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Three ducks trading strategy

Three ducks trading strategy

2019-11-11 • Updated

Information is not investment advice

Today we are going to explain a system which requires the usage of a moving average. It is a strategy developed by professional traders.   It is called “Three ducks”. The name may seem strange, but it comes from a quite common phrase “get your ducks in a row”, which means to be well-prepared for a certain task or to become more efficient. Have you ever seen the family of ducks swimming in the lake? Usually, they tend to swim in a row. This is how this system works. It helps a trader to make a "row" of actions to achieve a better result. As with most of the setups, it is implemented during a trend.

So, what do we need to start using this system?

Three ducks trading system is as easy as a pie. It helps you to find the upward and downward movements in the market. You do not need to download complicated oscillators or look for specific patterns. All you need is to consider three timeframes: M5, H1, and H4. The only indicator that you need is the 60-period simple moving average, which you can find in any platform.

Analysts recommend implementing this system while trading EUR/USD or GBP/USD.

Let's look at what "ducks" make up this strategy. We will take the EUR/USD pair as an example.

The first duck

At first, we look at the largest timeframe (H4). We see if the current price is above or below the 60-period SMA.

  • If the current price is above the 60-period SMA, we consider opening a long position;
  • If the current price is below the 60-period SMA, we consider opening a short position.

On May 29, we could see that the 60-period MA was moving above the price on the H4 chart. That is, we will be looking for a selling opportunity.

1 (6).jpg

Ok, we caught the first duck! Let’s look if we can find more proofs on the smaller timeframes.

The second duck

During the second step, we look at the H1 chart.

  • If the first duck gave us a bullish hint, we need to see the current price above the 60-period SMA as well.
  • In case the first duck signaled to open a short position, the current price should be below the 60-period MA.

Important notice! If the conditions above are not met and the price acts differently than at the first step, we cannot move to step 3.

On the H1, EUR/USD was placed below the 60-period SMA. So, we felt confident enough to consider the third step.

2 (4).jpg

The third duck

Now, on the M5 chart, we are waiting for a crossover.

  • If we are looking for a buying opportunity, we wait for the price to cross the 60-period SMA from bottom to top.
  • If we want to sell, we wait for the price to cross the 60-period SMA upside down.
  • If you want to be 100% sure you need to wait when the price breaks the closest local minimum/maximum.

This situation would mean that price on all of the charts (all of the “ducks”) are moving in the same direction.

When you place you take profit?

You can place your take profit near the previous minimums or maximums, or trail your stop and follow the direction of the price.

Let’s look at the final example.

On M5, we waited for the price to cross the moving average from top to bottom and waited for it to break the previous local minimum. We opened a short position at 1.1161. Our stop loss was placed at 1.1170 (above the previous high) and we took profit higher than the previous support at 1.1149.

3 (4).jpg


This strategy helps you to consider the price movements and use them in order to find more profitable opportunities.


How do you trade a Cypher pattern?

The Cypher pattern isn’t the most famous trading formation. Nevertheless, this trading instrument can help you better understand and forecast the price moves.

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