( no filter )
take only one long and then wait for a short ( one trade per side )
after entering a trade reset the logic to neutral, so we need the moving average to move outside of the channel to be trade ready again ( one trade per cycle )

Examples :

One trade per side