Choosing your trading strategy can be very time consuming because there are so many out there to choose from – not to mention the back-testing that needs to be done. However, there is one strategy that has proven to be rather successful if executed correctly – the 9 30 trading strategy.
Table of Content:
What is the 9/30 Trading Strategy?
The 9/30 trading setup involves two moving average crossover pullback strategy, which utilises the 9-period Exponential Moving Average and the 30-period Weighted Moving Average.
- The 9-period EMA must be above the 30-period WMA.
- The two moving averages must be apart from each other.
- The first bar that closes below the 9-period EMA is to be used as the trigger for a buy setup.
- The 9-period EMA must be below the 30-period WMA.
- The two moving averages must be apart from each other.
- The first bar that closes above the 9-period EMA is to be used as the trigger for a sell setup.
- When setting your stop loss, you can use the high/low of the trigger bar as a starting point.
- Your stop loss shouldn’t be too high or too low to avoid heavy losses.
How to Trade with the 9/30 Trading Strategy
To make potentially profitable trades with the 9/30 trading strategy, you need to know how to trade it. Firstly, decide if you will be buying or selling using this strategy. Once you have done this, you can proceed to figuring out your entry. As mentioned in the key takeaways, for a buy you need to make sure that the 9-period EMA is sitting above the 30-period WMA. This is because we need the market sentiment to be bullish before we go any further, otherwise we would be buying in a bear market.
Once we have established that the 9-period EMA is above the 30-period WMA, we need to wait for when the two moving averages are apart from each other to show true divergence. Then we wait for the first bar to close above the 9-period EMA, which we will use as our entry.
Likewise, if we were using the 9/30 trading strategy to short then we would flip it round and do the opposite. We would need to wait for the 9-period EMA to be below the 30-period WMA, then we need to wait for the two moving averages to be far apart from each other. After that we would look for the first bar to close above the 9-period EMA, which will be used as our entry.
When to use the 9/30 Trading Method?
Deciding when to use the 9/30 trading setup can be difficult because there can be a lot going on in the markets at any one time. However, to help you figure out when to use this trading method, we have included some screenshots of historical setups.
Like the image below, if we remember the rules for a buy setup, the 9-period EMA (in green) must be above the 30-period WMA and the buy signal is the green candle that closes in between the two moving averages.
If we take a look at another example, a sell we can see that the EMA (again in green) is below the 30-period WMA (again in yellow) and we can see a red candle has closed in between the two moving averages. And just to add some weight to the signal, it is in the middle of a downtrend and the candle signal is a shooting star.
We have one more example above showing another sell example. This is during a downtrend, and this time it is more pronounced because the distance between the two moving averages is greater than the last. The sell signal is the doji-like candle that closes in the middle of the two moving averages. In fact, there are numerous sell signals in this example – the best entry into this trade would be where we have outlined.
9/30 Trading Strategy Setups
1. 9/30 Trading – Winning Trade strategy
The above trade example would have been considered a winning trade, as per our observation, the green 9-period EMA is below the yellow 30-period WMA, which is one of the rules that we must follow when looking for potential buys.
Next, we have highlighted the exact candle that we would consider as the entry, because it has re-entered the space between the two moving averages and has closed inside. Placing your entry at the close would have taken you all the way down to where the two moving averages cross.
2. 9/30 Trading – Losing Trade strategy
The above trade example could be considered a losing trade based on how long you would have had to hold the trade. To potentially minimise losses, we exit losing trades quickly. Based on the sell signal above, the trade would have gone south at first, but if you had held then you would have realised profits.
However, the debate is how long you might be willing to hold onto a potentially losing trade since the green 9-period EMA has already crossed over the yellow 30-period WMA. This might have been an indication to exit out of the trade, since the evidence suggests that it is due for the bulls to take over.
How to make the 9/30 more useful?
Using a single strategy on its own is unlikely to make you a successful trader. In fact, the best and most profitable traders combine other strategies together. If you take the 9/30 and combine it with a strategy like price action, it can help you to reinforce your trading methods and ideas.
1. Price Action
Using the above example, we can see that current market sentiment indicates that the bulls are in control. Right now, we are waiting for the price to move back in between the two moving averages, and to close. We have our movement back in between the moving averages and we also have confirmation from the red doji candle highlighted by the green arrow.
The doji represents a possible reversal. However, because we are already in an upward trend, we can consider the minor pause as profits being taken off the table. As you can see, the doji breaks through the green moving average and closes just slightly above. However, the next candle absolutely engulfs the previous candles.
2. Bollinger Bands
Combining Bollinger Bands with the 9/30 trading strategy will help the trading experience become a lot more useful in the long run because of how powerful the Bollinger Bands are. The two together can help you understand what kind of market sentiment is currently in place.
From the screenshot below we understand that the bear sentiment has reversed and is now becoming a bull market. But how can we know for sure? Well, the Bollinger Bands can help us detect this because as we can see by the time we are ready to enter into a trade, the price is already in the top half of the bands and this just gives us the confirmation we need.
One of the most popular technical strategies that traders use is the MACD indicator. It is best to combine the MACD with another technical indicator (in this case the 9 30) for favourable results.
You can see below that we have paired the MACD together with the 9/30 trading strategy, and you can also see the MACD is confirming that we are in an uptrend. The two strategies are supposed to complement each other and give the trader confirmation that they need to feel confident about their decision.
Trading Strategy Pros and Cons
|9/30 Trading Strategy – Pros
|9/30 Trading Strategy – Cons
|Can produce some good moves
|Not recommended to use the strategy on its own
|Suitable for beginners
|There are more potentially successful strategies out there
|Good indication of market continuation
|Not suitable for higher time frames
All in all, the 9/30 trading is a fairly robust strategy – and when used properly, can be a profitable one. However, the fact that it is a relatively simple strategy means that there can be some margin for error when it comes down to producing positive results.
With this being said, it is best used when combining it with another strong strategy or indicator to produce more promising results. If you were to ask the question “does the 9/30 trading strategy work?” – the answer would be a resounding ‘yes’, and it can offer decent results if used correctly.
Frequently Asked Questions
That would depend on what other strategies or indicators you’re comfortable using.
Like with countless other strategies, you aren’t going to profit from every trade – but it’s vital to know when to exit to minimise losses.
It’s not necessarily recommended, because news releases are quick and the impact often doesn’t last for very long. This means that by the time the news has broken, price reactions may have already been and gone