The Forex Diversity Trading System For MT4 is a trend and momentum-based trading system that uses some necessary technical tools/indicators to generate profitable trade ideas. It is a short term strategy that is suitable for any type of forex trader with some basic trading knowledge and a disciplined mind setup.
The Forex Diversity Trading System For MT4
This trading method suggests trading positions based on some commonly used technical tools of the foreign currency exchange market (at MetaTrader 4 platform).
List of Tools/ Indicators
- Trend Channel
- Support-Resistance
- VQ Bar
- RSI Filter
Introduction To Tools
The “Trend Channel” is a custom made indicator that is valid or works fine at lower time frames (5 min – 1-hour chart). This indicator can be called a combination of three trend lines (which appear like a trend channel at the main window). The upper line of the trend channel adds values of short-term higher highs and short term lower lows are added by the lower line of this indicator (or simply fractals formula).
Support-Resistance indicator is a unique type of indicator that identifies the market shifting points (highs/lows) and makes different colored bars after a valid support and resistance point at the main window. This indicator creates a yellow bar after a valid higher high and a white bar after a valid lower low created by price movement.
VQ bar is a simple indicator that changes the price candle’s color according to its types (bullish and bearish). White bars for bullish candles and the bearish candles become red by this indicator.
RSI filter is a modified version of the RSI indicator that calculates the price information in the same way traditional RSI indicator does but shows the results differently. This indicator creates different colored (same sized) bars above and below the middle (0.0) line at an independent window. Blue bars above the middle line indicate an uptrend price movement and red bars below the middle line indicate a downtrend.
Bullish Trading Strategy
While all the features above are set on the MetaTrader 4 platform, this system suggests short-term buy entries at the target asset window. This trading method works on every (major or cross) currency pair and the recommended time frame is a 1-hour window. Check the conditions below before placing any buy order:
Bullish Trading Conditions
- Price candle color is white.
- The bars of the RSI filter window is white and above the middle (0.0) line.
- White bars by the Support-Resistance indicator appears near the recent lower low (end of a short term downtrend).
- Trend channel indicator confirms an uptrend (this indicator reading can be ignored sometimes as this indicator shows results that are valid for short term time frames).
Entry
Check all the bullish conditions above are true for the target asset then wait for the current candle to close. If all the situation remains the same, place a buy order at a suitable price.
Note: Before placing any buy order, checking and matching the price direction of upper time frame windows (bullish) is highly recommended to get the bigger picture of the asset’s price movement. By checking on other (upper) time frames, any trader can quickly sort out and ignore the fake high/lows (may be suggested by the trend channel indicators) that appear at lower time frame windows.
Stop Loss
An initial stop loss by this trading system is below the recent swing low with a buffer of 10-15 pips is recommended.
Note: If the user holds the buy order for long term don’t hesitate to move the stop loss at or above the entry point for the sake of safe trading (after the asset makes a higher high).
Take Profit
Stop all the buy positions if
- Red color candles appear.
- A yellow bar appears at price candles (confirms a valid higher high).
- Price candles reach the upper line of the Trend Channel indicator (optional, cause price can move more upside if the trend remains intact at the upper time frame).
- Red bars appear below the middle line of the RSI filter indicator window.
Note: As far as the trend (uptrend) remains intact order can be continued, so little retracements of lower time frames can be ignored.
Bearish Trading Strategy
While all the features above are set on the MetaTrader 4 platform, this system suggests short-term sell entries at the target asset window. This trading method works on every (major or cross) currency pair and the recommended time frame is a 1-hour window. Check the conditions below before placing any sell order:
Bearish Trading Conditions
- Price candle color is red.
- The bars of the RSI filter window is red and below the middle (0.0) line.
- Yellow bars of the Support-Resistance indicator appear near the recent higher high (end of a short term uptrend).
- Trend channel indicator confirms a downtrend (this indicator reading can be ignored sometimes as this indicator shows results that are valid for short term time frames).
Entry
Check all the bearish conditions above are proper for the target asset then wait for the current candle to close. If all the situation remains the same, place a sell order at a suitable price.
Note: Before placing any sell order, checking and matching the price direction of upper time frame windows (bullish) is highly recommended to get the bigger picture of the asset’s price movement. By checking on other (upper) time frames, any trader can quickly sort out and ignore the fake high/lows (may be suggested by the trend channel indicators) that appear at lower time frame windows.
Stop Loss
An initial stop loss by this trading system is above the recent swing high with a buffer of 10-15 pips is recommended.
Note: If the user holds the sell order for long term don’t hesitate to move the stop loss at or below the entry point for the sake of safe trading (after the asset makes a lower low).
Take Profit
Stop all sell positions if:
- White color candles appear.
- A white bar appears at price candles (confirms a valid lower low).
- Price candles reach the lower line of the Trend Channel indicator (optional, cause price can move more downside if the trend remains intact at the upper time frame).
- White bars appear above the middle line of the RSI filter indicator window.
Note: As far as the trend (downtrend) remains intact order can be continued, so little retracements of lower time frames can be ignored.
Conclusion
This trading system described above is a straightforward and efficient trading method, just need to follow some basic trading rules and some common sense before placing or closing an order. As this is a trend following and short term strategy better to avoid major trading pairs by this strategy during FOMC meeting minutes, NFP, or any other major fundamental trend changing events.
