DMI Forex Strategy For Metatrader 5

In order to succeed at currency trading, one must buy or sell a pair in the direction of the most profitable trend.

Interpreting buy/sell signals from the pair’s price can be daunting and often times confusing due to price swings in both directions and character variations that accompany sessions of high versus low volatility.

Interestingly, the DMI Forex strategy for Metatrader 5 is a valuable trading strategy for determining the most profitable price buy/sell trend direction and its trend strength.

The strategy offers a good combination of the Directional Movement Index with other indicators for confirmation of trend direction or strength.

Let’s discover how we can catch trend using this amazing strategy on your preferred time frame.

Trade Setup 

MetaTrader 5 Indicators: Average Directional Movement Index.ex5 (Parameters Modified; Period=28), Higher Highs & Lower Lows.ex5 (Default Setting), gaussian_filter.ex5 (Inputs Variable Modified; Calculation period=50, Order=4)

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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Download the DMI Forex Strategy For Metatrader 5

Buy Trade Example: EURJPY, 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. If the DMI (light sea green) line of the Average Directional Movement Index Metatrader 5 indicator breaks above the 20.00 level, while the DI+ (yellow green) line aligns above the DI- (wheat) line (see Fig. 1.0), it is an indication that price is being pushed higher, as such a buy alert will suffice.
  2. If the medium sea green line of the Higher Highs & Lower Lows forex indicator staysabove the orange red line as illustrated on Fig. 1.0, price is said to be driven to the upside i.e. a trigger to go long on the selected currency pair.
  3. If the lime green line of the gaussian_filter custom indicator gets positioned somewhat below the candlestick as shown on Fig. 1.0, the general market sentiment is said to be bullish, as such a buy signal will do.

Suggested Stop Loss for Buy Entry: Place stop loss below the most recent key support.

Suggested Exit Strategy/Take Profit for Buy Trade

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

  1. If during a bullish signal the DMI line breaks below the 20.00 level as illustrated on Fig. 1.0, it denotes weak market trend, thus a signal to exit or take profit at once.
  2. If the medium sea green line of the Higher Highs & Lower Lows indicator intersects the orange red line during the course of a bullish trend, an exit or take profit stance is duly advised.
  3. If the line of the gaussian_filter custom indicator turns pale violet red while a bullish trend is running, it is a signal to exit or take profit immediately.

Sell Entry

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

  1. If the DMI (light sea green) line of the Average Directional Movement Index indicator breaks above the 20.00 level, while the DI- (wheat) line gets aligned above the DI+ (yellow green) line as depicted on Fig. 1.1, it is an indication that price is being dragged lower, as such a sell signal is right.
  2. If the orange red line of the Higher Highs & Lower Lows forex indicator staysabove the medium sea green line as exemplified on Fig. 1.1, price is said to be pressured lower i.e. a trigger to go short on the designated currency pair.
  3. If the pale violet red line of the gaussian_filter custom indicator gets positioned slightly above the candlestick as seen on Fig. 1.1, the overall market sentiment is said to be bearish, therefore a sell will suffice.

Suggested Stop Loss for Sell Entry: Place stop loss above the most recent key resistance.

Suggested Exit Strategy/Take Profit for Sell Entry

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

  1. If while a bearish trend is running the DMI line breaks below the 20.00 level, it denotes a weak market trend, therefore an exit or take profit is highly recommended.
  2. If the orange red line of the Higher Highs & Lower Lows indicator intersects the medium sea green line during the course of a bearish trend, an exit or take profit stance is apt.
  3. If the line of the gaussian_filter custom indicator reverts to lime green during a bearish trend, it is a signal to exit or take profit at once.

Sell Trade Example: EURJPY, H1 Chart

Fig. 1.1

Free Download

Download the DMI Forex Strategy For Metatrader 5

MT5 Trading Indicators Used For This Strategy

The Average Directional Movement Index or ADX Metatrader 5 indicator is one that quantifies the strength of a trend.

The default period value is set at 14 bars, although other time periods can also be tested.

The Higher Highs & Lower Lows is a momentum based indicator deigned to spot emerging trends, outline correction periods, and forecast reversals.

The gaussian_filter is a form of generalized Gaussian filter that can calculate arbitrary (order) pole Gaussian filter.

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