Correlation Forex Trading Strategy

The correlation forex trading strategy combines the custom moving average indicator, the correlation-mt4-indicator and the parabolic SAR in dishing out short-term FX signals.

The essence of the system is to help day traders achieve their profit targets during the day’s session.

Chart Setup

MetaTrader4 Indicators: Correlation-mt4-indicator.ex4 (default setting), Custom Moving Average.ex4 (Color Modified), Parabolic SAR.ex4 (0.02, 0.20)

Preferred Time Frame(s): 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours

Recommended Trading Sessions: Any

Currency Pairs: any low spread pair

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Buy Example (click the image for full size):

correlation-forex-trading-strategy

Fig. 1.0

Strategy

Long Entry Rules:

Enter a long position when the following indicator or chart pattern are in place:

  1. When the Correlation-mt4-indicator lines crosses in the oversold region (-1 to -0.6 region) and forms a corresponding blue upward facing arrow in the indicator window and lime colored horizontal line that has an attached upward facing arrow on the chart widow. This is suggestive of a bullish signal.
  2. The Parabolic SAR forms blue dots below price bars, an indication that price is being pushed to the upside.
  3. Price must close above the Custom Moving Average to validate our bullish signal.

Stop Loss for Long Entry: Place stop loss at appropriate levels below the Parabolic SAR dots (always considering your money management strategy).

Exit Strategy/Take Profit for Long Entry

Watch out for the following conditions before exiting or deciding on taking profits from position(s):

  1. The Correlation-mt4-indicator lines crosses in the overbought region (0.6 to 1 region), with a downward pointing yellow arrow in the indicator window and a corresponding red horizontal line that has a downward facing arrow. This is a reversal trigger during an uptrend.
  2. The Parabolic SAR form dots forms above the candlesticks, an indication that price is about to reverse.
  3. If a bearish candle closes below the Custom Moving Average, then you should consider exiting/closing your open position(s) in the market.

Sell Entry Rules

The following chart/indicator patterns will define a sell entry base on the following rules:

  1. When the Correlation-mt4-indicator lines crosses in the overbought region (0.6 to 1 region) and forms a corresponding yellow downward facing arrow in the indicator window and red horizontal line that has an red downward pointing arrow on the chart widow. This indicates that bears are winning the day.
  2. The Parabolic SAR forms blue dots above price bars, an indication that price is being pushed lower.
  3. Price must close below the Custom Moving Average to validate our bearish signal.

Stop Loss for Sell Entry: Place stop loss at appropriate levels above the Parabolic SAR dots (always considering your money management strategy).

Exit Strategy/Take Profit for Sell Entry

The following conditions should define your exit or take profit strategy:

  1. The Correlation-mt4-indicator lines crosses in the oversold region (-1 to -0.6 region), with an upward pointing blue arrow in the indicator window and a corresponding lime colored horizontal line that has an upward facing arrow.
  2. The Parabolic SAR form dots forms below the candlesticks, an indication that price is about to reverse.
  3. If a bullish candle closes above the Custom Moving Average, then an exit should be considered.

correlation-forex-trading-strategy1

Fig. 1.1

Free Download

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About The Trading Indicators

The Correlation-mt4-indicator is an oscillator that delivers buy and sell signals based on the cross-over of two lines.

The Custom Moving Average shows the mean price value of the asset over a period of time.

The Parabolic SAR doesn’t use lines but dots as seen above and is designed to deliver entry and exit alerts.

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