Traders are often drawn to trading because of the perceived ease of making money. Newbies would often hear of traders doubling their accounts in just a few months. Some could start with a few thousand dollars, grow their accounts and make a fortune. These stories are what usually draws people to trading the forex markets. But are these stories really true. For sure, there are real traders who could do that and have done that. However, there are also traders who lost their fortunes trying to do that. What traders should first aim for is to be profitable. This is the first step to making lots of money in forex trading.
So, how do we become profitable and start growing our accounts exponentially? First, we must learn to trade in a way wherein we either win more often than we lose, or we win bigger than what we are losing. This pertains to having a good win rate, a good risk-reward ratio or a combination of both. Each has its own advantages and disadvantages, and each has its own techniques to grow an account consistently and exponentially.
Big Time Cross Forex Trading Strategy is a strategy which allows traders to grow their account exponentially through high reward-risk ratios. This strategy can provide setups which have reward-risk ratios that are 5:1 or even higher. It uses a confluence of a long-term crossover setup, momentum and trend indications.
Fratelli MACD
Fratelli MACD or BB MACD is a custom indicator which is based on the classic Moving Average Convergence and Divergence (MACD).
The classic MACD is an oscillator which provides indications using the crossing over of two moving average lines. It identifies the difference between two moving average lines and plots it as an oscillating line on a separate window. It then plots another trailing line which is a moving average derived from the difference between the prior two moving averages. Trend direction and trend reversals are identified based on the crossing over of the two oscillating lines. The location of the two lines in relation to the midline of the MACD also play a role with regards to the probability of the trend reversing.
BB MACD is still much like the standard MACD. However, it also incorporates standard deviations within its formula. This creates a MACD which is smoothened out providing traders a reliable signal.
The BB MACD indicates trend direction by plotting dots on its own oscillator window. These dots represent the difference between the two oscillating lines. Positive lime dots indicate a bullish trend, while negative magenta dots indicate a bearish trend.
Momentum Indicator
The Momentum indicator is a technical indicator which provides information regarding the current direction of price action based on the relationship between the current price and historical price movements. It is a simple mathematical equation which identifies the difference between current price and the price n-periods ago, where “n” is the number of periods prior to the current candle.
The Momentum indicator is an oscillator that displays a line oscillating around zero. Positive momentum indicates a bullish momentum bias, while negative momentum indicates a bearish momentum bias. Crossovers of the momentum line above or below zero indicates a momentum reversal.
Trading Strategy
This trading strategy is a simple crossover strategy which identifies confluences with the Fratelli MACD and the Momentum oscillator. The two indicators act as an initial filter of a possible trend reversal, while the crossover acts as the actual trend reversal signal.
First, on the Fratelli MACD indicator, the dots should shift to positive or negative and change colors depending on the direction of the trend.
The Momentum indicator will also be applied on the Fratelli MACD window. The Momentum indicator line should also cross above or below zero depending on the direction of the trend.
The moving average lines used for the crossover signal will be the 5-period and 100-period Exponential Moving Average (EMA). The 5 EMA line should cross the 100 EMA line in the direction previously indicated by the other two indicators. Confluences between these signals will be qualified as a trend reversal entry.
Indicators:
- 5 EMA
- 100 EMA
- Fratell_MACD
- Momentum
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
Entry
- The Momentum oscillator line should cross above zero.
- The Fratelli MACD dots should cross above zero and change to lime.
- The 5 EMA line should cross above the 100 EMA line.
- Enter a buy order on the confluence of these conditions.
Stop Loss
- Set the stop loss on the support level below the entry candle.
Exit
- Close the trade as soon as the Fratelli MACD dots cross below zero and change to magenta.
Sell Trade Setup
Entry
- The Momentum oscillator line should cross below zero.
- The Fratelli MACD dots should cross below zero and change to magenta.
- The 5 EMA line should cross below the 100 EMA line.
- Enter a sell order on the confluence of these conditions.
Stop Loss
- Set the stop loss on the resistance level above the entry candle.
Exit
- Close the trade as soon as the Fratelli MACD dots cross above zero and change to lime.
Conclusion
This trading strategy is a working crossover strategy which provides setups that have a decent win probability and an excellent risk reward ratio.
If managed well, this strategy could give traders a good win rate with few losses. Managing the trade with this setup simply means moving the stop loss to breakeven when possible and trailing the stop loss to protect profits.
Where this strategy shine is with its excellent risk-reward ratio. Traders can potentially earn yields which 4x, 5x or even up to 10x the risk placed on the stop loss. Traders who can catch such trades can see their equity curve jump drastically from time to time, allowing them to be extremely profitable over the long run.
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