VR Moving Average Forex Trading Strategy

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VR Moving Average Forex Trading Strategy 1

The forex market sometimes seems very unpredictable. The market is usually very fickle. News releases could come out randomly and change the crowd’s opinion about a certain market or currency. As the market sentiment changes, price would also drastically change along with it. These are the times when the market becomes choppy. It is best to step on the sidelines if you observe such things taking place.

As the dust settles, market participants become more unified in a clear sentiment, and price trends become clearer, this is when traders find the most opportunity and start trading again. During these market conditions, when market movements seem to have a higher tendency to trade, traders should start looking for trend following opportunities.

The VR Moving Average Forex Trading Strategy is a simple trend following strategy optimized for such conditions.  It is a trading strategy that could be part of your trading arsenal, which you could use during market conditions that are conducive for trends.

VR Moving Average

The moving average is a staple indicator used by many traders. Technical traders love them for their simplicity. Not only is it simple, its interpretation of market trends and movements is very logical.

Moving Averages are very useful especially during trending market environments or markets which have a high propensity to trend. This is because the primary use of the moving average is to aid traders in identifying trend direction.

There are several ways to detect trend direction. Some traders make use of the location of price in relation to the moving average. Others use multiple moving averages and judge trend direction based on how the moving averages are stacked. Based on the prior theory, some traders also make use of the crossover of moving averages as an entry signal.

One of the most basic ways to identify trend direction using moving averages is by using the slope of the moving average as a basis for trend direction. Prices constantly going higher would naturally bend the moving average’s slope up, while prices constantly going down would naturally bend the moving average’s slope down. Slopes bending against the current trend is a telltale sign of a market about to reverse.

The VR Moving Average indicator is very useful for these kinds of situation. It is a custom moving average line which is colored depending on the direction of the trend. Moving averages sloping up are colored blue while moving averages sloping down are colored red. This helps traders identify if the trend is starting to reverse based on the color of the moving average line.

William 36 Histogram Waller Test

The William 36 Histogram Waller Test is a custom momentum oscillator that indicates trend directions. Its range run from -50 to +50 with its midline at zero. It then creates histograms based on the direction of the trend. Positive histograms are colored lime green and indicates a bullish trend bias. Negative histograms on the other hand are colored red and indicates a bearish trend bias. This indicator also has a marker at -15 and +15. Histograms that go beyond these markers are considered to indicate a strong trend.

Trading Strategy

This trading strategy produces trend reversal signals based on the VR Moving Average indicator and the William 36 Histogram Waller Test. To qualify as a trend reversal signal, price movements should result in a confluence between the two indicators.

The basis for entry signals on the VR Moving Average indicator would be its changing of colors, while the basis on the William 36 Histogram Waller Test would be the histograms changing from positive to negative or vice versa.

The two indicators are complementary indicators. Price tends to result in a trend whenever the entry signals of the two indicators are somewhat aligned. Trades taken during the start of these trend reversal signals could result in huge profits.

Indicators:

  • vr_moving_average
    • Period: 28
  • William36HistogramWallerTest

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

Currency Pairs: major and minor pairs

Trading Session: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • Price should close above the VR Moving Average line
  • The VR Moving Average line should change to blue indicating a bullish market bias
  • The William 36 Histogram Waller Test indicator should print positive histograms that are color lime green indicating a bullish trend reversal
  • These bullish trend reversal signals should be somewhat aligned
  • Enter a buy order on the confluence of the above conditions

Stop Loss

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

Exit

  • Close the trade as soon as the VR Moving Average line changes to red
  • Close the trade as soon as the William 36 Histogram Waller Test indicator prints a negative histogram colored red

VR Moving Average Forex Trading Strategy 1

VR Moving Average Forex Trading Strategy 2

Sell Trade Setup

Entry

  • Price should close below the VR Moving Average line
  • The VR Moving Average line should change to red indicating a bearish market bias
  • The William 36 Histogram Waller Test indicator should print negative histograms that are color red indicating a bearish trend reversal
  • These bearish trend reversal signals should be somewhat aligned
  • Enter a sell order on the confluence of the above conditions

Stop Loss

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

Exit

  • Close the trade as soon as the VR Moving Average line changes to blue
  • Close the trade as soon as the William 36 Histogram Waller Test indicator prints a positive histogram colored lime green

VR Moving Average Forex Trading Strategy 3

VR Moving Average Forex Trading Strategy 4

Conclusion

This trend following strategy is a great strategy to implement on a trending market environment or a currency pair or market that has a strong tendency to trend.

It allows traders to take trades that have a strong likelihood to result in a trend due to the confluence. At the same time, it also allows traders to enter the trade near the start of the trend, allowing traders to profit more rather than wait for a later confirmation.

If used on the right market condition and if used with a good trade management strategy, this strategy could produce great results for any trader.

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