Donchian middle band crossover Strategy For MT4

Donchian middle band crossover Strategy For MT4

The Donchian middle band crossover Strategy For MT4 is a strategy that can be used to trade various financial markets. The system works very well across several forex pairs and deploys various custom indicators. Some of the indicators are trend-following indicators, and others are momentum indicators.

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The essence of using a combination of trend-following and momentum indicators is to harness the strengths of each indicator class. Trend-indicators tend to lag the market and produce signals which point to entries that may be too late relative to the price action.

Momentum indicators lead the market, and so provide signals before the market moves. However, some of the signals generated may come too early and may produce fakeouts. By combining trend-following and momentum indicators, the negatives of each cancel themselves out, and traders are left with filtered signals which have a higher degree of accuracy.

This is what the Donchian Middle Band Crossover Strategy is all about. An additional advantage is that the momentum indicators enable the trader to catch overbought/oversold conditions, even when a market or asset is trending.

Indicators Used and Chart Setup



The indicators used for the Donchian middle band crossover Strategy For MT4 are as follows:

• Trendline lnx (optional)
• ml non-lag MA nrp (with period set to 9)
• SHI Channel lead indicator
• Price channel Zig Zag
• Donchian channel ATR lead indicator
• RSX x2 lead indicator;
• Insync Index or WPR MTF (with period set to 14)
• Elliot wave indicator (optional).

The best time frames to use for this strategy are time frames that can follow a trend and eliminate the market noise. For this reason, I advocate the use the 4-hour time frame as the lowest time chart to be used. You may use the daily time frame, as well as the weekly time frame.

You do not need to use all the indicators listed above. The beauty of the strategy is that there are variations that match some indicators and not others. For the variation described here, you can use the following:

• non-lag MA nrp (with period set to 9)
• SHI Channel lead indicator
• Donchian channel ATR lead indicator
• Insyinc Index

These are all customized indicators that need to be added to the MT4 indicator folder first before they can be used.

On your MT4 client, click File -> Open Data Folder.
• Within the MT4 data folder, double-click on MQL4 folder -> Indicators subfolder. Copy the indicator files from your computer and paste them into the indicators subfolder.
• Restart the MT4 terminal by closing and opening it again. This reveals the indicators in the Custom Indicators folder.
• Set the period of the ml non lag MA to 9).
Open the Custom indicator folder and add the indicators to the chart by clicking on Insert -> Indicator -> Custom -> selected indicator.


Trading the Strategy


The rule of the thumb here is to trade in the direction of the trend. The SHI Channel indicator showcases the trend. If it points upwards, the price move is an uptrend. If it points downwards, we have a downtrend.


Donchian middle band crossover Strategy For MT4 - Long Trade


It would be best if you looked to go long when:
• SHI Channel indicator is facing upwards.
• Non-lag MA indicator displays an aqua colour.
• The candle or price bar in view closes above the middle band of Donchian channel. This could be a candle which rises from below and (signifying a break of a key level). It could also be a price bar or candle which comes from above and is halted by the middle band of the channel (signifying rejection of a breakdown).
• The Insyindex indicator is above the RSI line (red line).
The snapshot below shows what the long trade setup looks like.



Donchian middle band crossover Strategy For MT4 - Long Trade Setup


On this chart, there are at least two buy signal points. As illustrated using the arrows, the 1st buy point occurred when the price bar broke above the channel’s middle band and closed above it.

At the same time, the non-lag MA indicator was already aqua coloured, and the Insync Index indicator line was located above the RSI line.


Stop Loss & Take Profit Settings


The Stop Loss (SL) is set at a few pips below the low price of the candle that breaks the middle Donchian channel band, while any of the three parameters listed on the chart indicate a good time to exit the long trade.

If the non-lag MA changes colour to red, the Insync Index indicator is overbought (shows a red line close to the +55 area) or price hits a resistance, these are all indicators to close the trade.


Donchian middle band crossover Strategy For MT4 - Short Entry


The short trade setup is taken in a downtrend and can be setup if the following are seen on the chart:
• SHI Channel indicator is facing downwards.
• Non lag ma indicator displays a red colour.
• The candle or price bar in view closes below the middle band of Donchian channel. This could be a candle which drops from above this band and closes below it, or could be coming from below and is rejected at the middle Donchian band.
• The Insync Index indicator is below the RSI line (red line).
The snapshot below shows what the long trade setup looks like.




Donchian middle band crossover Strategy For MT4 - Sell Entry Setup


The short trade parameters are all fulfilled. The non-lag MA is red, and the candle preceding the SELL candle closed below the middle band of the Donchian channel. At the same time, the Insync Index was located below the RSI, enabling a short trade to be taken.


Stop Loss & Take Profit Settings


The stop loss is placed a few pips above the high of the candle which closes below the Donchian channel’s middle band (the trigger candle). The Take Profit (TP) point is set using any of three parameters:
- price is at a prior support level.
- the non-lag MA has changed colour from red to aqua.
- the price bar is at the lower Donchian channel band.

This is how you can deploy this strategy. Practice it on demo before applying to a live account.

Download the complete system description and the files here:

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