Price charts are often a cluttered mess. This is especially true for new traders. New traders would look at chart and would often feel flustered not knowing how to make sense of what the chart is showing.
While it is true that most tradeable market is a chaotic confusion of price movements and that the forex market is one of the most volatile and unpredictable market, there are many instances wherein the price chart is showing clear signals regarding what it wants to do. Traders who can read what the market is about to do are the ones who can consistently earn profits from the forex market.
So, how do we make sense of an otherwise confusing price chart? New traders may find it difficult to decipher what the market is doing on a naked price chart. New traders can make use of technical indicators to help them see clearly what the market is doing. The right combination of complementary technical indicators can mean the difference between having no clue regarding market movements and making sense of what the market might probably do. Indicators do not give the exact answer as to what future prices would be, but it provides traders some clues.
Some indicators help traders identify trend direction. Some indicators help traders identify overbought and oversold market prices. Some indicators give traders a clue if the market is about to reverse. A good mix of such indicators can help traders identify trade direction and potential trade setups.
Fast Signals is a custom technical indicator which helps traders identify potential mean reversal signals based on reversals coming from extreme price points.
The Fast Signals indicator plots two dotted lines that forms a channel like structure, which would usually envelope price action. The lower line is a blue dotted line which acts as a dynamic support. The upper line is a red dotted line which acts as a dynamic resistance line.
Price tends to push towards the extremes. This would cause price to cross beyond the range of the channel. The market can be considered overbought if price crosses above the upper line of the channel. The market can also be considered oversold if price crosses below the lower line of the channel.
However, price would typically reverse towards its mean after being overbought or oversold. The Fast Signals indicator plots an arrow pointing the direction of a reversal whenever it detects a potential mean reversal. These arrows can serve as an entry signal for mean reversal setups.
The Stochastic Oscillator is a classic momentum technical indicator which many traders use. It detects momentum, trend and overbought or oversold price conditions.
The Stochastic Oscillator plots two lines derived from historical price movements. These lines oscillate within the range of 0 to 100.
Trend or momentum can be identified based on how the two stochastic lines overlap. Momentum is bullish if the faster line is above the slower line. Momentum is bearish if the faster line is below the slower line. Crossovers between the two lines are considered as a reversal signal.
The Stochastic Oscillator range also typically has markers at level 20 and 80. These levels indicate price extremes. Stochastic lines dropping below 20 indicate a mathematically oversold market. Stochastic lines breaching above 80 indicate a mathematically overbought market. Crossovers occurring in these areas could indicate a high probability of a potential mean reversal.
Fast Signal Mean Trend Forex Trading Strategy is a mean reversal strategy which isolates trades which agree with the direction of the long-term trend.
The direction of the long-term trend is identified based the 100-period Exponential Moving Average (EMA) line. This is based on the location of price action in relation to the 100 EMA line, as well as the slope of the 100 EMA line. Trend direction should also be visually confirmed based on the swing points of price action. Trade setups should only be taken in the direction of the long-term trend.
The Fast Signals channel would serve as a marker to help us identify overbought or oversold price candles on the price chart. Overbought and oversold prices should then be confirmed by the Stochastic Oscillator.
As price starts to revert back to its mean, the Fast Trend indicator should plot an arrow pointing the direction of the reversal. This should then be followed by the crossing over of the Stochastic Oscillator lines coming from an overbought or oversold level.
- 100 EMA
- Stochastic Oscillator
Preferred Time Frames: 30-minute, 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
- Price action should be above the 100 EMA line.
- Price action should be in an uptrend.
- The 100 EMA line should slope up.
- The Fast Signals channel should slope up.
- Price should pull back below the dotted blue line.
- The Stochastic Oscillator lines should drop below 20.
- The Fast Signals indicator should plot an arrow pointing up.
- Enter a buy order as soon as the faster line of the Stochastic Oscillator crosses above the slower line.
- Set the stop loss on the support below the entry candle.
- Close the trade as soon as the Fast Signals indicator plots an arrow pointing down.
Sell Trade Setup
- Price action should be below the 100 EMA line.
- Price action should be in a downtrend.
- The 100 EMA line should slope down.
- The Fast Signals channel should slope down.
- Price should pull back above the dotted red line.
- The Stochastic Oscillator lines should breach above 80.
- The Fast Signals indicator should plot an arrow pointing down.
- Enter a sell order as soon as the faster line of the Stochastic Oscillator crosses below the slower line.
- Set the stop loss on the resistance above the entry candle.
- Close the trade as soon as the Fast Signals indicator plots an arrow pointing up.
This strategy is a good mean reversal strategy.
Although this strategy is not perfect, it does produce trade setups with a decent combination of good win rates and risk-reward ratios.
This strategy has the potential to produce consistent profits when used in the right market condition.
Forex Trading Strategies Installation Instructions
This 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.
This 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 this Forex Strategy?
- Download the zip file
- *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 this strategy
- You will see the strategy setup 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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