Forex Strategies

Cusiv Moving Average Forex Trading Strategy

September 17, 2020

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The Forex markets is one of the most erratic types of trading markets. You would often see price change directions several times within a given period. Many say it is even more erratic than stocks and other commodities that are also traded in the market. This is because the forex market is a peculiar one. Unlike stocks and other commodities that are based on a single item being traded, currency pairs are made up of two items being traded. This is why it is called a “currency pair”, because you are trading a currency to another currency. Unlike commodities and stocks wherein we are only looking at how the price of a particular commodity or stock is moving, currency pairs have two different currencies pulling each other. Say for example, you are trading the dollar and the yen. It could be that both the dollar and the yen are appreciating compared to other currencies. If one of them were not moving, it would have been easier, but since both currencies are moving on the same direction, this may cause a choppy market condition on such pair. So, how would price move in such a condition? It would depend on which currency is stronger. This is what we call currency strength.

The Cusiv Moving Average Forex Trading Strategy is a strategy based on the strength of a currency pair. Trades are taken based on the strength of the major currency in the pair.

CUSIV01 Indicator

The CUSIV01 indicator is a strength indicator which measures the strength of the commodity currency in the pair. It then displays the result as an oscillating indicator in a different window. If the commodity currency is bullish, it would print lime bars, while if the commodity currency is bearish, it would print red bars.

There are many different currency strength indicators available in the market, however most indicators would require that the trader would open many charts for it to properly work. The CUSIV01 indicator however could analyze the market even with just the information coming from the currency pair being traded. This makes the indicator very useful.

Envelopes Indicator

The Envelope Indicator is indicator is an indicator which is also based on a moving average. The difference is that it also plots an upper band and lower band around the moving average. You may think that it somewhat like the Bollinger Band, but it is not. This is because the Bollinger Band measure the standard deviation from the moving average, while the Envelopes just simply deviates the other two bands from the moving average in order to offset the other two lines up and down by a certain degree.

This indicator is used to create a band of moving averages, which could be used for many trading methods. Some traders would use it as a measure of the retrace area in order to time retracement entries well. Other traders would also use it as part of a crossover strategy.

Trading Strategy

This trading strategy is a crossover strategy which is based on the Envelopes indicator. By using the Envelopes indicator as part of a crossover strategy, we tend to have a much more confirmed trend reversal because of the offset done by the Envelopes indicator.

We would also be making sure that the strength of the commodity currency is also in agreement with our crossover strategy. The currency strength will then be based on the CUSIV01 indicator.

Indicators:

50-period Simple Moving Average (SMA) (gold)
Envelopes
- MA method: Exponential
- Period: 28
- Deviation: 0.20%
CUSIV01
- EMA Size: 64

Timeframe: 4-hour and daily charts only

Currency Pairs: any major and minor pairs

Trading Session: Tokyo, London and New York sessions

Buy Trade Setup

Entry

The CUSIV01 indicator should be printing lime bars indicating a strong commodity currency
The lower envelope line (red) should cross above the 50 SMA (gold) indicating a bullish trend reversal
Enter a buy order on the confluence of the above conditions

Stop Loss

Set the stop loss below the moving averages

Exit

Close the trade as soon as the CUSIV01 indicator starts printing red bars
Close the trade as soon as the lower envelope line crosses below the 50 SMA

Sell Trade Setup

Entry

The CUSIV01 indicator should be printing red bars indicating a weak commodity currency
The upper envelope line (blue) should cross below the 50 SMA (gold) indicating a bearish trend reversal
Enter a sell order on the confluence of the above conditions

Stop Loss

Set the stop loss above the moving averages

Exit

Close the trade as soon as the CUSIV01 indicator starts printing lime bars
Close the trade as soon as the upper envelope line crosses above the 50 SMA

Conclusion

This strategy is a decent working crossover strategy. It tends to have better results than the usual crossover strategy because it takes into account the strength or weakness of the commodity currency.

However, the CUSIV01 indicator could also be indicated inversely in currency pairs in which the major currency is paired on the opposite side. An example of this would be some USD pairs, since on some pairs the commodity currency is the opposite currency of the USD, which is a major currency. Observe the currency pair prior to trading it in order to identify which side the indicator is measuring, either the commodity currency or the opposing major currency.