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You are here: Home / Trading Setups / 9/30 Trading Setup

9/30 Trading Setup

By Galen Woods in Trading Setups on July 1, 2012

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

  1. 9 EMA above 30 WMA
  2. Close below 9 EMA (More conservatively, entire bar below 9 EMA)
  3. Place buy stop order above the high of the bar that closes below 9 EMA

Short Setup

  1. 9 EMA below the 30 WMA
  2. Close above 9 EMA (More conservatively, entire bar above 9 EMA)
  3. Place sell stop order below the low of the bar that closes above 9 EMA

9/30 Trading Examples

Winning Trade – Long 9/30

9/30 Trading Setup - Winning Trade

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

9/30 Trading Setup - Losing Trade

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.

Read more about Moving Average, Trading Trend

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Comments

  1. Thant Zin says

    May 13, 2017 at 2:15 PM

    Informative

    Reply
  2. Richard says

    June 15, 2017 at 7:35 AM

    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.

    Reply
    • Galen Woods says

      June 20, 2017 at 2:55 PM

      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.)

      Reply
  3. Chris says

    June 16, 2017 at 10:46 PM

    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.

    Reply
    • Galen Woods says

      June 22, 2017 at 10:55 AM

      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.

      Reply
  4. Robert says

    November 12, 2017 at 10:56 PM

    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.

    Reply
    • Galen Woods says

      November 14, 2017 at 9:27 AM

      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.

      Reply
  5. Adam says

    March 25, 2020 at 3:01 AM

    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!

    Reply
    • Galen Woods says

      March 25, 2020 at 11:18 AM

      This strategy is very suitable for trending markets. You might want to check out this other article on the 9/30 strategy too.

      Reply
  6. amin says

    November 2, 2021 at 10:04 PM

    Hi Galen
    I am practicing combining this strategy with Pivot Point breakout and then Pullback into the space between the ema`s 12 and 32 (instead of the ema`s 9 / 30).
    I enter when a pin bar or trend bar is formed.
    Do you think this is a good strategy or not?
    How many trades should I make? 25 or 30 or 100?

    Reply
    • Galen Woods says

      November 3, 2021 at 12:28 PM

      I find that 30 trades is enough to get a sense of whether the approach is worth more effort. Ultimately it depends on your comfort level, even if you are profitable during your practice, there is no guarantee that you’ll be so in live trading. That is the uncertainty active traders need to deal with. All the best!

      Reply
      • amin says

        November 3, 2021 at 3:28 PM

        Thank you for answering.
        I do not understand a subject.
        This is my situation.
        I’m practicing a trading strategy that I’m comfortable with and that makes sense to me.
        How long will I continue to practice in the demo account?
        In this exercise, what should I achieve to be allowed to enter the real account?
        thanks

        Reply
        • Galen Woods says

          November 5, 2021 at 7:20 PM

          You might find this article helpful – it covers some guidelines for demo trading.

          Reply

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