Fisher Trend Flow Forex Trading Strategy

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Fisher Trend Flow Forex Trading Strategy

The forex market is a very fluid type of market. It usually moves fluidly, seldom standing still. There are moments wherein the market is quiet, but often the market moves erratically, swinging back and forth across the price chart. This is the natural characteristics of the forex market. It is the biggest trading market with over $5.1 trillion being traded on average daily. Given its sheer size, it also follows that it could be the most volatile. Add to it the fact that market participants buy and sell currencies for different reasons other than just speculating on price movements. This makes the forex market very fluid and at times very erratic.

However, despite its seemingly erratic behavior, the forex market does have a flow which seasoned traders can follow. Traders who are able to follow such flow and move with whatever the market is doing are the ones who make the most money out of the forex markets.

Fisher Trend Flow Forex Trading Strategy is a systematic strategy that helps traders understand and follow the flow of the market. It uses technical indicators that can give traders clarity as to what the market is doing and follow along as the market does its thing. It produces trade setups that follow the general trend of the market while trading on short and mid-term oscillations and cycles, helping traders enter and exit trades in line with the market flow.

Fisher Indicator

The Fisher indicator is an oscillating indicator which helps traders identify the cyclical movements of price.

It is based on the concept of a Gaussian normal distribution. It basically converts recent historical price into a Gaussian normal distribution. This allows the indicator to highlight extreme price movements which are often the beginning of a possible reversal. It can also indicate reversals and turning points in the market quite accurately.

The Fisher indicator is displayed as an oscillator that prints histogram bars. Positive bars indicate a bullish trend while negative bars indicate a bearish trend. The crossovers of histogram bars from negative to positive or vice versa indicate potential trend reversals. These crossovers can be used by traders as a trend reversal entry signal. Traders can also use the bars to filter trades based on trend direction.

EMA Crossover Signal

EMA Crossover Signal is a trend following signal indicator based on the Exponential Moving Average (EMA).

One of the most popular ways traders identify a potential trend reversal is through the use of moving averages. Traders would often apply a couple of moving averages on a price chart, one representing a shorter trend and the other a longer trend. Traders would then wait for the moving averages to crossover, which signals that the trend has reversed.

EMA Crossover Signal uses this concept by plotting trend reversal signals based on the crossing over of its underlying EMA lines. It then conveniently plots an arrow pointing the direction of the trend. Traders can then simply use the arrows to enter or exit the trades accordingly.

Trading Strategy

This trading strategy trades on confluences of trends and trend reversals using the Fisher indicator and the EMA Crossover Signal indicator. However, instead of taking every trend reversal signal available, it also filters trades based on the long-term trend.

The 200-period Exponential Moving Average (EMA) will be used as the basis for the long-term trend. It is simply based on the general location of price action in relation to the 200 EMA line, as well as the slope of the 200 EMA line.

Then, we will look for confluences of trend reversal signals coming from the Fisher indicator and the EMA Crossover Signal indicator.

On the Fisher indicator, reversal signals will be based on the shifting of the bars from positive to negative or vice versa, depending on the direction of the trend.

On the EMA Crossover Signal indicator, signals are simply based on its plotting of its signal arrows.

Indicators:

  • 200 EMA
  • EMA Crossover Signal
    • Faster EMA: 25
    • Slower EMA: 30
  • Fisher_Yur4ik

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

Currency Pairs: FX majors, minors and crosses

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • Price action must be generally above the 200 EMA line.
  • The 200 EMA must slope up.
  • The Fisher indicator bars should shift to positive.
  • The EMA Crossover Signal indicator should plot an arrow pointing up.
  • Enter a buy order on the confluence of these conditions.

Stop Loss

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

Exit

  • Close the trade as soon as the Fisher indicator plots a negative bar.
  • Close the trade as soon as the EMA Crossover Signal indicator plots an arrow pointing down.

Fisher Trend Flow Forex Trading Strategy

Fisher Trend Flow Forex Trading Strategy 2

Sell Trade Setup

Entry

  • Price action must be generally below the 200 EMA line.
  • The 200 EMA must slope down.
  • The Fisher indicator bars should shift to negative.
  • The EMA Crossover Signal indicator should plot an arrow pointing down.
  • Enter a sell order on the confluence of these conditions.

Stop Loss

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

Exit

  • Close the trade as soon as the Fisher indicator plots a positive bar.
  • Close the trade as soon as the EMA Crossover Signal indicator plots an arrow pointing up.

Fisher Trend Flow Forex Trading Strategy 3

Fisher Trend Flow Forex Trading Strategy 4

Conclusion

Trends and trend reversals are some of the most fulfilling types of trades to take especially when you end up in profit on a trade. This is because trend reversals have the potential to produce huge profits.

However, trend reversals are also difficult to catch. Often, traders end up trading against the flow of a strong trend.

This strategy allows traders to trade trend reversals while aligning the trades with the long-term trend. This creates setups that have a better probability compared to most trend reversal setups, while allowing traders to gain huge yields.

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