More advanced forex strategy, utilizing powerful, momentum focused combo of 2X RSI + CCI. Combined oscillators are working we in identifying momentum. This is furthermore confirmed by accurately defined momentum candle. Except the momentum candle size, we will also consider its wick in the direction of trend.
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We will be looking for a candle closing extremely near its high/low. Continuation of the trend is most likely on this type of candle. This has proved to be a nice advantage when using trailing stop as we will do in this forex strategy. This trading system can be also used for scalping (after modification of inputs) in lower time frames.
System was tested on high quality EURUSD tick data since 2003 using the expert advisor we have created for this strategy.
Used tools and indicators
Strategy was tested for following inputs in 4H chart of EURUSD.
Relative strength index (primary 50, secondary RSI 150, buy above 50, sell below 50) Two trend filters are used. Buy above 50/ sell below 50 zones is applied on both, separating the range. Adjusting those zones we will be able to modify indicator sensitivity to trending conditions. Wider the central, no trade zone, more accurate and less frequent the signal.
Commodity channel index (CCI 49). Immediate momentum entry signal. We will consider only closed data of CCI. Indicator must return into the central zone (between 100 and -100) for signal reset.
Momentum candle (min 1, max 150 pips). Strong bullish bearish candle closing in the direction of the RSI defined trend. Candle must have predefined body size.
Momentum candle wick (max 160 points). We will consider size of the signal candle wick in the direction of trend. We want to enter on candle with flat wick in the direction of our entry.
Trailing stop (extra deviation 120 pips for trail stop can be applied). Based on high/low of last closed candle. Adjusted with each candle close. Extra deviation for trail stop can be applied
Max open trades (5) this strategy allows opening more than one trade per direction Parameter can be also adjusted in indicators input, to modify this strategy
Take profit: expert advisor allows setting a take profit points parameter however it was not used in our test (0).
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Forex strategy rules
SELL
Both RSI filters trending below SELL below zone value. Signalizing sufficient downward momentum/downtrend. We will be looking for short entry on CCI signal.
CCI falling below -100 value while previous close was above -100 value.
Strong bearish candle with defined body size and bottom wick no larger than defined maximum wick size.
Enter the trade short on momentum candle close. Trailing stop is placed above the high of the candle and extra deviation above can be applied. We close our trade either by trailing stop or predefined take profit.
We can open more than one trade per market side on valid signal.
Buy
Both RSI filters trending above buy above zone value. Signalizing sufficient upward momentum/uptrend. We will be looking for long entry on CCI signal.
CCI rising above 100 value while previous close was below 100 value.
Strong bullish candle with defined body size and upper wick no larger than defined maximum wick size.
Enter the trade long on momentum candle close. Trailing stop is placed below the low of the candle and extra deviation below can be applied. We close our trade either by trailing stop or predefined take profit.
We can open more than one trade per market side on valid signal.
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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.
