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Forex trading strategy #21 (Those 4 Indicators)

Submitted by Nariman Ghanghro

Hi guys,

I've been looking at this site and have gone through almost all of the Trading Strategies. I'm just new to Forex markets and previously dealt

with the Traditional Equtiy Market for a long time. Currently, I'm working on CFD (Contract for Difference) market where I buy and sell the

following:

1. Stock Indices (ASX in morning, FTSE and DAX in evening and DJIA during late night hours)
2. Commodities (mainly Gold, Crude and Silver)
3. Forex (Just started to look at Forex Trading, thanks to your site)

I've a trading system which I've used for a long time. Of course, like any trading strategy, its not the best system in world and has its

shortcomings. The major shortcoming I've seen is the fake (and perhaps too many) signals generated when the market is trading sideways.

If anyone has ideas on how to improve the strategy then it will be most welcome.

Here goes the strategy:

--------------------------------
THOSE 4 INDICATORS:
--------------------------------

Timeframe: 15 mins, 30 mins, 1 hour or 4 hours
Indicators:
1. CCI (Commodity Channel Index) with default setting of 14
2. Stochastic with default setting of 14, 2
3. Directional Movement Index with default setting of 14
4. MACD with 8 and 40 as MA and 8 as Signal line

GO LONG WHEN:
1. (CCI >= 0) AND
2. (Stochastic >= 50) AND
3. (MACD >= 0 OR DI >=0)

GO SHORT WHEN:
1. (CCI <= 0) AND
2. (Stochastic <= 50) AND
3. (MACD <= 0 OR DI <=0)

The Strategy has worked very well (for years) with Equities with high Volume (NASDAQ and FTSE being my favourite) and it has given amazingly

accurate signals on Stock Indices. I've posted two different examples to look at. First one is this morning's (27th May) ASX (Australian

Index) session. The other one is USDCHF Pair from 26thMay. You'll also see three Moving Averages on chart which I plot as a visual help,

these are EMA5, 20 and 100.

Forex strategy: CCI, Stoch, MACD Forex strategy: CCI, Stoch, MACD

Important Points:
1. Note that I'm based in Australia that is why I said I trade on Wall street when its late night here in Brisbane
2. Also note that in the screenshot example (ASX Index) every single Point has a value of 25 AUD (to give you some idea on Profit or ROI)
3. In this particular example (ASX Index), the Spread is 2 points for Long Positions and 3 points for Short Positions
4. I'm sure, this question will come up so I thought to answer it in advance. There is no Stop Loss method used as such, its just that I
follow the Signals quite religiously and exit the trade as soon as the Signal has changed from Long to Short or the other way round
5. PSAR Indicator can be used (as you can see in chart) as an additional confirmation

Cheers and happy trading,
Nariman Ghanghro



http://forex-strategies-revealed.com/


A good one. Thank you for sharing!

Nariman,
Thank you for your strategy. I have a quick question about the exit on this strategy. You describe above to exit once the signal has changed, but is that once everyone of the(3or4) signal indicators have changed or just once one of the four different indicators has changed in the opposite direction. Thanks again for your help Nariman

Derek

No worries Derek,

I normally Exit when the Reverse Signal is generated which means I used all the Indicators, however thats not the case at all times. Sometimes, you can use Pivot Points or Channel Lines to determine where the price is going to find Support or Resistence and then just exit on that price.

Its also about personal level of comfort, I've defined some sort of ROI criteria in % form, once my target (in %) is achieved, I'll exit without any regrets that if I had stayed I could have got more profits.

Nariman

Hi Nariman,
Do you mean that the histogram of MACD and ADX should be above/under 0 ?
I use the indicators that are included in my Meta Trader 4 and none of those two (MACD, ADX) have histograms...
Indrek

ADX histogram above 0 = +di > -di and
ADX histogram under 0 = +di < -di
MACD histogram above 0 = mode_main > mode_signal
MACD histogram under 0 = mode_main < mode_signal

ADX MACD Example

Hi Indrek,

I guess Adiemzs has kindly answered your questions by posting a new screenshot.

In terms of Histogram not being shown in your MT4, unfortunately I'm not aware of MT system and have never used it. My broker provides the real-time charts through a 3rd party vendor and they have the MACD and DI indicator as Histogram as well.

Wish I could help.

Nariman

Thank you guys,
Still one more question about Stochastic. I do not have the possibility to use Fast Stochastic. What settings should I use for Full Stochastic? Is 14, 2, 1 good, for example?
Indrek

Hi Indrek,

Hope you've found some solution to your previous question regarding Histogram.

The Stoch setting is 14, 2, 2 in this particular case, however you might want to try different settings to suit your trading style.

Cheers

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