The perfect forex indicator?

noreply@blogger.com (Brad Jones) — Sun, 21 Aug 2011 14:50:00 +0000

Does the perfect Forex indicator even exist? those of you who are regular visitors to this blog will know it has changed many times, i have tried and tested most of the popular trading indicators in order to find one which can produce great returns.

From ADX to MACD all work to a certain degree but not as consistent as i would like, lets face it, forex trading isn`t the easiest of things to master at the best of times so finding a reliable forex indicator to give you an edge is imperative.

This is where things get a bit interesting, for the past few months I have been forex trading with a combination of indicators that seem to work very well indeed, 82% win rate to be exact, trading on all time frames from 15 minute charts up to daily, the win rate remained consistent, could this be what we`ve been searching for?

The trading system is pretty simple, which, i think, is what makes it so profitable. Three forex indicators which all work in harmony to produce a nice little system which will give some very nice gains indeed.

Firstly, I use metatrader 4 and all the indicators and template that i shall be giving you are coded for use with mt4.

Secondly, i am assuming that, seeing you are here, you already have an interest in trading and therefore have a certain amount of knowledge and understanding of trading, trends, price action, forex indicators etc, so I will not go into (or bore you) with the "ins and outs" of it all.

Have a look at the trade samples, download my indicators and template and see for yourself. I believe this to be one of the easiest and profitable trading systems I have traded with in a long time, ironically, looking for the perfect forex indicator may have lead me to the perfect forex system.

The buy set-up

We look for three things to go long, trend bars must be green, moving average diamonds must be green, bullish outside bar is then our entry, only when all three are there do we trade. I have put all outside bars blue for ease.

First off, we check to see if we are trending up or down, we do this with our trend bars indicator, next, we want confirmation of the uptrend, this is where the moving average diamond indicator comes in to play, green is up, red is down, white is neutral.

Next, we need our entry signal, this is where the outside bar comes in, not strictly an indicator but pure price action. Once we have green, we wait for our bullish outside bar to form, we place a buy at the high and wait for the market to take us in.

The sell set-up

We look for three things to go short, trend bars must be red, moving average diamonds must be red, bearish outside bar is then our entry, only when all three are there do we trade. I have put all outside bars blue for ease.

First off, we check to see if we are trending up or down, we do this with our trend bars indicator, next, we want confirmation of the downtrend, this is where the moving average diamond indicator comes in to play, green is up, red is down, white is neutral.

Next, we need our entry signal, this is where the outside bar comes in, not strictly an indicator but pure price action. Once we have red, we wait for our bearish outside bar to form, we place a sell at the low and wait for the market to take us in.

The indicators and template

Indicators and template now in the download section.

Trend bars:

My favourate of all forex indicators, trading with the trend is the most profitable and effective way of trading but knowing which way the trend is going is a bit more tricky. Due mainly to the fact we can have long term short term and intermediate trends, so, trend bars will make life easier, if the bars are red we are in a down trend and will look to short, if they are green we we are in an uptrend and will look to go long. Simples.

Moving Average Diamonds:

Using moving averages in forex trading is pretty common, this one is a bit more user friendly. The settings are based on a 20 period, this counts for one months trading period...5 days in a trading week, but you can change the periods if you want to. The best thing about this indicator is it changes colour when the MA turns up or down, green for long, red for short, white for neutral. Nice and simple, red trend bars with red MA we look for shorts, green MA green trend bars we look to go long.

Outside Bar Indicator:

If you don`t understand the power of outside bars watch this video:

Outside bars are pure price action and make great entry points, i have set the colour to blue to make it easier to see. You must first recognise bullish and bearish outside bars.

Bullish: the close of the bar must be higher than the close of the previous bar.

Bearish: the close of the bar must be lower than the close of the previous bar.

Once we have identified which bar we have, we simply look to trade with the trend, placing an entry at the high for longs or the low for shorts.

Forex Indicator

The perfect forex indicator?