This is relatively complex forex strategy. It is based on common money making maneuver – test formation. This purposeful move created by market makers, measures the interest of traders in trend continuation. The forex strategy is coupled with free expert advisor that defines formation very well and was tested, with positive results on past historical data. At some settings' variation, strategy produces extremely accurate, low risk/high reward entry.
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In this forex system, test formation is distinguished by the tick volume, candle size and wick size of test candle. All compared to test reaction candle. This, together with smart trailing stop loss is making this strategy viable in volatile forex market.
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Used tools and forex indicators
Moving average convergence divergence histogram (MACD). Two separate MACD (500,250 and 250,100) histograms are used in the calculation. The aim is to confirm that both major and current trend are corresponding. This alone, can improve success rate of any forex strategy tremendously. To modify the settings in expert advisor, adjust slow and fast calculation periods for both MACDs.
Test formation: Candle with wick at least 2x (adjust wick multiplier) the size of candle body. The wick is drawn in directio opposing the trend. The candle is immediatelly followed by strong candle in the direction of trend and fully overcoming the test candle (closing beyond its high/low in the direction of main trend).
In expert advisor freely provided by www.theforexkings.com test candle is also defined by minimum and maximum size.
Advanced trailing Stop loss: It is placed above the test candle high/ below test candle low. Additional distance (30 pips in the test) might be used to achieve better results and modify exposure. It is trailed with each candle close, protecting profits.
Forex strategy rules
Both MACD histograms trending below zero. We will consider this situation to be a valid downtrend.
Candle with upper wick at least 2x the size of its body. The test candle body must be at least 10 pips tall. It is followed by bearish candle closing below its low (signal candle). Tick volume of signal candle is higher than test candle volume.
We enter the trade short on signal candle close.
Both MACD histograms trending above zero. We will consider this situation to be a valid uptrend.
Candle with bottom wick at least 2x the size of its body. The test candle body must be at least 10 pips tall. It is followed by bullish candle closing above its high (signal candle). Tick volume of signal candle is higher than test candle volume.
We enter the trade long on signal candle close.
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Disclaimer: Expert advisor was tested for profitability on historical data. All screen shots provided are displaying real results of the test. However past data will never guarantee future success. Every expert advisor needs to be tested properly on demo account. LIVE use only on your own risk. Read full disclaimer. TheForexKings Team does not give any financial advice. TheForexKings does not take any responsibility for any user’s investments and investment decisions. All rights reserved. Strictly for personal use.