Zone Based Range Forex Trading Strategy For MT4
Table Of Contents:
- Zone Based Range Forex Trading Strategy For MT4
- Essential factors that you need to learn
- A brief idea on the essential factors
- The long trade setup sequence
- The short trade setup sequence
- Zone Based Range Forex Trading Strategy For MT4 – Useful advice
- Zone Based Range Forex Trading 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 Zone Based Range Forex Trading Strategy For MT4 is based on the well-known fact that the markets are most of the time in ranging conditions instead of trending conditions. The market tends to exhibit 3 distinct movements during the active hours. In general, traders love to trade the trending condition and some scalpers often take trades in the ranging market. But the reversal trading method is mostly used by the experienced trader.
The Zone Based Range Forex Trading Strategy For MT4 is not based on any indicator or EAs. The trade signals are determined by using the raw tools available on the MT4 platform. As you use this strategy, you should be able to develop your basic skills from the scratch. Before you move on to the core of this system, let’s see the core factors which we have to learn.
Essential factors that you need to learn
- Phases of the trend
- Support and resistance level
- Selection of time frame
- Factors affecting the trend
Chart setup with the Zone-Based Range Forex Trading Strategy For MT4
A brief idea on the essential factors
Knowing about the names of the essential factors used in this system is not enough. To execute the trades properly, you should how these elements form the overall trading system. For your better understanding, we are going to discuss these terms briefly.
Phases of the trend
We all know the Forex market is dynamic. Study the price movement of a certain asset, you should see the price is either trending up or down. In some cases, you will notice the price is confined to a certain range. Price trapped in a rectangular box defines the ranging movement of the market.
Phases of the trend
The ranging or consolidation phase takes place due to the absence of market volatility. In general, the price of the asset gains strong momentum after the breakout from the confined zone. This same concept will be used while using the Zone Based Range Forex Trading Strategy For MT4.
Support and resistance level
Support is such a place in the market that pushes the price of a certain asset higher. On the contrary, a resistance level limits the upward rally in the price and pushes the price lower. Usually, the long trades at taken at the support level, and the short trades are executed at the critical resistance.
As a rookie trader, you may think support and resistance level is the absolute zone for trading. But in reality, these levels are often broken causing a major shift in the trend. And if a support level is broken, it will turn into strong resistance and vice versa.
Selection of the time frame
A higher time frame is always profitable as it provides better opportunities to retail traders. But trading the higher time frame requires skills and strong analytical knowledge. Unless you are good at managing your emotions, you won’t have a pleasant time with the time higher time frame settings.
Selecting the time frame
You might be wondering which time frame while drawing the support and resistance level. We suggest using the H1 or H4 time frame while using the Zone Based Range Forex Trading Strategy For MT4. This should give you the intraday trading opportunity and thus the waiting period will be less.
Factors affecting the trend
To use the Zone-Based Range Forex Trading Strategy For MT4 efficiently, you have to learn about the critical factors that affect the trend. Usually, the high-impact news is the prime factor that causes a major shift in the trend. However, the medium impact news does have the potential to shift the trend provided that the market sentiment favors the new direction of the price movement.
Being a new trader, you should try to avoid taking the trades right before the major news release. High impact news like NFP, ECB press conference, interest rate decision is the most vital news for the retail traders. Avoid these news factors and you won’t have to deal with fewer false spikes during the trade execution process.
The long trade setup sequence
Executing the long trades with the help of the Zone Based Range Forex Trading Strategy For MT4 is a pretty straightforward process. Since you now have the basic knowledge about the essential factors, let's move into the key steps to take the trades.
Conditions to execute the long trade
- Pick an asset that is showing stable price movement. This means the price of the asset should exhibit choppy movements.
- Wait for the consolidation pattern as it will define the range. The ranging phase of the market should take place in the existing bullish trade.
- Define the support and resistance level in the consolidation zone. Note that consolidation zones are often formed by weak support and resistance level.
- Wait for the price to break above the resistance level in the consolidation zone. A clear break of the price will turn the existing resistance level into a strong support zone.
- The price should retrace back to the consolidated or the ranging zone. The ranging zone should act as a strong support level.
- As the price test the support zone, look for the bullish bounce in the price. This means the price should have a higher closing than the opening price.
- Once you have checked all these features, you should be able to open the long trade favoring the current long trade.
Execution of the long trade
Stop loss
The stop loss should be set by analyzing the consolidation zone. If you trade with the price action confirmation signal, you may set the stop loss below the tail of the bullish candlestick. On the contrary, conservative traders may set their stop-loss price right below the consolidated or the ranging zone.
Take profit
To determine the take profit, the traders need to analyze the nearest resistance level or the high. But the TP should be set in such a way so that the overall risk to reward ratio is better than 1:3. If the risk to reward ratio is less than that, you might struggle to deal with the losses.
The short trade setup sequence
In this segment, we will learn to use the Zone Based Range Forex Trading Strategy For MT4 to trade the major reversals in the market. Since reversal trading is a bit risky, we will analyze the data in the H4 or D1 time frame only. Now let’s check the conditions to execute the short trade.
Conditions to execute the short trade
- Select the major currency pairs only and analyze the existing trend in the D1 or H4 time frame. The price should be trading near a critical high or resistance.
- As the price reaches near the major resistance, the ranging pattern should start to form in the asset. The ranging factor represents the buyers are getting exhausted.
- Look for the bearish pin bar or the doji pattern formation inside the consolidation zone. This pattern will act as the primary confirmation that the price is most likely to fall.
- Wait till the price breaks below the bottom support of the ranging market. As the break takes place, you should be preparing for a bullish correction.
- The bullish correction in the price is most likely to end by forming a rejection pattern right at the ranging zone of the price.
- Check the economic news calendar and make sure you are not taking the trades right before the major news release.
- Once you have checked all these factors, short the asset with less than 1% risk exposure. Try not to increase the risk factor as it is a reversal trading technique.
Execution of the short trade
Stop loss
Reversal trading always pushes the risk factor slightly higher. That’s why it is better to set the stop-loss price right above the consolidation zone. You may also use the nearest high as the reference point for determining the stop loss price for the trade.
Take profit
The take profit should be set based on a higher risk to reward ratio as you are betting against the existing trend. So, the minimum risk to reward ratio should be 1:5 while using the Zone Based Range Forex Trading Strategy For MT4 to trade the major reversal. So, it is better to set the take profit to a significant swing low as it will act as a strong support level.
Zone Based Range Forex Trading Strategy For MT4 – Useful advice
Though the Zone Based Range Forex Trading Strategy For MT4 offers a reversal trading method still you should not try to take the trades against the trend in the early stage. Make yourself comfortable with the trend trading strategy and learn the INS and out of this system. If required, stick to the paper trading account for few months as it will offer you a risk-free learning environment.
Zone Based Range Forex Trading Strategy For MT4 – Conclusion
Learning the core functions of the Zone-Based Range Forex Trading Strategy For MT4 will not be hard provided that you have paid close attention to the conditions of a long and short trade. But this doesn’t mean you won’t have to deal with the losing trades. So, always be prepared to deal with the losses as it will keep you emotionally stable during the bad times.
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