Yang Trader Forex Trading Strategy

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Yang Trader Forex Trading Strategy 2

Often times, the market seems difficult to decipher. It is often hard to predict which way the market is heading. However, if you’d come to think of it, the market moves only in two directions, up or down. And often times, the market tends to have a trend which shows us which way the market is more likely to go. It is not perfect but the probability of having the trade direction right would be higher if we trade with the flow of the market. The question is how do we get the trend direction right?

The Yang Trader Main Indicator

The Yang Trader Main custom indicator is one of the indicators that could point which direction the market is generally heading. The indicator itself is based on a modified moving average. It draws a single line on the chart which would slope up and down as the market changes direction. However, this indicator has another feature that points the direction of the trend even before the market actually changes trend direction. It does this by printing arrows pointing which direction the market is heading. The arrows are printed a bit earlier than the actual reversal of the moving average. This also usually occurs when there is a momentum candle going the opposite direction or if several candles have been pushing price to reverse. These arrows serve as an early warning letting us know that the market might reverse trend.

The William 36 Histogram Waller Test Indicator

The William 36 Histogram Waller Test custom indicator is an oscillating indicator that also identifies trend direction. It is a bounded oscillating indicator that allows the histograms to be printed from -50 to +50. This indicator also has a marker on +/- 15 mark which allows traders to determine if the trend has actually started or if a candle has enough momentum to change the trend direction.

Trading Strategy Concept

This strategy aims to use the Yang Trader Main indicator as an early warning device, pointing which direction we should start looking for a trade. As soon as an arrow appears, we would get ready for a trade if the trend actually changes. This should be accompanied by price staying at the correct side of the modified moving average line and the moving average hooking towards the direction of the trend. If an arrow pointing up appears on the chart, that is a sign that the market might start to get bullish. Then, price should be staying above the modified moving average line and the moving average line should start sloping up. If on the other hand, an arrow pointing would appear, the reverse should also happen. Price should stay below the modified moving average line and the moving average line should slope down.

The change in trend should be confirmed by the William 36 Histogram Waller Test indicator. As price reverses, the histogram bars would start crossing over the midline. However, this doesn’t confirm the momentum of the change in trend. To confirm the change in trend, we would have to wait for the histogram bars to cross over the +/- 15 mark. If the trend is bullish, the histogram bar should cross above + 15, If the market is bearish, the histogram should cross below – 15. This would serve as our entry signal.

The stop loss would be placed either on the high or low of the entry candle. This would be a tight stop loss but since we are trading momentum setups, having an aggressive stop loss would be good. The take profit target would also be a conservative 1.5x the risk on the stop loss. This allows the trade to have a higher probability even with a tight stop loss.

Indicators:

  • YangTraderMain (default settings)
  • William36WallerTest (default settings)

Timeframe: 5-min, 15-min, 30-min, 1-hour, 4-hour and daily charts

Currency Pair: any major and minor pair plus some crosses that have enough volatility

Trading Session: any trading session if on the higher timeframe; lower timeframes should be on sessions with volume

Buy (Long) Trade Setup

Entry

  • The YangTraderMain indicator should print an arrow pointing up
  • The modified moving average line should start bending up
  • Price should stay above the modified moving average line
  • The William36WallerTest indicator should start printing positive histogram bars
  • Enter a buy order as soon as a histogram bar crosses above +15

Stop Loss

  • Set the stop loss a few pips below the low of the entry candle

Take Profit

  • Set the take profit target at 1.5x the risk on the stop loss

Yang Trader Forex Trading Strategy 1

Yang Trader Forex Trading Strategy 2

Sell (Short) Trade Setup

Entry

  • The YangTraderMain indicator should print an arrow pointing down
  • The modified moving average line should start bending down
  • Price should stay below the modified moving average line
  • The William36WallerTest indicator should start printing negative histogram bars
  • Enter a sell order as soon as a histogram bar crosses below -15

Stop Loss

  • Set the stop loss a few pips above the high of the entry candle

Take Profit

  • Set the take profit target at 1.5x the risk on the stop loss

Yang Trader Forex Trading Strategy 3

Yang Trader Forex Trading Strategy 4

Conclusion

This strategy is a momentum based strategy that makes use of the YangTraderMain indicator as the trend direction filter and the William36WallerTest indicator as the basis for the momentum entry. This strategy is not perfect, there will be some losing trades due to the tight stop loss. However, because of the fixed 1.5x reward-risk ratio, the strategy should allow for a positive outlook in the long run.

The key to this strategy is in catching the right trend with a strong momentum behind it.

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