Wave Auto Trendlines Forex Support and Resistance Strategy For MT4
Table Of Contents:
- Essential factors you should know
- Functions of the essential factors
- The long trade setup sequence
- The short trade setup sequence
- Wave Auto Trendlines Forex Support and Resistance Strategy For MT4 – Useful advice
- Wave Auto Trendlines Forex Support and Resistance Strategy For MT4 – Conclusion
Please note: This strategy was publicly published in the trading community and is free to use. We do NOT make an attempt to decide if this strategy is profitable or not, because we know that the major factors regarding trading results are the skills/experience of the trader who executes the strategy. Therefore, we are mainly explaining the components and rules of the strategy. If applicable, we are highlighting advantages, disadvantages and possible improvements of the strategy.
The Wave Auto Trendlines Forex Support and Resistance Strategy For MT4 are based on an indicator named WATI. This wonderful little helper draws trend lines and support/resistance levels on your charts. With the help of these drawings, you will be able to detect standard chart formations like head and shoulder formations, triangles, flags, and even 1-2-3 continuation patterns.
The indicator has several configuration options for the parts Semaphores, Trend Lines, and Forecast Lines. But as a new user of the Wave Auto Trendlines Forex Support and Resistance Strategy For MT4, it would be better to stick to the default configurations as it is well-calibrated. But to use this system strategically, you should rely on some essential factors.
Essential factors you should know
- Wati indicator
- Selection of the trend lines
- Support and resistance level
- Dealing with the reversal pattern
Chart setup with the Wave Auto Trendlines Forex Support and Resistance Strategy For MT4
Functions of the essential factors
Before you start using the Wave Auto Trendlines Forex Support and Resistance Strategy For MT4, you should know how the essential factors are integrated into this system. Many rookie traders often start using this system and eventually fails as they don’t have a sound knowledge about the basic elements of this market. To ease the overall process of this system, we are going to briefly discuss the core functions of the essential factors used in this system.
The Wati indicator is based on a simple algorithm and you can easily tweak its input settings. In general, the highs and lows of the market are taken into consideration while drawing the trendlines and SR levels.
Input settings in the Wati indicator
The default period for the high is set to 70 and for the low, the period is set to 21. If you trade the major and minor currency pairs, you are not required to bring any change. However, if you deal with the S&P 500 or stock market, it is better to use a higher period in the high and low segments.
Selection of the trend lines
After installing the Wati indicator, you might get confused by seeing multiple trendlines, support, and resistance levels. To solve this problem, you need to focus on the critical highs and lows in the higher time frame.
Selecting the proper trendlines
Some of the automated drawn trend lines might have very sharp steep. These lines should be ignored since these are the levels that will be broken frequently. Look for the natural-looking trend line that has a slope of around 45 degrees.
Support and resistance level
The long trades are usually executed at the major support level and the short trades are taken at the critical resistance level. Learn to draw the horizontal support and resistance level by connecting a minimum of three significant points.
Some of you might think the support and resistance level can be drawn by connecting two highs or lows. But these levels should be considered as weak support and resistance. Unless you are using the price action signal, you should not rely on such support and a resistance line.
Dealing with the reversal pattern
The Wave Auto Trendlines Forex Support and Resistance Strategy For MT4 can be used to trade the major reversal in the trend. But to do so, you need to find the junction of the trend lines and the support or resistance level. Once the price break the important support or resistance level, you should take the confirmation by analyzing the news.
If you intend to trade the news, you must learn to evaluate the news data. Unless you become good at analyzing the news factors, you should stick to the trend continuation trading pattern. Trade the reversals only if the technical and fundamental data strongly suggest a trend change.
The long trade setup sequence
Experienced traders always prefer to trade with the existing trend. To be on the safe side, we will learn to use the Wave Auto Trendlines Forex Support and Resistance Strategy For MT4 to trade with the uptrend. Now let’s check the key conditions which we need to assess to open a long order.
Conditions to execute the long trade
- Analyze the chart of major or minor currency pairs in the 4-hour time frame. Try to pick an asset that is already in a strong uptrend.
- Look for the formation of the forecast high trend line. The color of this trendline should be pink and it should provide strong support to the asset.
- Wait for the price to retrace back towards the LTL yellow color trendline. Note that the support level of the LTL trend line should be close to the horizontal support level.
- As the price test the yellow color trendline, look for the bullish bounce in the price. This means the closing price of the candle should be higher than the opening price of the candle.
- Once you have checked all these metrics, you may open the long trade with less than 2% risk exposure.
Execution of the long trade
If you use the price action confirmation signal, you may set the SL below the low of the bullish candlestick pattern. You may also set the stop loss below the nearest support level but make sure you are not placing the SL right at the critical swing low.
Setting up the take profit with the Wave Auto Trendlines Forex Support and Resistance Strategy For MT4 greatly depends on the trader’s skill. Inexperienced traders should set the TP based on a 1:3 risk to reward ratio.
On the contrary, experienced traders may set the TP to the nearest resistance level or they might ride the bullish trend till they get a pop-up message stating the top has been generated in the chart.
The short trade setup sequence
In this segment, we will show how to deal with the false break and ride the existing bearish trend. At times, you will notice the price is breaking above the pink color trendline and forming a bearish candlestick pattern. In such a state, you may get ready to execute the short trade. Let’s check the prime conditions to take the short trade.
Conditions to execute the short trade
- Pick an asset that is already in a downtrend. Since you are looking to deal with the false break, it is better to pick the minor currency pairs.
- Look for a break of the pink color trendline resistance in the H4 time frame. Right after the bullish break, you should see exhaustion candles.
- Wait for the price to fall below the pink color trend line resistance. As the price drops below the pink color trend line resistance, you have the confirmation that the breakout was false.
- The price should retrace back to the red color HTL trend line. From that level, the sellers should gain back their momentum.
- As the price completes its bullish correction by testing the HTL trendline, you have the formation of the bearish trade setup.
- After checking all these conditions, you may take the short with a risk factor of less than 2% of your account balance.
Execution of the short trade
Since you are going to deal with the false break, it is better to place the SL few pips above the pink color forecast high trendline. However, you may place a tight stop by using the HTL red color trendline but in that case, you should use the bearish price action confirmation signals.
While using the Wave Auto Trendlines Forex Support and Resistance Strategy For MT4 for reversal trading, you must use a 1:5 or higher risk to reward ratio. If you trade with the typical 1:3 risk to reward ratio, the risk factor may outperform the reward factors.
Wave Auto Trendlines Forex Support and Resistance Strategy For MT4 – Useful advice
The functions of the Wave Auto Trendlines Forex Support and Resistance Strategy For MT4 are closely related to the basic trading parameters. So, we advised the rookie traders to have strong knowledge about trendlines, support, and resistance level. Though the wati indicator will draw these lines automatically, still having sound knowledge of these factors will let you pick the best trendlines.
Wave Auto Trendlines Forex Support and Resistance Strategy For MT4 – Conclusion
Currency trading is all about making smart decisions. The Wave Auto Trendlines Forex Support and Resistance Strategy For MT4 might provide very accurate trade signals still it is not going to pave a hassle-free path towards success. You need to go through the ups and downs of the currency trading business. And the only way by which you can keep your capital safe is by following the standard rules of money management.
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