Trading is a numbers game. There will be some winning and losing trades. This will always be a part of trading. However, in order to succeed in trading, traders must learn how to find trade setups that has a higher probability of being profitable. As soon as a trader would learn to identify high probability trade setups and filter out trade setups that have a low probability of success, a trader could already be a step towards the right direction in his or her trading career.
The Fisher Parabolic Forex Trading Strategy is a high probability trading strategy that allows traders to filter out trades that are of low probability and take trades that are only of high quality.
The Fisher Indicator
Table of Contents
- 1 The Fisher Indicator
- 2 Parabolic M Indicator
- 3 Trading Strategy Concept
- 4 Conclusion
The Fisher custom indicator used in this trading strategy is based on John Ehler’s Inverse Fisher Transform indicator. It is a probability based oscillating indicator which plots histogram bars on its own window.
The idea behind the Fisher indicator is that price movement is not an equal probability scenario. Price would always be biased to move towards a certain direction. If you have been trading for quite some time, you would know that during trending market conditions, price has a tendency to move towards the direction of the trend. On the other hand, during an overbought or oversold market condition, there is also a high probability that price may reverse. This is the very reason why we are trading, because we understand that the market is predictable to a certain degree and that money could be made out of that predictability.
The Fisher Indicator predicts price direction based on the trend. It does this by printing lime histogram bars when it detects a bullish bias and red bars when it detects a bearish bias.
Parabolic M Indicator
The Parabolic M custom indicator is a modified version of the Parabolic SAR indicator. It is a trend following indicator which is based on the highest highs and lowest lows of a trend.
The Parabolic M indicator places dots on the price chart to indicate the direction of the trend. If the dots are below the price candles, then the trend is considered bullish. On the other hand, if the dots are above the price candles, then the trend is considered bearish.
This feature is also very useful for traders as the dots also represent the point of no return for a trend. If price reaches and breaks through the level of the dots, the trend is usually considered to have reversed. For this reason, the dots on the Parabolic M indicator could also be used as a stop loss level or even as a trailing stop loss for trade management.
Trading Strategy Concept
The Fisher Parabolic Forex Trading Strategy makes use of the accuracy of the Fisher Indicator in determining trend direction. More often than not, during an established trend, the Fisher Indicator would clearly indicate the right trend direction and price would usually move towards that direction.
Markets should be filtered based on whether the Fisher Indicator is showing an established trend direction. This is characterized by having a histogram bars having the same color for quite some time.
Then, as soon as we find currency pairs that have been trending based on the Fisher Indicator, we will wait for a slight retrace, which would cause the Parabolic M indicator to reverse temporarily. Then, as soon as the Parabolic M indicator would resume the trend indicated by the Fisher Indicator, we take the trade on the direction of the trend.
- Range Periods: 36
Timeframe: 1-hour, 4-hour and daily charts
Currency Pair: major and minor pairs
Trading Session: Tokyo, London and New York sessions
Buy (Long) Trade Setup
- The Fisher Indicator should be printing positive lime histogram bars for quite some time indicating an established bullish market condition
- Wait for the price to retrace on the shorter-term which would cause the ParabolicM indicator to print a dot above price
- Enter a buy order as soon as the ParabolicM indicator prints a dot below price indicating that the bullish trend has resumed
- Set the stop loss a few pips below the ParabolicM dot
- Close the trade as soon as the ParabolicM indicator prints a dot above price indicating a possible end to the trend
Sell (Short) Trade Setup
- The Fisher Indicator should be printing negative red histogram bars for quite some time indicating an established bearish market condition
- Wait for the price to retrace on the shorter-term which would cause the ParabolicM indicator to print a dot below price
- Enter a sell order as soon as the ParabolicM indicator prints a dot above price indicating that the bullish trend has resumed
- Set the stop loss a few pips above the ParabolicM dot
- Close the trade as soon as the ParabolicM indicator prints a dot below price indicating a possible end to the trend
This strategy is a high probability strategy that allows traders to consistently make money out of the market. The key to this strategy is to be able to identify established trends using the Fisher custom indicator. This would generally result in a profitable trade more often than not.
In a trending market condition, price would usually retrace for about three times, sometimes even more. This means that there would be as much opportunities every time the market trends, with only the last one being a losing trade. This is a very profitable proposition. As long as you get a hang of identifying trending markets and using this strategy on the right context, you should be profitable.
Forex Trading Strategies Installation Instructions
Fisher Parabolic 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.
Fisher Parabolic 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 Fisher Parabolic Forex Trading Strategy?
- Download Fisher Parabolic 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 Fisher Parabolic Forex Trading Strategy
- You will see Fisher Parabolic 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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