9/30 trading setup is by Mike Bruns on Trading Naked (now defunct), a site with lots of trading wisdom. Highly recommended. In fact, TradingNaked inspired this collection of trade setups.
Trading Rules – 9/30 Trading Setups
This trading setup uses two moving averages: the 9-period exponential moving average (EMA) and the 30-period weighted moving average (WMA).
Long Setup
- 9 EMA above 30 WMA
- Close below 9 EMA (More conservatively, entire bar below 9 EMA)
- Place buy stop order above the high of the bar that closes below 9 EMA
Short Setup
- 9 EMA below the 30 WMA
- Close above 9 EMA (More conservatively, entire bar above 9 EMA)
- Place sell stop order below the low of the bar that closes above 9 EMA
9/30 Trading Examples
Winning Trade – Long 9/30
The chart above shows the daily prices of CBRE Group Inc (NYSE). The 9 EMA is orange, and the 30 WMA is red.
Price pulled back and closed below the 9 EMA for a 9/30 trading setup at the bar before the highlighted bar.
However, the buy order above the high of the bar was not triggered. The next bar went entirely under the 9 EMA, setting up a conservative 9/30 setup. The buy order at the high of this bar was triggered, and the price shot up over 20% in the next two months.
The long bottom tails at the 30 WMA showed clear buying, but the signal bar was a doji with a small bear body. Hence, the conservative trader could wait to enter on the next test of the 30 WMA which occurred four bars later.
Losing Trade – Long 9/30
In a different daily chart of CBRE Group Inc, we saw the marked bar close above the 9 EMA. Hence, we placed a sell order below its low. The order was triggered, but prices moved up right after our short entry and never looked back.
TradingNaked stated that the “most reliable entry occur the first time there is a crossover of the moving averages.” This trade was exactly the first one after a moving average crossover, but it failed. Possible reasons included the prior upwards trend and the rather bullish signal bar (the marked bar).
Review – 9/30 Trading Setup
The strength of the 9/30 trading setup is its simplicity. It is simple to understand and gives the trader more time to observe the price action. TradingNaked also mentioned that “those who focus their decisions almost exclusively on price bars should find it helpful”.
The conservative trade with a higher probability of success requires the entire bar to be below the 9 EMA, highlighting the importance of extent of the pullback in a trend. The greater the pullback, the more likely that the trend resumption is imminent. However, if the pullback is overdone (as a guide: more than 70% of the previous move), the trend may have ended.
You can also use candlestick patterns to improve the performance of this strategy.
Traders should use this trading setup for retracements rather than reversals unless there are compelling reasons to consider a trend change.
Informative
Hi Galen, do you have a recommended timeframe for this? I just reviewed it on a 610 tick chart and it didn’t seem to work very well using conservative setups as the entry and the 9 EMA crossing back over as the exit.
Hi, which market did you review for the 610 tick? I can’t give very specific advice as I did not use the 9/30 setup mechanically. It was useful for me in my discretionary trading as a way to pinpoint potential setups before analyzing them in the context of the market price action (S/R, trend lines, price swings etc.)
Awesome! Could you shed some more light on stop loss placement and exits using this setup?
Also could you please give an example of an overdone pullback bigger than 70%:
“However, if the pullback is overdone (as a guide: more than 70% of the previous move), the trend may have ended.”
Great stuff Galen thanks again.
Hi Chris, thank you for your kind words. Check out these two articles for stop loss and profit taking ideas. As for the deep pullback example, you can use Fibonacci retracement as a gauge.
Galen,
Great article as always. I wanted to point out that Mike Bruns passed away in early 2017. This article still links to the TradingNaked website but it is no longer active. I know it’s a relatively old article but I thought you’d still want to know.
Robert, I was aware that the site has been defunct for some time but was not aware of Mike Bruns’ passing. He was a great trader who was generous with sharing his ideas. A loss to the community. I’ll be removing the link to the website to avoid confusion.
This is quite interesting and informative. I’m currently backtesting this the past few weeks on the QQQ’s (5m timeframe) and it works quite well during the morning sessions!
This strategy is very suitable for trending markets. You might want to check out this other article on the 9/30 strategy too.