Forex Exclusive Strategy For MT4

Forex Exclusive Strategy For MT4

 

Table Of Contents:

  1. Forex Exclusive Strategy For MT4
  2. Indicators Used and Timeframes
  3. Forex Exclusive Strategy For MT4 - Trading Strategy
    1. Long Entry Setup
      1. Forex_Exclusive_2.png
    2. Stop Loss and Take Profit Settings
    3. Short Entry Setup
    4. Stop Loss and Take Profit Settings
  4. Forex Exclusive 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 Forex Exclusive Strategy For MT4 was originally designed to be a contrarian forex strategy when it was created in 2013. However recent evaluations of the performance of this strategy in 2020 have shown that the strategy would work better as a trend-following strategy rather than a contrarian one. For this reason, the discussion of the forex exclusive strategy for MT4 describes its use as a trend-following strategy rather than as a contrarian strategy.

Trend-following strategies aim to detect the trend of the asset so that traders can trade along the trend. The strategy uses moving averages to detect the trend, and then filters the signals using a custom indicator that works like a momentum indicator. The entry signals are delivered by another indicator in the form of colour-coded arrows.


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Indicators Used and Timeframes

 

Several indicators are used to design the forex exclusive strategy for MT4. These indicators are as follows:

 

    1. Moving average, set to a period of 21; 

    2. Moving average, set to a period of 13;

    3. FX Fisher (period-10; Smooth1 - 067; smooth2- 0.50);

    4. Investor2 indicator, which delivers the arrows that point to areas where there is the possibility of the parameters above aligning to produce a tradable setup.



The moving averages used for this strategy are simple moving averages. The trader is at liberty to set whatever colours he or she wants for each moving average. Here, we have used red for the faster moving average (13-period) while a yellow colour has been used for the slower moving average.

The FX Fisher is a custom indicator which is colour-coded. It is a momentum indicator which is equipped with histogram bars and a vertical range. The midline is at point 0.00, with the overbought and oversold areas at 2.0 and -2.0. The signals generated by the FX Fisher are not meant to measure the market extremes as this is not a trend reversal strategy. Rather, the FX Fisher changes colour when the histogram bars cross the midline from top to bottom and vice versa. The colours applied to the FX Fisher are green (cross into positive territory) and red (cross into negative territory). The change in colour provides the indication for the trader on when to buy or sell the currency pair.

The Forex Exclusive Strategy for MT4 can be used on any currency pair. Preferred time frames are the short time frames: M15 and H1 (15-minute and 1-hour charts).

A minimum trading deposit of $100 is required, along with a leverage of 1:50 to 1:1000. The lower the trading capital, the higher the leverage that should be applied.

 

Forex Exclusive Strategy For MT4 - Trading Strategy

 

The Forex Exclusive Strategy for MT4 requires the trader to watch for the cross of the faster moving average (13-SMA) above or below the slower moving average (21-SMA), and to correlate this crossover signal with the cross of the midline by the FX Fisher indicator. These signals are then used to decide if the arrow signal shown by the Investor2 indicator is worth trading or not.

The Investor2 arrows appear very frequently and more often than not, will deliver false signals. It is important for the trader to use the moving average crossover and the FX Fisher’s midline cross to determine which arrow signal is valid or not. There will be a lot of invalid arrow signals and there will also be a lot of losing trades. What makes the difference here is careful selection of signals and also the use of good risk-reward ratios (RRR). A risk-reward ratio of 1:3 (i.e. 3R) will be required to ensure that out of 20 trades, at least 8 trades will be profitable, cancelling out the 12 bad ones that may come up. In other words, an RRR of 3R guarantees that even with a win rate of just 8 out of 20 trades, the trader will remain profitable.

Here are the setups for the forex exclusive strategy for MT4.

 

Long Entry Setup

 

You can set up a long trade if the following conditions are fulfilled on the chart:

 

    • The 13-SMA crosses above the 21-SMA.

 

    • The FX Fisher crosses the midline from the negative to the positive area, and changes colour from red to green in the process.

 

    • The appearance of a blue arrow below the chart AFTER the first two parameters have been confirmed should be the trigger to go long using a market BUY entry.


    • Allow the candle providing the arrow signal to close, then enter the trade at the open of the next candle.



Forex_Exclusive_2.png

 

The snapshot above shows that there are just two valid buy entry setups. The reasons for the non-validity of the other areas where the blue arrows showed up on the charts are all shown. Reasons could be that there was a wrong colour of the FX Fisher, a non-cross of the midline by the FX Fisher or no crossover signal by the moving averages.

If there is a previous crossover very near to the entry arrow, and the FX Fisher has bounced off the midline (when coming from above), the trade may be taken as shown in the second buy setup.

 

Stop Loss and Take Profit Settings

 

Exit parameters in terms of a take profit are as follows:

 

- exit the trade when the opposite arrow appears (not very reliable).

- a hard target, set at 30 pips from entry (better than the first but not always reliable)

- exit the trade when the price approaches a previous resistance, or a previous support that has undergone role reversal (the best method). This method ensures that you actually calculate the risk and reward on the trade prior to trade entry.

Stop loss should be set a few pips below the entry, and if there is a previous support before this level, the SL should be set below this. Always aim for a RRR of 3R.

 

Short Entry Setup

 

You can enter a short trade if the following conditions are fulfilled:

 

    • The 13-SMA crosses below the 21-SMA.

 

    • The FX Fisher crosses the midline from the positive to negative region, changing colour from green to red in the process.


    • The appearance of a red arrow above the price candles or bars AFTER the first two parameters have been confirmed should be the trigger to short the asset at market price.



Stop Loss and Take Profit Settings

 

Set the Stop Loss a few pips above the entry price, and make sure to set it above the closest resistance to the entry level.

 

As indicated above, the best way to set a profit target is to use a previous support as the benchmark for your profitable exit. Set the Take Profit (TP) target just above this level.

 

Forex Exclusive Strategy For MT4 - Conclusion

 

The forex exclusive strategy for MT4 trading system is a trend-following system that is easy to apply. This is also a system that requires a lot of commonsense application of the principles of risk management and an eye to detail. There will be many false signals as the charts show. What makes the difference between ending the trading season with profits or going home with a loss is the application of the risk-reward ratio of at least 3R to each trade.

Download the complete system description and the files here:

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