Contents
- The main idea of the strategy
- The basic Trend Finder system for 4H
- Day version of the Trend Finder strategy
- General rules of the money management
- Several practical notes
- Conclusion
The medium-term multiple currency trade Forex Trend Finder system for four-hour graphs under the data of their developers allows to earn effectively on the trend market and to leave the market in time without any loss.
The main idea of the Trend Finder system
The main Forex Trend Finder indicator for the family of such trading systems is Awesome Oscillator system by Bill Williams. Additional indicators are not contained in a standard set of the popular trading systems, but can be found in a network freely.
Tasks of indicators in strategy:
- AwesomeOscillator shows the global direction (a long-term trend);
- Advanced_ADX (in some versions - moving average) determines the force of a trend and confirms the direction (a medium-term trend);
- Stochastics shows a point of change of the direction of a trend (a short-term trend).
All indicators are presented in the form of histograms. While the position with respect to zero level is not of interest here (as the points of intersection of the central line are not considered as a trading signal), only colour and height of the elements of a histogram are used for the analysis. The reliable trading signal requires that conditions for all three indicators must have been met. Signal of Advanced_ADX is a control point for an entrance, while StochasticHistogram signal is necessary for the position closing.
The basic Trend Finder trading system for 4H period
Asset: any currency pair in the period of a steady trend.
Timeframe: for the analysis and an entry - H4, for holding the position - D1 and above.
Indicators: AwesomeOscillator with standard parameters, StochasticHistogram (5,3,3), Advanced_ADX(13) with the additional level of 15. StopLosses and TakeProfits are mandatory.
These three indicators altogether give very reliable signal for an entry.
It is necessary for the purchase that all three histograms have been of green color, and the Advanced_ADX indicator has been above the level 15.
It is necessary for the sale that all three histograms have been of red color, and the Advanced_ADX indicator has been above the level 15.
In case of coincidence of all signals, we open the transaction on purchase at the opening of the following candle after «alarm» candle (on which all conditions have matched). Positions are held open until two of three Trend Finder indicators change color on the opposite or in case of achievement of the profit level.
Day version of the Trend Finder Daily strategy
In practice a version with use of simple moving average as the trend filter was more effective rather than Advanced_ADX oscillator. Timeframe: for the analysis and an entry - D1, for holding the position - D1 and above. Indicators: AwesomeOscillator, StochasticHistogram (5,3,3), SMA(200). StopLosses and TakeProfits - under the regular scheme.
We enter the transaction at opening of the candle where the following conditions have been satisfied.
For the purchase, if:
- the price moves higher than a moving average;
- histogram of AwesomeOscillator is of green colour;
- StochasticHistogram indicator is green.
For the sale the reverse conditions should have been met:
- the price moves below the line of moving average;
- histogram of AwesomeOscillator is of red color;
- StochasticHistogram indicator is red.
If there is a breakthrough of the moving average where positions are open (even if the moving average is speculative), it is recommended to close transactions or transfer them to a zero loss zone.
General rules of the money management
Under the author's version of the Trend Finder strategy, two positions are opened simultaneously in the same lot that must not lead to the general risk of more than 3% of the deposit. Nevertheless, in practice it is recommended for the first transaction to choose trade lot, which is twice as large, than the one for the second transaction. Even though the first transaction is in the market less time, the chances of success will be bigger. It is assumed that the transaction will bring the main profit, and therefore the amount of it can be increased.
We put TakeProfit for the first transaction on 70-100 points, for the second transaction the rigid profit cannot be determined as this transaction will be closed only after the histogram of the AwesomeOscillator indicator changes the color for opposite.
StopLoss is fixed on 50-100 points from a point of opening of both transactions. After achievement of the profit level of at least +50 points on two transactions we transfer StopLoss to opening price.
We will ignore any signals for both transactions until they have reached profit in 50 points and have transferred Stop to profitability level.
Several practical notes
Strategy of Trend Finder is known as a trend strategy, but there can be various trends. In practice this technique makes profit only on strong and long movement, and in a flat it does everything to the contrary - sale on a minimum and purchase on a maximum. Therefore, even in a wide flat, after the recommended profit of 50 points it is worth fixing 30-50% of transactions and tightening a profit further by means of a trailing. In practice Stops in 50-100 points can be not profitable. Therefore it is recommended to set up them behind the level of the next max/min.
For trade under Forex Trend Finder strategy it is necessary to choose an asset with stable volatility, without speculative bounces, and in the modern market it is difficult to find such a currency pair. At least, popular EUR/USD or GBP/USD will hardly give a stable profit.
The system really looks effective on currency pairs, but you should not forget that all three indicators of the basic strategy are oscillators. Signals on indicators are late, and there is practically no filter of ‘false’ signals in system. Without application of moving average it is better not to trade – it will help to monitor a major tendency of the market more precisely. It is better to select parameters for oscillators for a specific asset and to apply on the real account only after careful testing.
Conclusion
Forex Trend Finder technique is not ideal. Trading signals arise seldom, even though all of them have rather high reliability. Stable results practically on any asset are undoubted advantage of the system. Therefore, it can be used as addition to the short-term techniques. Strategy is suitable for a quiet medium-term trade and for the technically trained traders. As all medium-term strategies, it places rather great demands on the deposit to wait out possible kickbacks and speculative bounces.
