eWaves Trend Forex Trading Strategy

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eWaves Trend Forex Trading Strategy

People who see a price chart for the first time would often find it difficult to make any sense out of it. What they would see are bars and lines that move up and down unpredictably. Yes, many with basic knowledge of how chart looks like would understand what it means, price on the y-axis and time on the x-axis. They would know that the bars represent how price have moved over time. However, it would be very difficult for them to have an intelligent prediction as to where price might be moving.

Looking at naked charts is often daunting and seems very nonsensical to many. However, as traders gain understanding and enough time looking at charts, they begin to understand how price moves. They would begin to see that price moves in patterns and waves. They would see the cyclical movement of price trending in certain directions for a time or ranging during market contraction phases. This is more evident when the price chart is zoomed out.

New traders find it difficult to anticipate these cycles and waves. The eWaves Trend Forex Trading Strategy helps traders trade according to these cycles. It uses indicators that help traders anticipate the cyclical reversals of mid-term trends. It also pinpoints intelligent entry points where price has more likely reversed in the direction of a longer-term trend.

eWaves Indicator

The eWaves indicator is a custom oscillating indicator that helps traders anticipate and follow trends. It is plotted using histogram bars that oscillate in a free range.

The eWaves bars could be positive or negative. Positive bars indicate a bullish trend, while negative bars indicate a bearish trend.

Another feature of the eWaves indicator is that the bars change color to indicate the strength of the trend. Orange bars indicate a weak trend that could go in any direction. Lime green bars indicate a strengthening bullish trend, while dark green bars indicate a weakening bullish trend. Red bars indicate a strengthening bearish trend, while maroon bars indicate a weakening bearish trend.

The eWaves indicator could be used in a variety of ways. Traders could use it as a trend filter, trading only in the direction of the general trend. Traders could also use it as an entry trigger taking cues from the crossing over of the bars over the midline. Traders could also opt to take entries as the color of the bar changes to indicate a strengthening trend and exit trades as the color of the bars indicate a weakening trend.

EMA Crossover Signal

EMA Crossover Signal is a simple entry trigger signal which helps traders identify trend reversals.

It is practically based on a pair of Exponential Moving Averages (EMA). Trend reversal signals are generated whenever the underlying EMA lines have crossed over. The indicator then plots an arrow pointing the specific entry candle and the direction of the trend reversal. Bullish signals are plotted as green arrows pointing up, while bearish signals are plotted as red arrows pointing down.

Trading Strategy

The eWaves Trend Forex Trading Strategy is a trend reversal strategy that is focused on mid-term trend reversals. It uses the confluence of the eWaves indicator and the EMA Crossover Signal to generate high probability trend reversal signals that tend to produce large yields.

The entry signals are first aligned with the long-term trend. To identify the long-term trend, we will be using the 200-bar Exponential Moving Average (EMA). Trend direction will be based on the slope of the 200 EMA line as well as the location of price in relation to the 200 EMA line. Trades are taken only in the direction of the trend.

Then, we wait for the eWaves indicator to align with the trend as indicated by the 200 EMA. The mid-term trend will be based on the crossing over of the eWaves bars over its midline.

Then, we wait of the EMA Crossover Signal indicator to confirm the trend reversal. Trades are taken as soon as the EMA Crossover Signal indicator generates an arrow pointing the direction of the long-term and mid-term trend.

Indicators:

  • EMA Crossover Signal
    • Faster EMA: 20
    • Slower EMA: 50
  • 200 EMA (Green)
  • eWaves (default setting)

Currency Pairs: major and minor pairs

Preferred Time Frames: 15-minute, 30-minute, 1-hour, 4-hour and daily charts

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • Price should be above the 200 EMA line.
  • The 200 EMA line should be sloping up.
  • The eWaves bars should cross above zero.
  • The EMA Crossover Signal indicator should plot an arrow pointing up.
  • Enter a buy order on the confluence of these bullish signals.

Stop Loss

  • Set the stop loss on the fractal below the entry candle.

Exit

  • Close the trade as soon as the eWaves bar crosses below zero.

eWaves Trend Forex Trading Strategy

eWaves Trend Forex Trading Strategy 2

Sell Trade Setup

Entry

  • Price should be below the 200 EMA line.
  • The 200 EMA line should be sloping down.
  • The eWaves bars should cross below zero.
  • The EMA Crossover Signal indicator should plot an arrow pointing down.
  • Enter a sell order on the confluence of these bearish signals.

Stop Loss

  • Set the stop loss on the fractal above the entry candle.

Exit

  • Close the trade as soon as the eWaves bar crosses above zero.

eWaves Trend Forex Trading Strategy 3

eWaves Trend Forex Trading Strategy 4

Conclusion

This trading strategy is an excellent trend reversal strategy that works best on mid-term trends.

This strategy generates trade signals that could produce decent yields because it allows trades to run in the direction of the trend as long as the mid-term trend is still in place. It is also able to produce high probability trades because it aligns trade signals with the long-term trend.

The strategy would also work best when aligned with a higher timeframe trend. Traders could either zoom out of the chart or go to a higher timeframe in order to identify long-term trends easily.

It is best to use this strategy when the market is trending in the long-term. However, traders should also avoid trading whenever the market is in a choppy condition. It is still possible to trade in such conditions, however, the probability of winning is much lower.

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