The Secret Trend Trading System For MT4
Table Of Contents:
- The Secret Trend Trading System For MT4
- Indicators Used and Time Frames
- The Secret Trend Trading System For MT4 - Trading Strategy
- Long Trade
- Short Trade
- 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 Secret Trend Trading System For MT4 is a swing trend-following strategy, which is based on the retracement trading method.
Retracements are also known as countertrends. Retracements occur very commonly and are a consequence of the forces of demand and supply at work on any given asset. These trend-retracement-trend moves are captured by the Dow Theory of price action. This theory recognizes price movements as occurring like the ebbs and flows that occur with the wave actions of an ocean. Retracements are like the periods when the waves of the ocean are ebbing. Each period of flowing and ebbing of an ocean are repetitive and follow each other in sequence.
In applying this to the forex market, we see that anytime price moves strongly in the direction of the trend, this is followed by a period when prices pull back or retrace. These retracements are periods when the entities that have driven prices strongly decide to take profits. For instance, buyers who have created an uptrend will take profits at some point, allowing prices to reverse to a level where other market players who are out of the market will find them cheap enough to start buying again. Therefore, prices will resume the direction of the trend following a retracement period.
Indicators Used and Time Frames
The time frame used for this strategy is the 4H or daily time frame. This is because the 4-hour and daily charts are representative of the short-term trends of an asset recognized by the Dow Theory. Any other shorter time frame is more indicative of market noise and is therefore not considered a good measure of the trend by the Dow Theory, which defined the retracement principles.
The Secret Trend Trading System can be used in any market. The strategy uses the following indicators:
- SFX MLC (5,6,2,0)
- CM Indicator
- The Secret Trend indicator
- FXST3 CCI indicator (14,4).
The CM Indicator and FXST3 CCI indicator are momentum indicators which present vertical bars
and histogram bars (FXST3 CCI) that indicate the momentum of the asset based on a midline cross and a colour change.
The Secret Trend Reversal indicator shows colour changes that correspond to periods when the retracement of price on the trend indicator is complete and traders have started to make re-entry signals.
The SFX MLC indicator is a trend indicator which points towards the trend of the asset. This is where the retracement seen on the price chart is first detected.
The Secret Trend Trading System For MT4 - Trading Strategy
The strategy is very easy. On the price chart, you need to watch for the time that the price candles cross above or below the trend indicator. After moving for some time in the new direction so that there is some distance between the price and the indicator lines, you will start to see a retracement. The retracement is in the form of the price bars or candles narrowing the distance between them and the indicator lines to the point where there is contact between both. At the same time, the momentum indicators will show colour changes. There has to be a synchrony between the colours on the indicators in order to produce a trading signal.
Long Trade
The long trade setup is as follows:
- The SFX MLC indicator line which is pink in colour is higher than the dodger blue line.
- The FXST3 CCI indicator is showing green bars.
- The CM indicator is also showing green bars, and is crossing from the negative part of the vertical range (lower half) to the positive part of the vertical range (upper half).
- The Secret Trend Reversal Indicator is showing dots of a dodger blue colour.
Allow the price to retrace to the pink line of the SFX MLC indicator, then open the trade when the active candle touches off the pink line.
Secret_trend_trading_system_2: long entry
The chart shows the long trade setup on the 4-hour chart of the USDCHF pair. There are a number of things that you need to look for. Note that there were actually three long trade signals according to the trend-following indicator. However, only one of these signals was valid. Let us start with the first signal. Note that the pink line had crossed the dodger blue line at least nine candles earlier, showing that the signal appeared 36 hours before the pullback occurred.
This is actually too long. Ideally the pullback should occur within the first three to four candles. Also look at the FXST3 CCI indicator. You will notice that the amplitude of the histogram was actually declining at this point, showing that buying momentum on the assets was already drying up. Ideally, you should aim to take a long trade within the first five histogram bars of this indicator, irrespective of what the other momentum indicators are saying.
Also take a look at the third setup shown by the trend indicator. Notice that the first two candles before the pullback were actually pinbar candles. These candles are indicative of a trend reversal and not a pullback. This was the first warning sign that the trend was already exhausted. The second warning sign was that the amplitude of the histogram bars of the FXST3 CCI indicator was also declining, just as was the case with the first signal. This is why it was not surprising to see that the trade immediately started failing once the signal was generated.
In contrast, the second signal went perfectly. The signal occurred within the first five histogram bars of the FXST3 CCI indicator. and the pullback occurred within the first six candles. The other signals on the momentum indicators all aligned at the same time, allowing the trade to perform as expected.
Stop Loss and Take Profit Settings
For the Stop Loss, you should be able to set the stop loss below the lows of the candles that are located around the point where the pink line crossed above the dodger blue line of the trend indicator.
The risk-reward ratio for this trade should be a minimum of 1: 3 on the daily chart, and 1:2 on the 4-hour chart. You should aim to set the TP at an area where a previous resistance is found, on the condition that the distance from the entry price to this point should be at least two times the stop-loss on the 4-hour chart or at least three times a stop-loss on the daily chart. Where this is not possible, make sure that you move your stop loss to the entry price (break even point) when the trade has made some profits, and you can use a trailing stop to chase the unrealized profits already existing on the active position. You may also decide to close the trade manually if the reverse signals (i.e. signals for a short trade) start to appear on the chart, or if candlestick patterns that indicate price reversals start to show up on the charts. For the trade example used, you can see that the pinbars on the chart proved to be a good exit signal for the valid trade signal.
Short Trade
The short trade setup is as follows:
- The SFX MLC indicator line which is pink in colour has crossed below the dodger blue line and now lies below it.
- The FXST3 CCI indicator is showing red bars.
- The CM indicator is also showing red bars, and is crossing from the negative part of the vertical range (lower half) to the positive part of the vertical range (upper half).
- The Secret Trend Reversal Indicator is showing red dots.
Allow the price to retrace up to the pink line of the SFX MLC indicator, then open the short trade when the candle touches off the pink line.
Secret_trend_trading_system_3: short entry
Only one short trade signal of notes appeared on the chart and it aligned perfectly for the short straight to be taken. Note that the signal appeared at a time when the FXST3 CCI indicator was just coming off the midline in a lower direction, and the signal occurred within the first 5 histogram bars that were declining in the short trade’s direction, which is good.
Stop Loss and Take Profit Settings
The stop loss settings follow the same principle. Set the SL above the highs of the candle around the point where the pink line crosses below the dodger blue line of the trend indicator.
The Take Profit setting follows the same principles outlined above. If you wish to have the TP executed automatically, you should set this a few pips above a previous support. If you wish to exit the trade in profit manually, close the trade when the reverse signals appear on the oscillators, or when the moving average lines of the trend indicator change position. You can also exit the trade when bullish reversal pinbars appear on the chart.
Conclusion
The Secret Trend Trading Strategy for MT4 is dependent on identifying the retracement of the price bars and candles on the faster line of the SFX MLC indicator, which functions as a double moving average. The signals must be supported by the momentum indicators, and entries must be done as early as is possible. If the signals show up late despite all the parameters aligning, the trade setup should be ignored and the next best setup sought.
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