3 Color MA Forex Trading Strategy

The 3 Color MA forex trading strategy tries to smoothen price data in a bid to adequately follow the major trend.

Combining three basic indicators, it is able to predict price fluctuations, thereby forecasting buy/sell scenarios in the market.

Chart Setup

MetaTrader4 Indicators: Three_Color_MA.ex4 (default setting), i-AMA-Optimum.ex4 (default setting), Discipline.ex4 (Input Variable modified: period = 24)

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, Day, Week

Recommended Trading Sessions: Any

Currency Pairs: All pairs

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Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Enter a buy in the market if following indicator or chart pattern gets displayed:

  1. If the black dots on orange line of the i-AMA-Optimum custom mt4 indicator crosses the line of the Three_Color_MA.ex4 indicator bottom up as illustrated on Fig. 1.0 with price trading somewhat above, the momentum in the market is said to be bullish i.e. a buy signal.
  2. If the lime histogram of the Discipline.ex4 indicator aligns above the 0.00 signal level as seen on Fig. 1.0, price is said to be pressured to the upside, hence a buy signal is ripe.

Stop Loss for Buy Entry: Place stop loss below immediate support.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following rules or conditions hold sway:

  1. If the line of the Three_Color_MA.ex4 custom mt4 indicator crosses the black dots on orange line of the i-AMA-Optimum custom mt4 indicator top downwards, price is said to be making a U-turn i.e. a trigger to exit or take profit.
  2. If the red histogram of the Discipline custom mt4 indicator forms below the 0.00 signal level, it is a signal of weaning bulls pressure in the market, hence an exit or take profit is advised.

Sell Entry Rules

Enter a sell in the market if the following indicator or chart pattern gets displayed:

  1. If the black dots on orange line of the i-AMA-Optimum custom mt4 indicator crosses the line of the Three_Color_MA.ex4 indicator top downwards as shown on Fig. 1.1 with price trading somewhat below, the momentum in the market is said to be bearish i.e. a sell signal.
  2. If the red histogram of the Discipline custom mt4 indicator aligns below the 0.00 signal level as illustrated on Fig. 1.1, price is said to be pressured to the downside, i.e. a trigger to sell.

Stop Loss for Sell Entry: Place stop loss above immediate resistance.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit on position(s) if the following holds true:

  1. If the line of the Three_Color_MA.ex4 custom mt4 indicator crosses the black dots on orange line of the i-AMA-Optimum custom mt4 indicator bottom up, price is said to be making a reversal, hence a trigger to exit or take profit at once.
  2. If the lime histogram of the Discipline custom mt4 indicator forms above the 0.00 signal level as seen on Fig. 1.1, it is a signal of weaning bears pressure in the market, i.e. an exit or take profit is advised.

Sell Trade Example

Fig. 1.1

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About The Trading Indicators

The i-AMA-Optimum.ex4 is an improved version of the Kaufman’s Adaptive Moving Average (AMA) that was previously developed by Perry Kaufman and finds use on short and long periods.

The Three_Color_MA.ex4 is an alternative Moving Average.

The indicator plots exponential moving average with the specific period marking diverse color movement upwards and downwards.

The Discipline indicator is a trend reversal technical study that has the ability of spotting impending trend.

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