Trend following strategies are one of the most popular types of trading strategies among traders. This is because trend following strategies do work. Not all trend following strategies produce high probability trade setups, but trend following strategies usually allow traders to squeeze as much pips as possible on a winning trade. This is because traders are able to enter the market as the trend starts and exits the market when the trend starts to reverse.
One of the most popular types of trend following strategies are crossover strategies. Most newbie traders would come across one and trade them for a while. Some crossover strategies are profitable, while some are not. The key to a successful crossover trading strategy is to catch trades that would trend. This is because many crossover strategies are not high probability trade setups, however, most would allow traders ride big trending moves which could cover up much of the losses plus some profits.
The Gator Trend Forex Trading Strategy however is a high probability trend following strategy. It is a variation of a crossover strategy, however it is based on modified moving averages which are incorporated in a custom indicator. This particular trend following strategy aims to make as much profit out of the market as possible, based on short-term trends.
The Gator Indicator
The Gator Indicator is a custom trend following indicator. It makes use of three modified moving averages which are preset on the short-term trend.
These moving averages crisscross each other whenever the trend is reversing. On a bullish trend reversal, the short-term moving average would cross above the longer-term moving averages. On the other hand, whenever the shorter-term moving average would cross below the longer-term moving averages, it signifies a bearish market reversal.
On a strong trend or market expansion phases of a trend, the moving averages tend to fan out. The farther apart the moving averages are, the stronger the trend.
The Forex Major Trend Indicator
The Forex Major Trend Indicator is a custom indicator which indicates the markets trend bias based on a confluence of rules built-in within the indicator.
Whenever the Forex Major Trend Indicator detects a bullish market condition, the indicator would start to print blue bars, while on a bearish market condition, it prints red bars.
If you would observer this indicator visually, you would notice that this indicator tends to respond quick, making it a step ahead of most lagging indicators. In fact, it tends to follow the short-term trend.
Trading Strategy Concept
The Gator Trend Forex Trading Strategy is a crossover strategy based on the modified moving averages of the Gator indicator. This is then confirmed by the Forex major Trend Indicator’s changing of colors. However, the confluence of the two indicators should be exactly at the same candle. This is because the confluence of the two complimentary indicators would usually occur when there is momentum behind the trend reversal.
Indicators:
- r_Gator
- ForexMajorTrend
Timeframe: 1-hour, 4-hour and daily charts
Currency Pairs: major and minor pairs
Trading Session: Tokyo, London and New York session
Buy (Long) Trade Setup
Entry
- The Gator indicator’s red line should cross above the green and blue lines indicating a bullish trend reversal
- The Forex Major Trend Indicator’s bars should change to color blue indicating a bullish trend reversal
- The above-mentioned rules should coincide on the same candle
- Enter a buy order on the confluence of the above rules
Stop Loss
- Set the stop loss on support below the entry candle
Exit
- Close the trade if the Gator indicator’s red line crosses below the green and blue lines indicating a possible bearish trend reversal
- Close the trade if the Forex Major Trend Indicator’s bars change to red indicating a possible bearish trend reversal
Sell (Short) Trade Setup
Entry
- The Gator indicator’s red line should cross below the green and blue lines indicating a bearish trend reversal
- The Forex Major Trend Indicator’s bars should change to color red indicating a bullish trend reversal
- The above-mentioned rules should coincide on the same candle
- Enter a sell order on the confluence of the above rules
Stop Loss
- Set the stop loss on resistance above the entry candle
Exit
- Close the trade if the Gator indicator’s red line crosses above the green and blue lines indicating a possible bullish trend reversal
- Close the trade if the Forex Major Trend Indicator’s bars change to blue indicating a possible bullish trend reversal
Conclusion
This crossover strategy, which is based on the short-term trend of the Gator Indicator, is a high probability trading strategy, which also allows traders to ride trends from start to finish. However, since this strategy is based on the short-term, winning trades may not continue as far as the longer-term crossover strategies would. The advantage though is that traders tend to be more in sync with the market since the basis of the entries are on the short-term trend. It also allows traders to respond quicker to market reversals and enter trades a bit earlier compared to other trading strategies.
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