Buzzer Buyers vs Sellers Forex Day Trading Strategy

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Buzzer Buyers vs Sellers Forex Day Trading Strategy

It is prudent to ask how traders make money out of forex trading before diving in head on in the world of forex trading. So, how do forex traders make money out of forex trading?

Traders make transactions based on the posted bid and offer price. If they would want to buy or sell at market price, they would have to trade based on the price posted on the market. If prices do not move, then traders do not make any money at all. With that said, we could say that traders make money because of price movements or volatility.

The next question is why do prices move? Prices move because of the various transactions made by traders worldwide. If most traders are making buy trades, the market would move up. If most traders are making sell trades, then the market would move down.

However, the more relevant question is, how do we anticipate which direction the market is more likely to move. If it is possible, the best way to anticipate where price will move next is by knowing which direction most traders are planning to trade. This is called market sentiment.

Market sentiment is basically the overall attitude of traders and investors toward a particular tradeable security, commodity or forex pair. It is the overall feeling of the market, whether they are looking to buy or sell a certain tradeable security.

In a way, price moves because of crowd psychology. If a bulk of the market is looking to buy a security and acts on it, its price will move up. If most of the market participants are thinking of selling a security and acts on it, its price will drop.

Buzzer Indicator

Buzzer indicator is a custom trend following technical indicator which can be used by traders to aid them in identifying trend direction bias or trend reversals.

This simple indicator plots a line which mimics the movement of price action. It follows the movements of price action quite closely making it very responsive to price movements.

Although it is somewhat similar to moving averages, it still differs from moving averages because its movements are very jagged.

The color of the line changes to indicate the direction of the momentum. Lime indicates a bullish momentum, while red indicates a bearish momentum.

Traders can use the changing of the color of the lines to help them identify potential momentum reversal entry points.

Buyers vs. Sellers

The Buyers vs Sellers indicator, also known as BvS, is a custom market sentiment indicator which is also part of the oscillator family of indicators.

The BvS indicator plots histogram bars which oscillate around zero. Positive bars indicate a bullish a market sentiment, while negative bars indicate a bearish market sentiment. The color of the bars also changes based on the direction of the market sentiment. Lime bars indicate a bullish sentiment, while red bars indicate a bearish sentiment.

The indicator can also be modified not to show negative bars by removing the “delta”. By doing so, market sentiment is identified only based on the color of the bars.

It can also be modified as a binary market sentiment filter. With this mode, the value of the bars does not reflect on the window. Bars will be of uniform length. Market sentiment will still be identified based on the color of the bars.

Trading Strategy

While it is impossible to read the thoughts of thousands of traders worldwide, it is still possible to have an indication of the market sentiment based on historical price movements.

Buzzer Buyers vs Sellers Forex Day Trading Strategy is a trend reversal strategy which is confirmed by market sentiment.

The trend reversal signal is first identified based on the crossing of the Buzzer line over 36-period Simple Moving Average (SMA) line. The color of the Buzzer line should also indicate that the short-term momentum agrees with the trend reversal direction.

Then, the BvS histogram bars should indicate that the direction of the market sentiment is in line with the direction of the trend reversal. This is based on whether the bars are positive or negative, as well as the color of the bars.

Indicators:

  • Buzzer
    • Length: 20
  • 36 SMA
  • BvS v3
    • BvS Period: 40
    • Show Histogram: true
    • Show Delta: true

Preferred Time Frames: 5-minute, 15-minute, 30-minute and 1-hour charts

Currency Pairs: FX majors, minors and crosses

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • The Buzzer line should cross above the 36 SMA line.
  • The Buzzer line should be lime.
  • The BvS bars should be positive lime.
  • Enter a buy order on the confluence of the conditions above.

Stop Loss

  • Set the stop loss on a support below the entry candle.

Exit

  • Close the trade as soon as the Buzzer line crosses below the 36 SMA line.

Buzzer Buyers vs Sellers Forex Day Trading Strategy

Buzzer Buyers vs Sellers Forex Day Trading Strategy 2

Sell Trade Setup

Entry

  • The Buzzer line should cross below the 36 SMA line.
  • The Buzzer line should be red.
  • The BvS bars should be positive red.
  • Enter a sell order on the confluence of the conditions above.

Stop Loss

  • Set the stop loss on a resistance above the entry candle.

Exit

  • Close the trade as soon as the Buzzer line crosses above the 36 SMA line.

Buzzer Buyers vs Sellers Forex Day Trading Strategy 3

Buzzer Buyers vs Sellers Forex Day Trading Strategy 4

Conclusion

This trading strategy is a simple trend following strategy which combines a crossover strategy using a custom technical indicator and a Simple Moving Average line, as well as the confirmation of a market sentiment indicator.

Trading with the direction of the market sentiment could prove to be very effective. This is because market sentiments attempt to predict what the market is thinking, which if put into action, should drive price in a certain direction.

Traders can practice with this strategy to get a feel if this type of strategy could work for them.

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