Signal Generator Forex Trading Strategy

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Signal Generator Forex Trading Strategy

Technical indicators are some of the most helpful tools for many traders. Although not everyone would agree with this, technical indicators could help traders make good trade setups when used properly.

One thing to keep in mind though is that technical indicators are just that – indicators. As such, traders should not blindly follow a single technical indicator and expect to consistently profit from the market. All the indicator is doing is indicating where price might be heading based on historical price movement data.

Instead of blindly following a technical indicator as the only trade signal, traders should look for confluences.

Confluences are points on a price chart where there are several indications pointing the same direction. These indications could come from a candlestick pattern, price action analysis, a supply and demand bounce, a crossover of moving averages, technical indicators, etc. The key is in finding one or two signals coming from any of these sources occurring close to each other.

Confluence of signals coming from price action or candlestick patterns could be useful. However, new traders who have not mastered these skills might find it a bit difficult. Instead, traders can find confluences coming from two or more indicators that complement each other.

In this strategy, we will be looking at two high probability technical indicators which when used together can provide good trade setups with high win probability.

Signal Generator MA Crossing RSI

Signal Generator MA Crossing RSI, or Signal Generator, is a technical indicator which works just as its name suggests. It is an oscillator which is based on moving averages and an underlying Relative Strength Index (RSI).

Signal Generator an RSI line which oscillates within the range of 0 to 100. This RSI line closely mimics the movements generated by price action. This line could work just as the standard RSI line does. It could identify trend bias based on where the RSI line generally is in relation to the median of its range. It also has markers at level 30 and 70, which is used to identify oversold and overbought markets, which are prime indications of a mean reversal.

However, instead of plotting just the RSI, Signal Generator also plots a moving average line. This moving average line is based on the RSI line. Aside from the main moving average line, a signal line is also plotted on the same oscillator window, which is derived from the moving average line.

The RSI line is plotted as a green line, while the moving average line is plotted as a blue line and the signal line is plotted as a maroon line.

The indicator plots a dark turquoise dot whenever the moving average line crosses above the signal line, and a dark violet dot whenever the moving average line crosses below the signal line.

Traders can use this indicator to identify potential trend reversals based on the crossing over of the moving average line and the signal line. However, traders should also confirm the trend reversal based on the crossing of the RSI line and the moving average lines.

This indicator basically identifies confluences of momentum signals coming from the RSI and the moving average line and signal line crossover.

Stochastic Cross Alert

Stochastic Cross Alert is a momentum reversal signal indicator which is based on an underlying Stochastic Oscillator.

The classic Stochastic Oscillator is a momentum indicator which can also identify mean reversals. It plots two lines which oscillate within the range of 0 to 100. Momentum direction is identified based on how the two lines are stacked. As such, momentum reversal is identified based on the crossing over of the two lines. It also typically has markers at level 20 and 80. Lines below 20 indicate an oversold market while lines above 80 indicate an overbought market. Crossovers occurring in these areas tend to produce high probability trade setups based on mean reversals.

Stochastic Cross Alert signals are based on this concept. It plots an arrow pointing up whenever it detects that momentum is reversing up, and an arrow pointing down whenever it detects that momentum is reversing down.

Traders can use these arrows as an entry signal to confirm their trade setups and act as an additional confluence.

Trading Strategy

Signal Generator Forex Trading Strategy is a simple trading strategy which attempts to follow market swings based on the confluence of signals coming from the two indicators above.

The Signal Generator indicator is used based on the crossing over of the moving average line and the signal line, which should cause the indicator to plot a dot. The location of the RSI line in relation to the moving average line should also confirm the direction of momentum.

The Stochastic Cross Alert indicator serves as a confirmation that the trend reversal signal from the Signal Generator indicator is in confluence with a mean reversal or momentum reversal signal coming from the Stochastic Cross Alert indicator.

Confluences between the two signals would verify a valid reversal setup.

Indicators:

  • Stochastic Cross Alert
    • K Period: 15
  • Signal Generator MA Crossing RSI
    • RSI: 10
    • MA: 15

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

Currency Pairs: FX majors, minors and crosses

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • The moving average line of the Signal Generator indicator should cross above the signal line.
  • The Signal Generator indicator should plot a dark turquoise dot.
  • The RSI line should be above the moving average line.
  • The Stochastic Cross Alert indicator should plot an arrow pointing up.
  • Place a buy order on the confluence of these signals.

Stop Loss

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

Exit

  • Close the trade as soon as the moving average line of the Signal Generator crosses below the signal line.

Signal Generator Forex Trading Strategy

Signal Generator Forex Trading Strategy 2

Sell Trade Setup

Entry

  • The moving average line of the Signal Generator indicator should cross below the signal line.
  • The Signal Generator indicator should plot a dark violet dot.
  • The RSI line should be below the moving average line.
  • The Stochastic Cross Alert indicator should plot an arrow pointing down.
  • Place a sell order on the confluence of these signals.

Stop Loss

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

Exit

  • Close the trade as soon as the moving average line of the Signal Generator crosses above the signal line.

Signal Generator Forex Trading Strategy 3

Signal Generator Forex Trading Strategy 4

Conclusion

This trading strategy is a great strategy which traders can use in markets which tends to have clear market swings. Confluences between the two complementary technical indicators tend to produce high probability setups which have a high earning potential when used in such market condition.

However, traders should avoid trading this type of strategy in market conditions which are very choppy. Most trading strategies do not work in a choppy market. Traders should learn to pick the right market condition to trade on. Traders who have the discipline to avoid such market conditions can consistently profit from the forex market using this strategy which is based on confluences.


Forex Trading Strategies Installation Instructions

Signal Generator 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.

Signal Generator 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 Signal Generator Forex Trading Strategy?

  • Download Signal Generator 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 Signal Generator Forex Trading Strategy
  • You will see Signal Generator 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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