Trading The 9/30 Setup

What is the 9/30 trading method?

The 9/30 setup is a two moving average crossover pullback strategy using the 9-period EMA and the 30-WMA (weighted moving average) which is great for a trending market.

It is a trading setup that is used to join the current trend direction which is also noted via the moving averages.

9-period EMA is the shorter-term moving average

30-period WMA is the longer-term moving average

The space between the averages is the pullback zone – an area of opportunity

9 EMA above the 30 WMA is an up-trending market

9 EMA below the 30 WMA is a down-trending market

The 930 can be used on any market and time frame however lower time frames can produce a lot of whipsaw price action

How To Trade The 930 Trading Strategy

It is a simple strategy however you must have your trading rules defined long before you begin to trade with it.

Buy Setup

1. The 9-period EMA is above the 30 WMA
2. Price pulls back and closes in the space between the averages
3. A buy stop order is placed above the high of the candlestick that closes in the area of opportunity

Short Setup

1. The 9-period EMA is below the 30 WMA
2. Price pulls back and closes in the space between the averages
3. A sell stop order is placed below the low of the candlestick that closes in the area of opportunity

The red lines are the stop placement using the average true range.  The green lines are where the trade exited due to hitting the trailing stop loss.

Overall, on the daily chart of the Forex pair EURUSD, we saw 2 wins and 1 loss for a combined win of 22 pips.  On the first two trades, prices did move 1X risk and at that point, traders may decide to scale out positions.

Here is an example of day trading crude oil using the 9/30 setup for a long trade.

This trade traveled almost 2% giving a price increase of $1.05.

Traders have the option of moving the entry orders closer to the price if new lower highs are put in for longs or higher lows for shorts.

Better Entry Trigger

It can be easy to enter these trades and sometimes confirmation can cost you if price runs too far.

Statistically, the break of a high or low of an individual candlestick does not have an edge.  An edge is present in the resumption of a trending price pattern.

• Higher highs and lows equal an uptrend
• Lower highs and lows is a downtrend
• Watch for price to resume

How do we look for trend resumption?

The small chart is a daily time frame and we have a 930 setup. Instead of using the high of the setup candle, we can dial down to a lower time frame, in this case, a four-hour chart.

The pattern of LL and LH shows the four-hour chart is in a downtrend.  A HL (higher low) is put in and we can take a trade entry when price breaks the last LH.

A simple price pattern that makes sense, resumption of trend direction, makes an excellent trigger for a 9/30 setup.

Trend Line Entry

One other method to try is using a trend line break as the trader trigger.

It can be difficult to draw a proper trend line depending on the price action but multiple time frame trading can help.

This chart is a one hour chart however the setup was on a daily chart.  The four-hour chart did not have any swing that could be used for a trend line.

The entry is marked with a green arrow and some traders may wait until the moving averages cross back in the direction of the higher time frame trend before entry.

Stop Loss and Profit Target

There are many ways to set the stop loss to protect our risk capital and while below the low for a long is simple, is it effective?

We want to keep our stop out of the market noise and one way to do that is using the ATR for the stop.

Profit targets depend on your style: long term or short term trader.

You have options to use a multiple of your risk, trailing stops, or use previous swing highs or low for price targets.

This is a CFD chart of natural gas.  The setup is marked with the green arrow and we are using the break of highs for the trigger.

We are using a 2X ATR from lows as our stop loss and you can see the various target levels at 1, 2, 3 R.

If you wanted to trail your stop, you could use the 30 WMA for simplicity’s sake.

Consider Support And Resistance Zones

Using a price structure with any trading system is a viable addition.  The issue lies in your definition of support and resistance.  Whatever it is, ensure that the levels are visible, make sense, and are a turning point in price.

You can see that the price has pulled back into a zone that has had price activity.  The great thing about the 930 setup is that it forces you to zone in on a particular area on the chart.  There are lots of price levels on a chart and perhaps the ones that show up in a zone of an average price, are more relevant than others.

Wrap Up

Should you use the 9/30 in your trading?

• Takes into account trend direction and pullback trading (pullback trading has an edge)
• Keeps you focused on certain areas on a chart
• Simple stop loss placement
• Built-in trailing stop with the 30 WMA

Also note that there will be traders who add on a longer term average so they are using at least three averages: 9, 30, and some will add the 90 or the 2oo EMA.

It is not a mechanical trading system.  You may want to consider what makes a good pullback and I have written about it here: Pullback failures.  Using that information can help you avoid entering trades that have a lower chance of working out.

The question is, do you use moving averages and pullbacks like this 9/30 setup?  If so, let me know in the comments below.