Fisher Trend Forex Trading Strategy

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Fisher Trend Forex Trading Strategy 2

“Trade with the trend!” This is one key concept in trading that would greatly improve a trader’s performance. Trades that have the market’s momentum behind it has a higher probability of going the direction of the trade rather than trades that are taken against the general trend direction of the market. But how do you determine the trend?

There are many ways to determine the trend. There are those who use price action and a naked chart to determine the trend direction. There are those who make use of moving averages. While others make use of indicators. Of the three, naked chart price action trading might probably be the most difficult as this would generally need some mastery. Moving averages also do work well. However, there are some custom technical indicators that really makes sense visually. They are easy to understand and does seem to work well in following price action and determining the trend.

The Fisher Trend Forex Trading Strategy is one which makes use of custom indicators to determine the mid-term trend and entry signals. It is very objective, easy to follow and it works.

Fisher Yur4ik Trend

The Fisher Yur4ik Indicator which is used in this trading strategy is based on John Ehlers Inverse Fisher Transform indicator. It is a probability-based indicator which is formulated for price movements in trading. Regular probability distributions would usually have an equal probability to travel an equal distance away from a certain point. If a number starts from zero, it would have an equal probability of traveling to +1 or -1. This is true in most cases, but this does not apply to price and trading in general. If you have been trading for a while, you would know that price does move in trends, and could have some degree of predictability. This is because the distribution of probability of price movement is not equal. If price is starting from zero, it would not necessarily follow that it has an equal probability of moving +1 or -1. You would have to take into account the trend and mean reversion. This is what the Fisher Yur4ik Trend Indicator addresses.

This indicator is basically an oscillating indicator which prints histogram bars on its own window. It paints lime bars for positive histogram figures and red bars for negative histogram figures.

If you would look at it visually, it does work well in indicating the trend direction on the mid-term. If you would observe it closely, price does tend to have a higher probability of moving towards the trend indicated by this indicator.

Trend Manager Indicator

The Trend Manager Indicator is a custom indicator which accurately indicates trend direction. It does this by painting bars on the price chart, which changes color whenever the trend direction changes. It acts more like the “cloud” of the Ichimoku Cloud Indicator. The difference is that it does tend to be less lagging, making the indicator useful in determining the short-term and mid-term trends.

Trading Strategy Concept

This strategy is a high probability trend following strategy based on the indicated trends of the Fisher Yur4ik and Trend Manager custom indicators.

The Fisher Yur4ik indicator will serve as the main trend filter. Since the trend direction indicated by the Fisher Yur4ik is quite good, it is highly likely that price would sooner or later travel towards the direction it is pointing. The question is when?

This is where the Trend Manager Indicator would come in. Because the Trend Manager Indicator tends to do well in pointing out specific entry points on shorter-term trend, it would work well as an entry signal.

Trades are taken only when the signal produced by the Trend Manager Indicator agrees with the direction of the Fisher Yur4ik indicator. Pairing these indicators together seem to work well since both indicators tend to be complimentary.

Indicators:

  • TrendManager
    • TM Shift: 4
  • Fisher Yur4ik
    • Period: 24

Timeframe: 1-hour, 4-hour and daily charts

Currency Pair: major and minor pairs

Trading Session: Tokyo, London and New York sessions

Buy (Long) Trade Setup

Entry

  • The Fisher Yur4ik indicator should be printing lime positive histograms indicating a bullish trend direction
  • Enter a buy order as soon as the Trend Manager Indicator prints a blue bar indicating a bullish trend reversal on the shorter-term

Stop Loss

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

Exit

  • Close the trade as soon as the Trend Manager Indicator turns red indicating a possible bearish trend reversal

Fisher Trend Forex Trading Strategy 1

Fisher Trend Forex Trading Strategy 2

Sell (Short) Trade Setup

Entry

  • The Fisher Yur4ik indicator should be printing red negative histograms indicating a bearish trend direction
  • Enter a sell order as soon as the Trend Manager Indicator prints a red bar indicating a bearish trend reversal on the shorter-term

Stop Loss

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

Exit

  • Close the trade as soon as the Trend Manager Indicator turns blue indicating a possible bullish trend reversal

Fisher Trend Forex Trading Strategy 3

Fisher Trend Forex Trading Strategy 4

Conclusion

This trading strategy is a high probability, high yield trading strategy. The reason behind its relatively high win rate is because of the use of the Fisher Yur4ik custom indicator. Trading on the direction indicated by the Fisher Yur4ik indicator seems to greatly increase the chances that price would move on the direction of the trade.

Then, because of the Trend Manager Indicator, we get to accurately get in and get out of the market. This allows us to make the most out of the trending moves, while at the same time retaining most of the profits as the trend ends.

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