This next forex trading strategy you are going to learn is called Picking Tops And Bottoms Forex Trading Strategy Using ADX Indicator.
It might take a bit of time to understand this trading system if you are are newbie forex trader.
Currency Pairs: Can be used on any pairs
Timeframes You will need to use: 5 min, 15 mins, 30 mins, 1hr, 4hrs and daily chart. You will have to use one chart at a time for this forex strategy.
Forex Indicators: 20 EMA and 40 EMA applied to all timeframes given above as well as the ADX 14 indicator applied to all timeframes given above.
BACKGROUND ABOUT THIS FOREX STRATEGY
The idea behind this forex trading system is that that ADX indicator helps to measure the strength of a trend while the 20 exponential moving average indicator acts as a flexible support-resistance line.
The ADX indicator gives you warning that the market is about to change direction. Here are some of the things the ADX indicator tell you:
- the ADX indicator tells you if the trend is present or not
- the ADX indicator tells you if its too early or late in a trend
- the ADX indicator tells you of de-trending, of a reversal and renewal.
THE TRADING RULES
The first step is[sociallocker] to find the chart which shows the ADX indicator over the 30 mark, which indicates a strong trend. So start with the daily chart first and work your way down to the smaller timeframes. If you see several timeframes having ADX indicator over 30, you must select the highest timeframe and ignore the smaller timeframes.
Sell Setup
- identify first which timeframe has ADX indicator over the 30 mark.
- then check to see if EMA 20 crosses EMA 40 to the downside therefore its a downtrend so you look for sell opportunity only.
- as soon as a candlestick that comes and touches the 20 ema line, you place a sell stop pending order 1-2 pips under its low or you can sell immediately at the market price.
- place your stop loss 1-2 pips above the 40 EMA
- for take profit, set at 2 to 3 times what you risked initially
Buy Setup
For buy setup, just do the exact apposite of sell setup:
- identify first which timeframe has ADX indicator over the 30 mark.
- then check to see if EMA 20 crosses EMA 40 to the upsideside therefore its a uptrendtrend so you look for buy opportunity only.
- as soon as a candlestick that comes and touches the 20 ema line, you place a buy stop pending order 1-2 pips above its high or you can buy immediately at the market price.
- place your stop loss 1-2 pips below the 40 EMA line
- for take profit, set at 2 to 3 times what you risked initially
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