FREE FOREX STRATEGIES

#5 Range-bound trading (Following WellxAMA)


One of the easiest methods to distinguish range-bound conditions from trends is probably by looking at indicators.
I'd like to introduce one those indicators, which attentive readers may have already discovered on our site, called WellxAMA - a custom MT4 indicator.

Download (right click + save as)

wellxAMA.mq4

Indicator settings: you can use default, which are equally good.
(On the screen shot I used my own settings: 9, 3, 50, 2.0, 2.0)

Time frame: any

Currency: any

Here is the way it may help with detecting Raging and Trending markets:

Forex range-bound trading

Rules:

1. As long as the dots are of the same color - the current trend continues.

2. Whenever a WellxAMA dot changinges color - the trend changes to the opposite.

3. If WellxAMA draws a new dot with every new chart candlestick - the market is trending.

4. Whenever a dot is missing - it is an indication of a sideways moving market ahead.

(On the screen shot we can see that as an empty/bare thin brown line stretching alongside several candlesticks in a row) - this means a trend is pausing and we may encounter range-bound conditions ahead.

5. What direction to follow when the WellxAMA dots are missing? Stick to the previous trend direction = the previous WellxAMA dot color before the range occurs.

6. If you're in a trade when WellxAMA starts to range, consider tightening your stops. If you haven't started trading - you may want to keep out until the trend is resumed.


Edward Revy,
http://forex-strategies-revealed.com/

Copyright © Forex Strategies Revealed

Hi Luna, did you ever get a chance to post the new indicator?

Hi Edward! The User who commented here on May 11, 2012 - 11:55, saying that wellxAMA is an implementation of the Kaufman adaptive moving average is absolutely correct. In fact, the original name of the indicator (if you look at the header in the source code) is Kaufman.mq4.

The Adaptive Moving Average is an improvement over Exponential Moving Averages because it becomes more sensitive during periods when price is trending up or down, and becomes less sensitive to price movement when price is volatile but not going anywhere.

Be that as it may, I didn't like the fact that the wellXAMA indicator refrains from showing dots when the AMA flattens out. It's already showing dots going up and going down, I think it may as well go all the way and show dots when it's flattening out too, only of a different color. Don't you agree?

So I revised wellxAMA.mq4 to show ForestGreen dots (instead of DeepSkyBlue) when the trend is up, Red dots (instead of Gold) when the trend is down, and Gold dots (instead of nothing) when the market is ranging. Like a traffic light, you know. The Sienna line in the background stays.

It's now called wellXAMA v2.mq4. I'd post it here but I don't know how to. If you'll email me and show me, I'd be happy to. Or I can email it back to you, and you can be the one to post it here for everyone else.

Thanks!

-Luna.

I have just stumbled on this forum, and want to express my appreciation for the effort to collect and categorize EA's and indicators. In case anyone wants to know more about this particular indicator, it implements the Kaufman adaptive moving average, and the filter
described in Perry Kaufman's book "Smarter Trading - Improving Performance in Changing Markets"
Kaufman suggests G = 2 (this is the exponent used to deemphasize small efficiency ratios.
He also suggests Kf from 1 to 10. This is the change in the AMA (from nearest extreme) required
to pass the filter.

What indicator settings would you recommend for 5M chart?
Thank you.
Marijan

Excellent

Could you repeat what you have been thinking?
Seems little " scary thoughts"
emma

Hi Dear Edward,
I am addicted to Your comments,Your enormous patience answering all question(s. Your ) dedication of helping people in this very difficult area is remarkable.I am spending couple hours daily reading Your web side and Your strategy. I am your big fan.I want to Thank YOU and Your Team for Your fantastic job and Your personal lovely energy.Maybe because of You I will try my best to be a better trader.
My Kindest Regards :
Emma

I am curious. Can we use that as a strategy for EA in Metatrader? Here is what I am thinking. Lets say when we get one of the blue dot, OrderSend (....Buy ...). If the dot is missing, then OrderSend (...CloseBuy)....

If the dot is yellow OrderSend (....Sell...), If missing yellow and previous was yellow OrderSend (... CloseSell ...)

However to do that , we need to modify you indicator. And I guess the following may be implemented.

If the wellXAMA = 0 ... means previous dot == green and a dot has been printed now and the color of dot printed now is also green

If the wellXAMA = 0 ... means previous dot == green and a dot has been printed now and the color of dot printed now is also green (buy)

If the wellXAMA = 1 ... means previous dot == Yellow and a dot has been printed now and the color of dot printed now is also Yellow (SELL)

If the wellXAMA = 2 ... means previous dot == green and a dot has NOT been printed now (Close BUY)
If the wellXAMA = 3 ... means previous dot == Yellow and a dot has NOT been printed now (Close Sell)

If the wellXAMA = 4 ... means previous dot == green and a dot has been printed now and the color of dot printed now is also Yellow (Close Buy)
If the wellXAMA = 5 ... means previous dot == Yellow and a dot has been printed now and the color of dot printed now is also green (Close Sell)

great signal !!!
thx Edward

Where can we get that WellxAMA indicator please? I can't find it in my MT4 platform.
Any body where can we download it. Thanks by: Boyax

You would need some editing of the indicator code:

#property indicator_chart_window

should be replaced by:

#property indicator_separate_window

Regards,
Edward

Hi Edward,

Thanks for the indicator. Is there anyway we can have the wellxAMA indicator to be displayed in a window below the chart ? I am thinking doing it that way may help make my chart less cluttered.

nice!!!

no, it's not, although visually it has some similarities.


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