MA 4H QQE Trend Forex Trading Strategy

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MA 4H QQE Trend Forex Trading Strategy

“Trade with the trend!” In my experience, this is one of the best trading advices that I have had. Trading with the trend simply means trading with the general flow of the market. In the bigger scheme of things, trading with the trend means trading with momentum. If you would zoom out a trending market on the lower timeframe, chances are you are looking at a strong momentum. This often leads to trading with higher win probabilities.

One of the reasons why traders have a hard time trading with high accuracy is that they find it difficult to trade in the direction of the trend. This often stems from the fear that they may be entering the market at its peak and that it is about to reverse. This is a well-founded fear. Chasing price is one of the most common reasons why momentum traders fail.

However, there is a middle ground wherein trend following traders can enter a market as it is trending, while at the same time not chasing price. These opportunities are found right after a retracement. Retracements are scenarios wherein price is reverting back to its mathematical mean right after a strong market swing. In a trending market, the area wherein price could retrace keeps moving in the direction of the trend. It is a better price to enter the market, yet at the same time it also confirms the trend is still active. This is what traders call “buying the dip”.

In this strategy, we will be looking at a trend following strategy which helps traders enter the market on retracements using a couple of complementary technical indicators.

MA 4H

The MA 4H indicator is a custom trend following technical indicator which is based on a pair of modified moving average lines.

The MA 4H moving average lines are modified moving averages that are based on the 4-hour timeframe. The lines it plots have a staircase like characteristic which rises as the trend is rising and drops as the trend is falling.

The faster moving average line is colored red, while the slower moving average line is colored green. The market has a bullish bias if the red line is above the green line, and a bearish bias if the red line is below the green line.

Consequently, crossovers between the two moving average lines can be considered as a trend reversal signal, much like a moving average crossover.

On the lower timeframes, the area between the two lines can also be considered as a dynamic area of support or resistance.

QQE

QQE or Quantitative Qualitative Estimation is a trend following technical indicator, which is displayed as an oscillator.

It plots two lines that attempt to mimic the movement of price action. These two lines oscillate within the range of 0 to 100, with its midline being at 50. Lines below 50 indicate a bearish bias, while lines above 50 indicate a bullish bias.

The main QQE line is plotted as a blue line, while its signal line is plotted as a dotted white line. Having the blue line above the dotted line indicates a bullish momentum, while having the blue line below the dotted line indicates a bearish momentum. Traders can use the crossover between the two lines as an entry signal.

Trading Strategy

MA 4H QQE Trend Forex Trading Strategy is a trend following strategy which trades on bounces off a dynamic area of support or resistance using the MA 4H indicator and the QQE indicator.

The timeframe used in this strategy is the 1-hour timeframe as it fits perfectly for using the MA 4H as a dynamic area of support or resistance in a trending market environment. The trend is identified based on how the MA 4H lines are stacked. Price action should also confirm the trend direction based on the trajectory of its swing points.

Price should then retrace towards the area around the MA 4H lines then bounce off it. The bounce from the said dynamic area of support or resistance should then be confirmed by the QQE lines crossing over.

Indicators:

  • MA-4H
  • QQE

Preferred Time Frames: 1-hour chart only

Currency Pairs: FX majors, minors and crosses

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • The red line of the MA 4H indicator should be above the green line.
  • Price action should be plotting higher swing highs and swing lows indicating a bullish trend.
  • Price should retrace towards the area between the red and green lines and bounce off.
  • Enter a buy order as soon as the blue QQE line crosses above the signal line.

Stop Loss

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

Exit

  • Close the trade as soon as the blue QQE line crosses below the dotted line.

MA 4H QQE Trend Forex Trading Strategy

MA 4H QQE Trend Forex Trading Strategy 2

Sell Trade Setup

Entry

  • The red line of the MA 4H indicator should be below the green line.
  • Price action should be plotting lower swing highs and swing lows indicating a bearish trend.
  • Price should retrace towards the area between the red and green lines and bounce off.
  • Enter a sell order as soon as the blue QQE line crosses below the signal line.

Stop Loss

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

Exit

  • Close the trade as soon as the blue QQE line crosses above the dotted line.

MA 4H QQE Trend Forex Trading Strategy 3

MA 4H QQE Trend Forex Trading Strategy 4

Conclusion

This trading strategy is a high probability trading strategy which can produce good quality trade setups. This is because trading in the direction of the trend is a high probability strategy in itself. Plus, we are trading on retracements which means we are not chasing price. Add to it the fact that we are using the QQE indicator as an entry signal, which is a high probability indicator, then we have a high probability trading strategy.

It may not be a high yield trading strategy due to its low risk reward ratio. However, using it in the correct market environment may produce consistent profits based on high win rates.

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