The forex market is quite peculiar compared to other trading markets. Most trading markets have a large chunk of trading participants being speculators, those who are attempting to profit from the market based on price fluctuations. The forex market however is quite different. Although there are also many speculators trading the forex markets, a big chunk of the transactions is for regular business transactions, which are necessary for international businesses to conduct their day to day operations. When the market is dominated by these transactions, the market tends to chop around without clear direction. However, the forex market also has a strong tendency to trend in many occasions. These are caused by big institutional banks changing their opinion on the economy and thus changing their forex trading portfolio. At times they would stock up on the US Dollar, other times they would shift to the Japanese Yen or Euro. And this happens quite often. But how do we identify these moves?
Huge trends caused by big banks are often unpredictable. However, traders could jump right in on such trends as it starts. One of the best ways to identify the start of a trend is by using technical indicators. Using technical indicators provide traders an insight as to what is happening in the market. It allows traders to identify whether the market is just chopping around or if it is showing signs of a possible trend taking shape.
Guppy Multiple Moving Averages
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The Moving Average is one of the most popular technical indicators. It is widely used due to its simplicity and the fact that it simply works as an indicator. It helps traders logically identify trend direction.
Traders often identify trend direction by looking at the location of price in relation to a moving average. Bullish markets are characterized by rising prices, which coincides with price constantly closing above a moving average. Bearish markets on the other hand are characterized by falling prices, in which price is constantly closing below the average. Some traders use the slope of the moving average to judge whether the market is trending or not. Rising trend momentum tend to steepen the curve of a moving average’s slope.
The moving average is a very useful technical trading tool. It is effective and is logically sound. However, there are many different moving average parameters that could be used to judge the trend. A bullish trend on short period moving average may be the exact opposite of a long period moving average.
The Guppy Multiple Moving Average is a custom technical indicator composed of a band of moving averages. It has a set of short-term moving average and a long-term moving average. The short-term moving average is composed of 3, 5, 8, 10, 12 and 15-period moving averages. The long-term moving averages are composed of 30, 35, 40, 45, 50 and 60-period moving averages. Having multiple moving averages indicating the same trade direction helps traders identify strong momentum price movements which could lead to long-term trends.
Traders often use the crossing over of the short-term and long-term moving average sets to identify trend reversals. Moving averages that fan out are also indicative of a strong trend.
The FX Forecaster is a custom momentum indicator which aids traders in identifying trend direction. It is an oscillating indicator based on the crossover of moving averages, the Oscillator of Moving Averages (OSMA) indicator, and the Fisher Transform indicator. In a way, it is a confluence of multiple indicators. Having this much confluence makes this indicator very efficient in identifying trend direction.
The FX Forecaster has two sets of histograms overlapping each other, one representing the short-term trend and the other for the long-term trend. Having the two positive histogram sets indicate a bullish trend while having both histograms on the negative indicate a bearish trend. Crossovers of both histograms above or below zero could indicate a trend reversal.
To trade this strategy, traders must look for confluences of trend reversal signals indicated by the Guppy Multiple Moving Average and the FX Forecaster indicator.
During non-trending market conditions, the Guppy Multiple Moving Average are characterized by compressed moving average lines. Price action also tend to chop around too much around the area of the long-term trend. However, as the market starts to trend, these lines tend to fan out and price would usually pull away from the long-term trend.
On the FX Forecaster, non-trending markets usually have the histogram bars crisscrossing the midline. These lines also usually have opposing trend direction signals. However, if momentum is strong enough and the market does start to trend, the short-term histogram would usually crossover the midline followed by the long-term trend histogram.
What we would be looking for is a confluence of the crossover of the short-term and long-term Guppy Multiple Moving Averages and the crossover of both histograms of the FX Forecaster indicator.
Timeframe: 1-hour, 4-hour and daily charts
Currency Pairs: preferably major and minor pairs
Trading Session: Tokyo, London and New York sessions
Buy Trade Setup
- Both histograms of the FX Forecaster indicator should cross above zero indicating a bullish trend reversal
- The short-term moving average set of the Guppy Multiple Moving Averages indicator should cross above the long-term moving average set indicating a bullish trend reversal
- The short-term moving averages should start to fan out
- Enter a buy order on the confluence of the conditions above
- Set the stop loss at the support level below the entry candle
- Close the trade as soon as the FX Forecaster indicator shows a negative histogram
Sell Trade Setup
- Both histograms of the FX Forecaster indicator should cross below zero indicating a bearish trend reversal
- The short-term moving average set of the Guppy Multiple Moving Averages indicator should cross below the long-term moving average set indicating a bearish trend reversal
- The short-term moving averages should start to fan out
- Enter a sell order on the confluence of the conditions above
- Set the stop loss at the resistance level above the entry candle
- Close the trade as soon as the FX Forecaster indicator shows a positive histogram
This strategy is one which is aimed at taking trades at the onset of a new trend. If the trend has enough momentum and has consistency in its trend direction, traders could hold on to a trade up until near the end of the trend. However, there will be times when traders are taken out of the trade due to premature reversals of the short-term histograms. Although it is better to stick to the rules in order to protect profits, traders who are more aggressive could judge the trend’s strength based on price action movements and how price behaves as it draws nearer to the long-term moving averages.
Forex Trading Strategies Installation Instructions
Moving Average Forecaster 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.
Moving Average Forecaster 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 Moving Average Forecaster Forex Trading Strategy?
- Download Moving Average Forecaster 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 Moving Average Forecaster Forex Trading Strategy
- You will see Moving Average Forecaster 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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