This is how to trade a Forex Trend. It's a system, and success is based on your discipline to accept when to exit a trend. I'll post an MT4 template,as it is somewhat tedious to set up. You would do yourself a great favour to read my MTF Stochastics and Escalator to Pip threads, if you want in depth theory and be slightly ahead of the game.
The system works because we are following 4 indicators that are designed to show us the trend in the short and long term -- together. The indicators are:
Heiken Ashi - to make the trend visible on the price chart
Stochastics - so we know where we are in the trend
Standard Deviation - so we know when the trend is changing (volatility in price)
Momentum - so we know when the current trend just passed is dead -- Momentum tells you what is happening to the historical trend, never forecasting the future or trend just developing -- extremely important to remember!
Here's how a typical long thread entry is triggered (see chart below):
I like to work from the top of the chart down for safe conservative entries. For early signals you work from the bottom up of the chart.
Starting at the top:
A note: the blue lines represent the short term and the red lines the long term on each indicator. The thick yellow lines are the base setting of the indicator, called the base lines.
Heiken Ashi - turns blue which is a trigger that a long trend could be forming.
Stochastics - the yellow Base Stochastic line (BS Line) crosses up across the 23.6 level. Key is that the blue lines have also crossed the 23.6 level and that they are nicely "combed" in sequence. Notice the red lines are also starting to comb. Also make note that just before the trend starts how nice and tight the blue and red lines were to the BS Line.
Standard Deviation - this is an early or confirmation trigger. It will generally start a signal prior to the thread starting. Key is that the blue lines cross the yellow line (up or down does not matter). We'd like to see a nice comb like in this chart, but the blue lines crossing is the signal for a trend change. Standard Deviation measures volatility - which used in this way indicates a change in trend.
Momentum - early indications of the previous trend dying. Momentum only refers to the historic, previous trend. Never forget this! When looking at momentum we are thinking about the past/previous. Momentum indicator works the same for signal as the Standard Deviation, when the blue lines cross the yellow line it is a great indication that the current trend is finished.
Yes, this is extremely simple! And it works extremely well.
The system works because we are following 4 indicators that are designed to show us the trend in the short and long term -- together. The indicators are:
Heiken Ashi - to make the trend visible on the price chart
Stochastics - so we know where we are in the trend
Standard Deviation - so we know when the trend is changing (volatility in price)
Momentum - so we know when the current trend just passed is dead -- Momentum tells you what is happening to the historical trend, never forecasting the future or trend just developing -- extremely important to remember!
Here's how a typical long thread entry is triggered (see chart below):
I like to work from the top of the chart down for safe conservative entries. For early signals you work from the bottom up of the chart.
Starting at the top:
A note: the blue lines represent the short term and the red lines the long term on each indicator. The thick yellow lines are the base setting of the indicator, called the base lines.
Heiken Ashi - turns blue which is a trigger that a long trend could be forming.
Stochastics - the yellow Base Stochastic line (BS Line) crosses up across the 23.6 level. Key is that the blue lines have also crossed the 23.6 level and that they are nicely "combed" in sequence. Notice the red lines are also starting to comb. Also make note that just before the trend starts how nice and tight the blue and red lines were to the BS Line.
Standard Deviation - this is an early or confirmation trigger. It will generally start a signal prior to the thread starting. Key is that the blue lines cross the yellow line (up or down does not matter). We'd like to see a nice comb like in this chart, but the blue lines crossing is the signal for a trend change. Standard Deviation measures volatility - which used in this way indicates a change in trend.
Momentum - early indications of the previous trend dying. Momentum only refers to the historic, previous trend. Never forget this! When looking at momentum we are thinking about the past/previous. Momentum indicator works the same for signal as the Standard Deviation, when the blue lines cross the yellow line it is a great indication that the current trend is finished.
Yes, this is extremely simple! And it works extremely well.