Tunnel inception scalping forex strategy

There is a tunnel within a tunnel. This is not some philosophical statement but a brief description of this forex scalping strategy, that was tested for profitability in over a 13 years of historical data. The system uses two very different calculation methods, to create two independent price tunnels. One of them is narrow and will identify breakout. The other one is wider. We will expect the price to bounce off of it. Therefore, we will use it as profit target.

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The strategy requires trader to draw two tunnels in the chart. Relatively common breakout signal is traded. We will be looking for narrow profit, expecting price to be more likely to bounce when reaching second, wider envelopes tunnel.

System was tested on historical data (4H eurusd tick) since 2003.

 

Used tools and indicators

Exponential moving averages (EMA 500,250) positioning of ema will identify main trend. This will increase accuracy of entry by about 15 – 20 percent. This is a tremendous advantage in any type of trading situation.

 

Bollinger bands (BB period 60, deviation 2) Breakout of tunnel boundaries will trigger the breakout position entry. We will be looking for candle close outside tunnel boundaries.

 

Envelopes (period 40, deviation 1,5) wider deviation is used. We want envelopes tunnel to close in the outskirts of BB tunnel. Price briefly closing outside of envelopes tunnel will signalize to exit the trade asap.

 

Advanced trailing stop (extra deviation 100 pips). TS is adjusted with each candle close, following the profitable trade. Extra deviation is applied to cover standard market volatility.

 

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Max open trades (1): Strategy allows opening more than one trade per side at the same time. During our tests, we have allowed opening just 1 trade per side.

 

Forex strategy rules

SELL

EMA fast trending below EMA sloe. Downtrend.

We will be looking for breakout of bottom BB band. Once price closes below the bottom BB (tunnel support), we enter the trade short.

 

Advanced trailing stop is placed above the high of signal (breakout) candle (extra distance applied).

Once the price close below the bottom envelopes line, we close the trade in profit.

 

BUY

EMA fast trending above EMA slow. Uptrend.

We will be looking for breakout of upper BB band. Once price closes above the upper BB (tunnel resistance), we enter the trade long.

 

Advanced trailing stop is placed below the low of breakout candle (extra distance applied).

Once the price close above the upper envelopes line, we close the trade in profit.

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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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Only in 2016 - 2017 we have created more than 400 forex strategies. During this period we have also developed and published +200 MT4 Expert advisors based on those strategies. We are dedicated to provide you with viable and complete trading systems that have thrived in extensive historical testing. We want to give you complete and transparent trading solutions, that once mastered ,will set you financially free. We want to give you a fighting and winning chance in the market. ” 

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