Parabolic Fisher Trend Forex Trading Strategy

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Parabolic Fisher Trend Forex Trading Strategy

Traders often look for trading strategies that trade on a confluence of trend reversal indications coming from various indicators. Some strategies have a combination of an oscillator and a moving average crossover, others use an oscillator and an entry signal indicator, others use a combination of oscillators, and the list goes one. Some traders use two indicators, others use three, while others use even more indicators.

Any combination of indicators could be beneficial as long as the indicators are complementary. This means that the indicators work well together in determining entries based on trend reversals. They often produce signals at almost the same time or at least whenever the trend reversal signal has a strong momentum.

However, there are also other ways to trade using technical indicators. While most traders look for confluences of a trend reversal signal, it is also possible to profit from the market by taking trades wherein one indicator is intended to filter for the trend while the others are used to determine trade entries.

Parabolic Fisher Trend Forex Trading Strategy is a trading strategy which uses an oscillating indicator to identify trend direction and a modified Parabolic SAR indicator to identify trade entries. This strategy trades on established long-term trends and takes entry signals on short-term trend reversals.

Parabolic Close

Parabolic Close is a custom momentum indicator based on the Parabolic Stop and Reverse (PSAR).

PSAR was developed to identify short-term momentum price movements in a trading asset or a forex pair. The classic PSAR then plots dots on the chart indicating the direction of the trend. Dots are placed a certain distance above or below price. Dots that are plotted below price indicate a bullish trend bias, while dots that are plotted above price indicate a bearish trend bias. The same dots could also be used to identify logical stop loss points. At these points, a trade would be invalidated if the trade is based on the short-term momentum.

Parabolic Close is somehow similar to the classic PSAR. The difference is that instead of being plotted on the price chart as dots, it is plotted as a line. The line then crosses over price strongly whenever it detects a trend reversal. This indicator also shares a lot of similarities with a moving average indicator. The difference is that it quickly shifts above or below price whenever it detects a trend reversal.

Fisher Indicator

The Fisher indicator is a momentum indicator that converts prices into a Gaussian normal distribution.

Price closes, which are not normally distributed, are converted into a normal distribution, which allows traders to visually identify peaks and troughs of price movements based on the Fisher indicator.

This information is useful for many reasons. Traders may use it to identify swing points as well as potential reversal points. It could also help identify and confirm trend reversals.

The Fisher indicator is plotted as a histogram that could produce positive or negative figures. Positive bars are lime and indicate a bullish trend. Negative bars on the other hand are red and indicate a bearish trend.

Trading Strategy

This trading strategy aligns the long-term trend and the short-term momentum to produce high probability trade entries.

The Fisher indicator is used to identify the mid- to long-term trend. In a trending market, the color of the bars would remain the same for quite some time. This means that the bars would be lime for quite some time during a bullish trend, and red during a bearish trend.

Trades are then filtered based on the direction of the trend as indicated on the Fisher indicator.

Price is then observed as it moves during such trend. If the market is still showing signs of a trend in place, then we would be taking trades in the direction of the trend.

Trade entries are based on the crossover of the Parabolic Close line and a 24-period Exponential Moving Average (EMA). The 24 EMA would serve as the faster line, while the Parabolic Close line will serve as the signal line. Trades are taken as soon as the 24 EMA line crosses the Parabolic Close line.

Indicators:

  • Fisher
    • Period: 50
  • 24 EMA (green line)
  • Parabolic-close (default setting)

Preferred Time Frames: 1-hour and 4-hour charts

Currency Pairs: major and minor pairs

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • The Fisher indicator should be printing lime bars.
  • Price action should be constantly making new highs.
  • The 24 EMA line (green) should be above the Parabolic Close line (blue).
  • Price should retrace or contract causing the Parabolic Close line to cross above the 24 EMA line temporarily.
  • Enter a buy order as soon as the Parabolic Close line crosses below the 24 EMA line.

Stop Loss

  • Set the stop loss on the fractal below the entry candle.

Exit

  • Close the trade as soon as the Parabolic Close line crosses above the 24 EMA line.

Parabolic Fisher Trend Forex Trading Strategy

Parabolic Fisher Trend Forex Trading Strategy 2

Sell Trade Setup

Entry

  • The Fisher indicator should be printing red bars.
  • Price action should be constantly making new lows.
  • The 24 EMA line (green) should be below the Parabolic Close line (blue).
  • Price should retrace or contract causing the Parabolic Close line to cross below the 24 EMA line temporarily.
  • Enter a sell order as soon as the Parabolic Close line crosses above the 24 EMA line.

Stop Loss

  • Set the stop loss on the fractal above the entry candle.

Exit

  • Close the trade as soon as the Parabolic Close line crosses below the 24 EMA line.

Conclusion

This trading strategy is a very good trading strategy to use during a trending market condition.

To trade this strategy successfully, traders should learn to identify trending markets based on the behavior of price action. If a trend is identified, then traders could wait for possible trade entries based on the rules above. It is also important to note that trade entries with significant momentum tend to work best.

Trends also do not last very long. As such, traders should avoid trading entry signals on an overextended trend. This may be observed by a weakening trend or a market that is starting to flatten out.


Forex Trading Strategies Installation Instructions

Parabolic Fisher 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.

Parabolic Fisher 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 Parabolic Fisher Trend Forex Trading Strategy?

  • Download Parabolic Fisher 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 Parabolic Fisher Trend Forex Trading Strategy
  • You will see Parabolic Fisher 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.

Click here below to download:

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Parabolic Fisher Trend Forex Trading Strategy

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