Contrarian Forex Strategy For Metatrader 5

For currency traders who are fans of picking peaks and troughs, taking a contrarian trading approach isn’t a big deal.

Market watchers are a bit hesitant to go against the long-term trend, especially when all charts points to a particular direction and event risk also supports the current market sentiment.

The Contrarian Forex strategy for Metatrader 5 is designed to trade against the major trend, although it sounds intimidating when your trading signals leads you to an out of favor bias.

The big advantage of this strategy is the use of low risk stops with good reward.

Trade Setup 

MetaTrader 5 Indicators: Moving Average.ex5 (Parameters Modified; Period=36, Metho=Simple), Gann_high-low_activator.ex5 (Default Setting), double_smoothed_stochastic_1_1t17.ex5 (Default Setting)

Trade Style: Scalping, day trading, swing trading

Trading Sessions: London | New York | Tokyo

Currency Pairs: Majors, cross pairs, exotics

Platform: Metatrader 5 (MT5)

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Buy Trade Example: EURUSD, H1 Chart

Fig. 1.0

Trading Strategy Rules For Buy and Sell Trades Explained

Buy Entry

Enter a buy trade if the following trading conditions are met:

  1. Following an overall bearish bias (seen when we zoom out of the price chart), if the dark gray line of the double_smoothed_stochastic_1_1t17 custom indicator breaksabove the oversold region (below the 20.00 level) as shown on Fig. 1.0, price is said to be pressured to upside i.e. a trigger to go long on the designated forex pair.
  2. If the blue 36 SMA Metatrader 5 indicator line crosses below the dual colored line of the Gann_high-low_activator custom indicator as depicted on Fig. 1.0, a bullish signal is said to be looming.

Suggested Stop Loss for Buy Entry: Place stop loss below the most recent swing low.

Suggested Exit Strategy/Take Profit for Buy Trade

Exit the buy trade if the following trading conditions are met:

  1. If the dark gray line of the double_smoothed_stochastic_1_1t17 custom indicator falls below the 80.00 horizontal after rising above it (see Fig. 1.0), bullish exhaustion is said to be kicking in, as such an exit or take profit is recommended.
  2. If the blue 36 SMA indicator line intersects the dual colored line of the Gann_high-low_activator forex indicator while a bullish trend is ongoing, a bearish reversal is said to be underway, therefore an exit or take profit is advised.

Sell Entry

Open a sell trade if the following trading conditions are met:

  1. Following an overall bullish market bias (seen when we zoom out of the price chart), if the dark gray line of the double_smoothed_stochastic_1_1t17 custom indicator breaksbelow the overbought region (above the 80.00 level) as depicted on Fig. 1.1, price is said to be dragged to the downside i.e. a trigger to go short on the selected currency pair.
  2. If the blue 36 SMA indicator line crosses above the dual colored line of the Gann_high-low_activator custom indicator as illustrated on Fig. 1.1, a bearish signal is said to be on the horizon.

Suggested Stop Loss for Sell Entry: Place stop loss above the most recent swing high.

Suggested Exit Strategy/Take Profit for Sell Entry

Exit the sell trade if the following trading conditions are met:

  1. If the dark gray line of the double_smoothed_stochastic_1_1t17 custom indicator surges above the 20.00 horizontal after falling below it (refer to Fig. 1.1), a bullish reversal is said to be imminent, as such an exit or take profit is advised.
  2. If the blue 36 SMA indicator line intersects the dual colored line of the Gann_high-low_activator forex indicator during a bearish trend, bears power is said to be weaning, therefore an exit or take profit will suffice.

Sell Trade Example: EURUSD, H1 Chart

Fig. 1.1

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MT5 Trading Indicators Used For This Strategy

The 36 SMA (Simple Moving Average) is a technical analysis indicator that smooths out price data by constantly creating an updated average price.

The Gann_high-low_activator is a Metatrader 5 indicator that simply represents a Simple Moving Average (SMA) of the prior N periods’ low or highs.

The double_smoothed_stochastic_1_1t17 is a custom forex indicator that compares the closing price of a currency pair to the range of its prices over a specified period of time.

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