Envelope Reversal Trading System For MT4
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 Envelope Reversal Trading System For MT4 is a simple trading method designed to trade the 15-minute chart. The inventor of this system has used simple indicators so that rookie traders can learn this strategy with ease. Though the system is easy to use, we recommend learning its function in the demo trading environment.
The Envelope Reversal Trading System For MT4
This trading strategy is based on the concept of the Envelope indicator. The Envelope indicator creates a simple upper and lower price limit in the chart. Since the width of the envelope becomes extremely small while using it in the higher time frame, we will be using this strategy in the 15-minute chart.
The purpose of this Envelope Reversal Trading System For MT4 is to identify the potential trading zone at the envelope upper and lower bands.
Let's see the list of indicators used to develop this strategy.
20 Exponential Moving Average (EMA)
Envelope 0.10, 0.20, 0.30, 0.40.
RSI (9)
Bollinger Bands (15, 1)
The first indicator is 20 EMA that works as a dynamic support and resistance level. So, any rejection spotted in the envelope zone might provide us a decent trading opportunity.
The deviation in the Envelope should be set to 0.10, 0.20. By using this custom deviation period, we will get a smoother reading from the envelope indicator.
For instance, if a Deviation of 0.20 is set, it means a 20% difference between the upper and lower band.
Usage of RSI and the Bollinger band indicator
RSI belongs to the Oscillator class indicator. It is usually used to identify the overbought and oversold zone. However, in The Envelope Reversal Trading System For MT4, the use of RSI is related to the trade filtering process.
In this strategy, we will use RSI and Bollinger Bands together. Instead of using the 70 and 30 reversal levels in RSI, we will relate the reading with the lower and upper bands of the Bollinger Bands indicator.
For example, if the RSI moves towards the Lower bands of the Bollinger Band indicator, we should be looking for buying opportunity. On the contrary, if the RSI moves towards the Upper bands of the Bollinger Bands, we should be looking for the short trade setups.
Envelope Reversal Trading System For MT4- Bullish Trade Setup
The Envelope Reversal Trading System For MT4 is often known as the intraday trading strategy since we will be using the 15-minute chart. During the data analysis, we need to pick our preferred trading session based on the trading instrument. For instance, if we intend to trade in EURUSD pair, we need to look for the trade signals in the London or the New York trading sessions.
By doing so, we will take our trades during the volatile period of the market. But each trade should be executed with a proper risk management policy.
Bullish Trade Conditions
- The price is moving within a bearish trend but we will spot a decent bounce at the Envelopes 0.4.
- RSI is moving up from the downside and shows strong rejection at the lower Bollinger bands.
Entry
After checking these two conditions, you can execute the trade. But try not to trade with the high lot as you need to keep yourself prepared to deal with the losses.
Stop Loss
The stop loss is usually placed below the support level. To identify the support level, you can use the lower band of the envelope indicator.
In some cases, you may set the stop loss by using the price action signals.
According to the inventor of this system, the stop loss should not exceed 20 pips. So, try to bear this fact in mind.
Take Profit
In this system, the 20 EMA will act as dynamic support and resistance. So, you may place the take profit at the 20 EMA.
If you are good at analyzing the support and resistance, place your take profit a few pips below the nearest resistance.
Some advanced traders may determine the take profit by using a unique style. In that case, they should test the new rule for setting up TP by using a demo account.
Envelope Reversal Trading System For MT4 Bearish Trade Setup
It is better to trade during the active trading session as it will reduce the cost of trading. Avoid taking the trades when the spread is bigger than 5 pips. By doing so, you can reduce the unnecessary hassle and avoid paying higher commissions for the spread.
Bearish Trade Conditions
- The price is moving within a bullish trend and the price should reject the upper band of the Envelopes 0.4.
- RSI is moving down from the upper zone and shows strong rejection at the upper Bollinger bands.
Entry
After checking these two conditions, you can open the short trade with low risk.
Stop Loss
The stop loss is usually placed above the resistance level. To identify the resistance level, you can use the upper band of the envelope indicator.
In some cases, you may set the stop loss by using the price action signals.
According to the inventor of this system, the stop loss should not exceed 20 pips (similar to the long trade setup)
Take Profit
You can use the 20 EMA to determine the take profit. 20 EMA will be acting as a strong support level. So, close your trade as the price reaches near the 20 EMA or any major support.
Envelope Reversal Trading System For MT4 - Conclusion
The functions of the Envelope Reversal Trading System is very easy to use. By using the step-by-step instructions of this guide, you may learn the proper use of this strategy. However, if you still get confused with the required steps mentioned in this guide, feel free to use the practice trading account. With the help of a practice trading account, learn the proper use of this strategy and develop your skills by standard money management rules.
Warning: When you start trading this system then you should begin with a demo account. Every new trading system requires that you learn new skills. Errors will occur at the beginning and therefore you can save yourself money if you learn on a demo account.
Download the complete system description and the files here:
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