PW Trend Forex Strategy For MT4

PW Trend Forex Strategy For MT4

 

Table Of Contents:

  1. PW Trend Forex Strategy For MT4
  2. Indicators Used and Chart Setup
  3. The PW Trend Forex Strategy For MT4
    1. 1) Long Trade with the PW Trend Forex Strategy For MT4
  4. Stop Loss & Take Profit Settings
    1. 2) Short Entry with the PW Trend Forex Strategy For MT4
  5. Stop Loss & Take Profit Settings

 

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 PW Trend Forex Strategy For MT4 is another trend-following strategy that is built specifically for the EURUSD currency pair and used on a short-term time chart.

This strategy is one strategy that combines both a trend indicator and a momentum indicator which displays the extremes of price action.

The PW Trend Forex Strategy is used for trading price reversals since the trades are created from price reversals at the heights or depths of the trend.

 

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Indicators Used and Chart Setup


This strategy uses two custom indicators. These are:

  • PW Trend indicator

  • i-Sadukey indicator

 

The time frame for which the strategy has been optimized is the 15-minute time frame. The developer of the system did not indicate if it works on other time frames or other currencies or assets apart from the EURUSD.

The strategy has also not been backtested against different time frames. So the 15-minute time frame will be used to describe the strategy parameters.

Indicators on the EURUSD 15-min Chart:



The PW trend indicator functions as a momentum indicator/oscillator. It has a vertical range like all the momentum indicators.

But unlike most oscillators, the range of the PW trend indicator extends from 0 to 31. The oversold area is found between 0 and 4 while the overbought area is located between 27 and 31.

The i-Sadukey indicator is the trend following indicator which tracks the price action. This indicator indicates a short-term trend reversal with a colour change. The colour of the indicator bars changes to blue when the asset is rising from oversold levels. The colour changes to red if the price is descending from an overbought level.

These two indicators must work in tandem to produce suitable signals. The chart examples below indicate how these two indicators can be made to work in tandem with each other to create alerts that have a good degree of accuracy. Let us see how the strategy is deployed.

The PW Trend Forex Strategy For MT4

Care must be taken when using the PW trend indicator. This is because the indicator line may remain in the oversold or overbought area for some time before emerging out of that zone to produce the reversal signal that triggers can use. So patience is required. Do not merely take trades when the PW trend indicator has just hit the overbought or oversold regions of its window.

1) Long Trade with the PW Trend Forex Strategy For MT4

Here are the parameters for the long trade:

  1. PW trend indicator has started to leave the oversold area (i.e. from 0-4) in an upward direction.

  2. The i_Sadukey_V1 indicator has changed colour to red.

  3. Allow the candle to close when the first two conditions have been met.

  4. Go long at the open price of the next candle.

 

In other words, the leading indicator is the PW trend indicator. It must have entered the oversold area and has started to emerge from that area in an upward move. When the i_Sadukey_V1 indicator changes colour, allow the candle to close with the new colour showing on this indicator, so you do not have a repaint situation. It is only when this candle has closed, and the first two conditions are met, that you can open a Buy trade at the open price of the next candle.

This is what the buy trade setup looks like:




Here, we can see that the PW trend had left the oversold area on the chart, but the signal from the i_Sadukey_V1 indicator took a few candles to form. The Buy point is the open price of the candle which has formed after there has been a previous candle that closed with a red coloured i_Sadukey_V1 indicator bar.

Stop Loss & Take Profit Settings

Set your Stop Loss (SL) below the lows of the candles that precede your buy candle. Use a previous resistance as your potential Take Profit target. In any case, you should aim for a TP that is at least three times your stop loss, which translates to a 3R risk-reward ratio. Using this ratio, you are guaranteed profit even if you lose 12 out of 20 trades in a month, assuming all trade sizes are the same for all transactions.

2) Short Entry with the PW Trend Forex Strategy For MT4

Here are the parameters for the long trade:

  1. PW trend indicator is emerging from the overbought area (i.e. from 27-31) in a downward direction.

  2. The i_Sadukey_V1 indicator has changed colour to blue.

  3.  Let the candle close when the first two conditions have been met, then initiate a short trade at the open price of the next candle.

 

The PW trend indicator leads the price action. It needs to have been in the overbought area, before emerging from there and moving upwards. When the i_Sadukey_V1 indicator changes colour to blue, allow the candle to close with the new colour showing on this indicator.

Only when this candle has closed, along with the first two conditions being met, can you open a short order. This short order has to use the open price of the next candle as the entry price.

This snapshot shows what the short trade setup looks like:




Here, we can see that the two setups fulfilled these conditions. PW trend was in the overbought territory very briefly before it started to turn downward. The sell entry point is the open price of that candle which has formed after there has been a previous candle that closed with a blue coloured i_Sadukey_V1 indicator bar.

Stop Loss & Take Profit Settings


Set your Stop Loss (SL) above the highs of the candles that precede your sell candle. In this setup, the parameters for setting the Take Profit target changed. Here, you can use two criteria:

  • The PW trend indicator ends up in the oversold area. This is a sign that the market drop will soon be over and you should quit any short positions.

  •  If the i_Sadukey_V1 indicator bars change colour to red, you should also consider exiting your positions.

 

As much as possible, try to aim for a risk-reward ratio of 1:3, to give you a solid cushion as you move ahead.

 

Download the complete system description and the files here:

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