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:
- 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.
- 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:
- 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.
- 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:
- 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.
- 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:
- 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.
- 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.