Momentum moves are one of the highest return entries in trading. There are many instances when you would see a momentum move right at the start of a trend which would continue for quite some time. These are the types of trades that could produce returns more than a hundred percent of what you have risked. Whenever we get to ride one of these trades, we often get to see my profits run. However, whenever we miss one, we end up kicking ourselves in the behind for not taking the trade.
This strategy is a trend reversal type of strategy which takes into consideration the momentum behind a trade. This is done by using an indicator which somehow reflects the momentum behind a move.
The Drive Indicator
Table of Contents
- 1 The Drive Indicator
- 2 The ASC Trend Indicator
- 3 The Trend Magic Indicator
- 4 Trading Strategy Concept
- 5 Conclusion
Drive is a custom indicator which takes into account momentum. This is based on the difference between the difference between the high or low and the open or close. The Drive custom indicator is composed of two lines, up and down. The high line is a green colored line which is plotted based on the average of the difference between the high and the open, and the close and low. The low line, which is the red colored line, is plotted based on the average of the difference of the open and low, and the high and close.
Looking at this equation, you would notice that what the indicator does is that it measures how far price has traveled from where it has started, while considering both directions. If you would come to think of it, that is what momentum is. Momentum is basically a market move that has caused price to move quite far from where it has started.
This indicator allows traders to objectively assess whether a market move has momentum or not.
The ASC Trend Indicator
The ASC Trend indicator is a trend following indicator which is great in pinpointing exact entry points. The ASC Trend indicator identifies trend reversals and conveniently places an arrow on the candle where it detects a change in trend. Bullish trend signals are painted as yellow upward pointing arrows, while bearish trend signals are painted as magenta downward pointing arrows.
The ASC Trend indicator is a derivative of the William Percent Range. This indicator also takes into consideration the highest high, lowest low and close. Although it has a different formula behind it, it is still another way of measuring momentum given the parameters it considers.
The Trend Magic Indicator
The Trend Magic is another trend following custom indicator. This indicator indicates the trend based on the changing of the color of the line it plots. Whenever the line is constantly rising, the Trend Magic indicator prints a blue line. On the other hand, it prints a red line whenever the Trend Magic indicator line is falling.
The Trend Magic indicator is an indicator that takes into consideration of two good indicators, the Commodity Channel Index (CCI) and the Average True Range (ATR).
Trading Strategy Concept
The Trend Drive Forex Trading Strategy is based on the confluence of these three indicators. The two prior indicators, Drive and ASC Trend places more emphasis on momentum, while the Trend Magic indicator serves as a filter and confirmation.
The first thing we will be looking for is the crossover of the Drive indicator’s lines. On a bullish setup, we will be looking for the green line to cross above the red line. A bullish setup would be the inverse of this.
Then, we would also be looking for the Trend Magic indicator to agree with the Drive indicator’s direction. Blue lines indicate a bullish trend while red lines indicate a bearish trend.
Finally, we will be waiting for the ASC Trend indicator to print an arrow on the direction of the Drive and Trend Magic indicator. This will serve as our final trade entry signal.
There will be cases wherein only one or two of the three conditions are met. These situations are not yet a clear trend change, thus we should ignore these scenarios and wait for a proper trade setup.
- Risk: 15
- Trend Magic
- Depth: 32
Timeframe: 15-min, 30-min, 1-hour and 4-hour charts
Currency Pair: any major and minor pair plus some crosses
Trading Session: any
Buy (Long) Trade Setup
- The Drive indicator’s green line should cross above its red line
- The Trend Magic indicator should change to color blue
- The ASC Trend indicator should print a yellow upward pointing arrow
- Open a buy order at the confluence of these conditions
- Set the stop loss below the Trend Magic indicator line
- Close the trade if the Trend Magic indicator changes to color red
- Close the trade if the Drive indicator’s green line crosses below the red line
Sell (Short) Trade Setup
- The Drive indicator’s green line should cross below its red line
- The Trend Magic indicator should change to color red
- The ASC Trend indicator should print a magenta downward pointing arrow
- Open a sell order at the confluence of these conditions
- Set the stop loss above the Trend Magic indicator line
- Close the trade if the Trend Magic indicator changes to color blue
- Close the trade if the Drive indicator’s green line crosses above the red line
This strategy is a high probability strategy with the potential to catch strong trending moves. This is because of the momentum that is typically behind the trade. If you would notice the trade setups, you would see that the entries are either full-bodied candles with short wicks or that there is a full-bodied candle with short wicks prior to the entry candle. This is typically somewhat close to where the Drive indicator crosses over. However, on hindsight, these candles will seem insignificant as the market picks up volume on the direction of the trend.
The setups would usually have a time wherein the trade would be in profit. It is important to get a feel as to when to move the stop loss to breakeven as there are times when the market would reverse after the momentum move.
Forex Trading Strategies Installation Instructions
Trend Drive 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.
Trend Drive 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 Trend Drive Forex Trading Strategy?
- Download Trend Drive 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 Trend Drive Forex Trading Strategy
- You will see Trend Drive 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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