This forex strategy offers reliable entry point that works not only in trend, but also in ranging market. Suggested MACD settings are able to filter out unsuitable trending conditions, with ability to estimate growing weakness in trend. In that case, set of strategy rules will prevent you from entering the trade into the dying trend.
Two crucial features of this forex strategy are:
Entering at the end of the correction within trend with tight stop loss.
Ability to stay in trend until its exhaustion.
Forex indicators used:
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MACD 26,52,18
Envelopes (period 10)
Apply both indicators in 15 chart of any major currency pair. Consider spread with your broker.
Forex strategy rules
SELL:
MACD histogram is closing below zero – negative values. Red MACD line is closing within the histogram, above its close. This will signalize downtrend with sufficient momentum for us to enter a short trade.
Price has touched upper (blue) envelopes line. After the touch we wait for bearish candle. Ideally bearish candle should close with upper wick of at least same size as candle body. Looking for signs of weakness on candle formations can improve the signal drastically.
We enter the trade short on bearish candle close. Stop loss is placed couple of pips (1 – 5) above the high of our signal formation.
Take profit: While MACD histogram still closes with negative values, we exit our trade in profit when first histogram bar closes above red MACD line.
BUY:
MACD histogram is closing above zero – positive values. Red MACD line is closing within the histogram, below its close. This will signalize uptrend with sufficient momentum for us to enter a long trade.
Price has touched bottom (red) envelopes line. After the touch we wait for bullish candle. Ideally bullish candle should close with bottom wick of at least same size as candle body. Looking for signs of strength on candle formations can improve the signal drastically.
We enter the trade short on bullish candle close. Stop loss is placed couple of pips (1 – 5) below the low of our signal formation.
Take profit: While MACD histogram still closes with positive values, we exit our trade in profit when first histogram bar closes below red MACD line.
Notes: It is possible that our first entry into the trend will fail. In that case we will play a numbers game and enter the trade couple of times more if necessary on following signal. Strategy uses tight stop loss hunting for a bigger prize, it can be expected that stop will be triggered relatively often.
