Many traders are attracted to strategies that would result in a higher win rate and a decent reward-risk ratio rather than strategies with extremely high reward-risk ratios with a win rate that is below 50%. Although both approaches could result in a consistently profitable strategy over the long run, having a high win rate could also mean being consistently profitable in the short-term. This is less taxing on a trader’s psyche because you are on the green on most days. This is what we call high probability trading.
There are two main ingredients for high probability trading. First is trade direction or bias, the other is the trade entry.
Trade direction refers to the general direction which you think price would be moving. Is it going up or is it going down? This would dictate whether you should be looking for buy trades or sell trades.
Trade entry refers to the actual entry signal which should cause you to take the trade at that specific bar. This answers the question, “When should I take the trade?”
The problem with most traders is that they would often disregard the first task which is identifying trade direction and go directly to trade entries. It seems that they are combining trade direction and trade entry into one idea. This causes them to take any trade that the market presents them without regard for trend direction. This gives them a mix of high probability and low probability trade setups, which often results in inconsistent results.
Awesome Chandelier Forex Trading Strategy is a strategy that answers both questions in a systematic manner. It identifies trade direction based on the general trend of the market and identifies specific entry signals using technical indicators.
Table of Contents
Chandelier Stops is a trend following technical indicator which helps traders identify the main trend direction.
There is a school of though in trading that trends could be identified based on the Average True Range (ATR). The theory is that if price reverses a certain distance which is greater than the ATR multiplied by a certain number, then the market is considered to have reversed. Most traders use the multiplier of three.
Chandelier Stops is based on this concept. It identifies trend direction based on price breaching a certain level based on the ATR.
It also plots a line opposite the current trend direction. This is the level which would indicate a probable trend reversal if price reaches it. It then shifts to the opposite side as soon as price breaches and closes beyond the line.
The indicator would plot a blue line below price action if it detects a bullish trend bias and plot a red line above price action if detects a bearish trend bias.
The Awesome Oscillator (AO) is a popular technical indicator used to measure and identify market momentum and trend. It is a simple oscillator based on the Simple Moving Average (SMA).
One of the most popular ways to identify trend direction is by looking at the location of a short-term moving average line in relation to a mid-term or long-term moving average line.
The Awesome Oscillator is based on this concept. It computes for the difference of the 5-bar Simple Moving Average (SMA) and the 34-bar Simple Moving Average (SMA). The result would be positive if the 5 SMA is above the 34 SMA, and negative if the 5 SMA is below the 34 SMA. The 5 SMA line represents the short-term moving average which moves closely with price action, while the 34 SMA represents the mid-term trend.
The Awesome Oscillator would then plot the results as bars. Positive bars indicate a bullish trend, while negative bars indicate a bearish trend. The bars also change color depending on whether the trend is strengthening or weakening. Green positive bars indicate a strengthening bullish trend, while red positive bars indicate a weakening bullish trend. Red negative bars indicate a strengthening bearish trend, while green negative bars indicate a weakening bearish trend.
EMA Crossover Signal
One of the most popular ways to trade the market is through crossovers of moving averages. It is a simple method, yet it is also very effective in identifying momentum or trend reversals. With the right setup, moving average crossovers could be a very effective entry signal if combined with the right indicators and filters.
The EMA Crossover Signal indicator simplifies this process. It is a moving average crossover signal indicator based on the Exponential Moving Average (EMA). The indicator simply plots arrows pointing the direction of the reversal whenever it detects a crossover of its underlying moving average.
This strategy is based on the concept of identifying trade bias based on trend direction and identifying trade entries based on short-term trend reversals.
To identify trade bias, we will be picking forex pairs where the Awesome Oscillator and the Chandelier Stops indicator is in confluence.
On the Awesome Oscillator, the trend bias filter will simply be based on whether the bars are positive or negative. Trend will also be filtered using the Chandelier Stops indicator based on the location of the line. The two indicators should be indicating the same trend direction to confirm the trend bias.
Finally, the entry signal will simply be based on the EMA Crossover Signal indicator plotting an arrow pointing the direction of the trend bias.
- EMA Crossover Signal
- Faster EMA: 5
- Slower EMA: 20
- ChandelierStops_v1 (default setting)
- Awesome (default setting)
Preferred Time Frames: 1-hour, 4-hour and daily charts
Currency Pairs: FX majors, minors and crosses
Trading Sessions: Tokyo, London and New York sessions
Buy Trade Setup
- The Chandelier Stops indicator should plot a blue line below price action.
- The Awesome Oscillator bars should be positive.
- Price action should be in an uptrend.
- Enter a buy order as soon as the EMA Crossover Signal indicator plots an arrow pointing up.
- Set the stop loss on the fractal below the entry candle.
- Set the take profit target at 2x the risk on the stop loss.
- Close the trade if the EMA Crossover Signal indicator plots an arrow pointing down.
Sell Trade Setup
- The Chandelier Stops indicator should plot a red line above price action.
- The Awesome Oscillator bars should be negative.
- Price action should be in a downtrend.
- Enter a sell order as soon as the EMA Crossover Signal indicator plots an arrow pointing down.
- Set the stop loss on the fractal above the entry candle.
- Set the take profit target at 2x the risk on the stop loss.
- Close the trade if the EMA Crossover Signal indicator plots an arrow pointing up.
This strategy works well as a trend following strategy. It produces high probability trade setups because of the confluence of trend direction bias and a specific trade entry signal based on short-term momentum.
It is important to use this strategy only markets that are clearly trending. If the market is showing signs of a probable reversal or if the market is choppy, it is best to avoid trading that currency pair and look for opportunities from other charts.
Forex Trading Strategies Installation Instructions
Awesome Chandelier Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator(s) and template.
The essence of this forex strategy is to transform the accumulated history data and trading signals.
Awesome Chandelier Forex Trading Strategy provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.
Based on this information, traders can assume further price movement and adjust this strategy accordingly.
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How to install Awesome Chandelier Forex Trading Strategy?
- Download Awesome Chandelier Forex Trading Strategy.zip
- *Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
- Copy tpl file (Template) to your Metatrader Directory / templates /
- Start or restart your Metatrader Client
- Select Chart and Timeframe where you want to test your forex strategy
- Right click on your trading chart and hover on “Template”
- Move right to select Awesome Chandelier Forex Trading Strategy
- You will see Awesome Chandelier Forex Trading Strategy is available on your Chart
*Note: Not all forex strategies come with mq4/ex4 files. Some templates are already integrated with the MT4 Indicators from the MetaTrader Platform.
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