Money Flow ADX Trend Forex Trading Strategy

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Money Flow ADX Trend Forex Trading Strategy

Traders dabble in the forex market for one reason, profits. Traders who trade in any market look for profits. Forex trading in particular is one of the markets that present so much opportunities. The sheer size of the market means that there is enough volatility and volume to move the market, and with volatility comes opportunities. The forex market is also a worldwide market which is open more than five days a week, as long as there is an economy open which trades with such currencies. This means that opportunities are available at any time of the day. Also, the forex market allows for high leverages, which in the right hands allows traders to quickly multiply their earnings if used properly.

Opportunities are present in the forex market. The question is where do we find them?

One of the best market conditions that present so much trading opportunities with high potential returns are trending markets and momentum-based reversals. Trending markets make it easier to anticipate which direction the market is moving. Momentum allows traders to trade setups with a very high probability that price would move strongly in a certain direction.

Traders who can find confluences between trend and momentum indications stand to earn huge profits from the market as long as they know how to trade during such market conditions.

Money Flow Index

The Money Flow Index (MFI) is a classic technical indicator which is of the oscillator type of indicators. It is widely available in most trading platforms and is easily accessible to most traders.

The MFI is an oscillator, much like the Relative Strength Index (RSI), which also mimics the movement of price action and helps in identifying trend direction, as well as overbought or oversold price conditions.

However, the MFI puts more emphasis on volume along with historical price movements. In a way, the MFI can be considered as a volume-weighted RSI.

The MFI plots a line that oscillates within the range of 0 to 100. It also typically has markers at level 20 and 80. Many traders identify oversold markets based on the MFI line dropping below 20, and overbought markets based on the MFI line breaching above 80. Some traders however consider these levels to be 10 and 90.

Some traders also add level 50 as it is the median of the range. Some would consider the trend bias to be bullish if the MFI line tends to stay above 50, and bearish if the MFI line stays below 50.

Slope Direction Line

The Slope Direction Line (SDL) is a trend following indicator which is based on moving averages. In fact, the Slope Direction Line is in itself a modified moving average.

One of the best ways traders objectively identify trends is based on the location of price action in relation to the moving average line, as well as the slope of the moving average line.

Crossovers between price action and a moving average line is a common trend reversal signal. Reversals could also be identified based on the shifting of the slope of a moving average line. However, most moving averages tend to be too erratic, making them susceptible to false signals.

The Slope Direction Line attempts to decrease such false signals by modifying its computation in order to smoothen out the response of the line. This makes the line more resilient to erratic price changes.

This version of the Slope Direction Line also changes color depending on the direction of the trend it detects. A light blue line indicates a bullish trend bias, while a tomato line indicates a bearish trend bias.

ADX Candles

The ADX Candles is a custom trend following indicator which indicates trend directions based on the Average Directional Movement Index (ADX).

The ADX Candles indicator overlays price bars over the existing price bars. It plots the same highs and lows. The only difference is that the colors of the candles change only when the ADX Candles indicator detects a change in trend direction or momentum based on its underlying ADX computations.

Dark green bars indicate a bullish trend, while lime bars indicate a bullish trend with a strong momentum. Maroon bars indicate a bearish trend, while red bars indicate a bearish trend with strong momentum.

Trading Strategy

Money Flow ADX Trend Forex Trading Strategy is a combination of a trend following strategy and a momentum strategy using the above-mentioned technical indicators.

First, trades are filtered based on the long-term trend. The long-term trend is identified based on the location of price action in relation to the 200 SMA line, as well as its slope.

Trend reversal signals are confirmed based on the changing of the color of the Slope Direction Line and confirmed by the crossing of the MFI line over its median.

Trend and momentum are then confirmed based on the color of the ADX Candles.

Indicators:

  • ADX Candles
    • ADX Period: 24
  • Big Trend
  • Money Flow Index
    • Period: 22

Preferred Time Frames: 30-minute, 1-hour and 4-hour charts

Currency Pairs: FX majors, minors and crosses

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • Price action should be above the 200 SMA line.
  • The Slope Direction Line should change to light blue.
  • The MFI line should cross above 50.
  • The ADX Candles should change to lime.
  • Enter a buy order on the confirmation of these conditions.

Stop Loss

  • Set the stop loss on a support below the entry candle.

Exit

  • Close the trade as soon as the ADX Candles change to maroon or red.
  • Close the trade as soon as the Slope Direction Line changes to tomato.

Money Flow ADX Trend Forex Trading Strategy

Money Flow ADX Trend Forex Trading Strategy 2

Sell Trade Setup

Entry

  • Price action should be below the 200 SMA line.
  • The Slope Direction Line should change to tomato.
  • The MFI line should cross below 50.
  • The ADX Candles should change to red.
  • Enter a sell order on the confirmation of these conditions.

Stop Loss

  • Set the stop loss on a resistance above the entry candle.

Exit

  • Close the trade as soon as the ADX Candles change to dark green or lime.
  • Close the trade as soon as the Slope Direction Line changes to light blue.

Money Flow ADX Trend Forex Trading Strategy 3

Money Flow ADX Trend Forex Trading Strategy 4

Conclusion

This trading strategy is a workable trend following strategy which is combined with momentum indications.

Although this strategy is not as high probability as many trend following strategies, it does manage to produce high yielding trades that could make or break a trading account.

Traders can make use of this type of strategy to earn some profits over the long run.


Forex Trading Strategies Installation Instructions

Money Flow ADX Trend 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.

Money Flow ADX Trend 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 Money Flow ADX Trend Forex Trading Strategy?

  • Download Money Flow ADX Trend 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 Money Flow ADX Trend Forex Trading Strategy
  • You will see Money Flow ADX Trend 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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