# The Rachek’s Method

**Indicators:**

* [SMA](https://trading-guide-1.gitbook.io/trading-guide/indicators/moving-averages-sma-ema) (10, 0, close)
* [SMA](https://trading-guide-1.gitbook.io/trading-guide/indicators/moving-averages-sma-ema) (20, 0, close)
* [ZigZag](https://trading-guide-1.gitbook.io/trading-guide/indicators/zig-zag) (12, 5, 3)

**Key conditions:**

The timeframe should be H4. A required condition is that the price on the rollback should break through the red MA and move to the blue.

<figure><img src="https://2144832987-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F9gpm8AbUkT9y2fUw2shH%2Fuploads%2Fo7dsq6Nahi9mBhWEG40f%2Fimage.png?alt=media&#x26;token=63e4093d-6d1a-4e97-9624-73c9d2607515" alt=""><figcaption></figcaption></figure>

**BUY conditions (all conditions must be met):**

* the SMA (10) crosses SMA (20) from the bottom up
* both lines are trending upwards
* the ZigZag shows two rising minimums

**SELL conditions (all conditions must be met):**

* the SMA (10) crosses SMA (20) from the top down
* both lines are trending downwards
* the ZigZag shows two rising maximums

**Exit criteria:** exit the trade by stop loss set by money management or when a break point appears on ZigZag.

### Exercise:

Open a chart with a timeframe of H4. Apply the SMA indicators with periods of 10 and 20 based on the close price. Add the ZigZag indicator with settings (12, 5, 3). Ensure that the price on the rollback breaks through the red MA and moves to the blue MA. Look for a BUY signal when the SMA (10) crosses the SMA (20) from the bottom up, both lines are trending upwards, and the ZigZag shows two rising minimums. Enter a long position on the next bar and set a stop loss according to your money management rules. Monitor the trade and exit when a break point appears on ZigZag or when the stop loss is hit.

Repeat the process for a SELL signal by identifying when the SMA (10) crosses the SMA (20) from the top down, both lines are trending downwards, and the ZigZag shows two rising maximums. Enter a short position on the next bar and set a stop loss accordingly, exiting the trade when a break point appears on ZigZag or when the stop loss is triggered.
