Center of Gravity Trading System For MT4

Center of Gravity Trading System For MT4

Centre of gravity is a point where there is even distribution of weight on all sides. Where there is balance, nature is in harmony and at peace. In the forex markets, a centre of gravity should be the point where you make profits in the market effortlessly. The CENTER OF GRAVITY TRADING SYSTEM FOR MT4 design ensures that traders that execute this trading system as per its prescribed manner find their centre of gravity in the financial markets.

Since the centre of gravity indicator, which is the main building block of this forex trading system, is a dynamic support and resistance indicator meaning that at its core this is a trend based system. By being a trend follower, the Centre of Gravity Forex Trading System applies to all trading assets and to all timeframes.



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OVERVIEW OF THE CENTER OF GRAVITY FOREX TRADING SYSTEM




Made up of just two trading indicators, this is one of the simplest forex trading methodologies you will come across. The question is, how do these two indicators result in a solid forex trading system that makes profits consistently.



Center of Gravity Indicator


This trading indicator is a momentum oscillator based on a dynamic weighted moving average. Being a dynamic oscillator on top of the weighting reduces the lag effect associated with moving averages and identifies price turning points precisely.

By being an oscillator, the centre of gravity indicator is not a mere trend-following indicator but one that seeks to identify the beginning of a trend. The shape of the center of gravity tells traders whether the market is bullish or bearish; a concave-shaped center of gravity shows an uptrend while a convex-shaped center of gravity indicates a downtrend.

The center of gravity indicator, COG, is made up of five lines;


  • Two gold lines making up the upper and lower boundaries,

  • Two lime green inner boundaries, an upper and lower boundary,

  • And a blue line that sits in the middle of the COG trading indicator.


The COG bands or lines give insight into support and resistance areas;


  • Gold bands indicate major supports and resistances,

  • Lime green bands signal minor areas of support and resistance,

  • The blue median band indicates where the price pivot is.


What are supports and resistance areas? Supports and resistance areas are price points in the market where the buying and selling power is in a state of equilibrium. For s support level to form, the price of an asset decline resulting in increased demand for that asset to the point where the existing market demand exceeds the prevailing market supply. At this particular point, the decline in prices is arrested, and the increase in demand buoys them back up. The lowest price reached before bouncing back up is a price support level. A resistance level, on the other hand, forms when an increase in asset prices come to a halt due to the current market supply exceeding the prevailing demand. The highest point reached by prices before they bounce back downwards is a price resistance level.

Support and resistance points are dynamic; they are not specific points. Different traders execute trades differently around support and resistance levels;


  • Some execute trades just before prices hit the support and resistance level.

  • Others execute their trades after prices get to the actual price turning point.


The characteristic of the majority of the executed trades, whether early or late, determines whether the actual price turning point is tested or not. This is why the COG indicator uses two boundaries, an inner price boundary and an outer price boundary. The two boundaries ensure that whichever trade execution method you choose; there is a trading signal for you.

The median line, blue in colour, is the center of gravity and is used to book either partial profits or as an exit signal.



MA Cross OC Indicator


This trading indicator plays the role of filter indicator for the ideal trading positions. The moving averages in use are simple moving averages of periods 5 applied to the open and close of the candles. They are coded to form red and blue arrows to point out the ideal entry points. Just remember to trade based on the shape of the center of gravity indicator; if the COG points upwards, concave, take long positions only, and if the COG Indicator is pointing downwards, take short positions only.



THE CENTER OF GRAVITY TRADING SYSTEM SETUPS



Sell Setup


To go short in the market:


  • First, the Center of gravity indicator has to be concave in shape, pointing down.

  • Second, prices go up and touch either one of the two boundary bands, either the gold-coloured one or the lime green one.

  • Third, the MA Cross OC indicator forms a red arrow validating that it is indeed the season of the bears.


Enter into a short position on close of the price candlestick with the signal arrow.

The sample chart below exhibits all of the above trading parameters.

Both of the positions highlighted had a price rally of over 70 pips, individually.




Both of the positions highlighted had a price rally of over 70 pips, individually.



Buy Setup


To go short in the market:


  • First, the Center of gravity indicator has to be convex in shape, pointing up.

  • Second, prices go down and touch either one of the two boundary bands, either the gold-coloured one or the lime green one.

  • Third, the MA Cross OC indicator forms a dodger blue arrow validating that it is indeed time to go long in the market.


Enter into a long position on close of the price candlestick with the signal arrow.

The sample chart below exhibits all of the above trading parameters.




Both of the positions highlighted had a price rally of over 150 pips, individually.




Both of the positions highlighted had a price rally of over 150 pips, individually.



Stop Loss and Take Profit Levels


Based on your entry point, the ideal stop-loss level is 15-25 pips either above or below the band used for entry for both short and long positions, respectively. A trailing stop of 30 pips is also applicable or a manual stop utilizing supports and resistance levels as they form.

For take profit, traders can approach it in two ways:


  1. A predetermined take profit level based on the risk to reward ratio of 1:2.

  2. The middle band to book partial profits and the extreme bands for the remaining profits.

Download the complete system description and the files here:

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