Scalping in trend forex strategy

This forex strategy was primarily designed for scalping. However, it seems that it is working just as well as a day trading system in 4H chart. Trend and momentum are identified by ADX and two exponential moving averages. Entry is based on candle signal.

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System was tested for profitability on high quality tick data since 2003 (EURUSD 4H).

 

Used tools and indicators

Exponential moving average (EMA 600, 200) first line of defense. Primary trend identification tool. Al trades must follow the trend.

 

Average directional movement index (ADX 50) Trend and momentum filter. Draw additional line with value 10 in the chart main ADX must trend above it to confirm the momentum.

Candle signal (signal candle width 40 – 150 pips). Entry signal consists of three candles. Formation is complete once the last signal candle overcomes previous two candle (closing below the low, above the high). Signal candle must be larger than any of previous two candles.

 

Trailing stop (extra deviation 40 pips) Upon the entry TS is placed according to the low/high of signal candle it will be adjusted in the direction of profitable trade on each candle close. Extra distance may be applicable to cover the market volatility.

 

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Forex strategy rules

SELL

EMA fast trending below EMA slow. Downtrend

DI+ trending below DI+. Downtrend confirmed.

ADX main line trending above 5 line. Momentum confirmed.

 

Signal.

Three candle formation. Signal completion – third candle with defined size, closing below the low of first candle in the formation. Signal candle has bigger body than previous two candles.

We enter the trade on its close, placing TS at the high of signal candle + extra deviation of pips.

Take profit 30 pips may be also placed, upon entry.

 

BUY

EMA fast trending above EMA slow. Uptrend

DI+ trending above DI+. Uptrend confirmed.

ADX main line trending above 5 line. Momentum confirmed.

 

Signal.

Three candle formation. Signal completion – third candle with defined size, closing above the high of first candle in the formation. Signal candle has bigger body than previous two candles.

We enter the trade on its close, placing TS at the low of signal candle - extra deviation of pips.

Take profit 30 pips may be also placed, upon entry.

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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.

 

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