The Forex Envelope strategy for Metatrader 5 is a great system that is designed to identify and trade the upper and lower bands of a trading range for more pips.
The strategy achieves this feature by plotting two moving average envelope on the activity chart, where one is pushed up at a certain distance and the other shifted downward.
Traders can benefit from trading this strategy when price crosses one of the tunnel boundaries, a move that is considered to be a range breakout.
Additionally, we have added the Price Rate of Change or ROC indicator to filter out corrections that may lead to reversals and spot trends as well.
Trade Setup
MetaTrader 5 Indicators: Envelopes.ex5 (Default Setting), roc.ex5 (Inputs Variable Modified; Period=24)
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: EURCAD, 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:
- If the price opens and closes above the blue upper boundary of the Envelopes Metatrader 5 forex indicator as seen on Fig. 1.0, price is said to be pushed higher i.e. a trigger to go long on the designated forex pair.
- If the light sea green line of the ROC custom indicator breaksand hovers above the 0.00 horizontal reference level as shown on Fig. 1.0, the overall market sentiment is said to be bullish, therefore a buy alert will suffice.
Suggested Stop Loss for Buy Entry: Place stop loss below the lower channel band.
Suggested Exit Strategy/Take Profit for Buy Trade
Exit the buy trade if the following trading conditions are met:
- If while the bullish trend is running, a candlestick is seen to open and close below the red lower boundary of the Envelopes custom indicator, bulls are said to be leaving the market increasingly, hence an exit or take profit stance will do.
- If during a bullish trend,the light sea green line of the ROC forex indicator dips below the 0.00 signal level as illustrated on Fig. 1.0, bulls power is said to be weaning, therefore an exit or take profit stance is advised.
Sell Entry
Open a sell trade if the following trading conditions are met:
- If the price opens and closes below the red lower boundary of the Envelopes forex indicator as depicted on Fig. 1.1, the general market sentiment is said to be bearish, making it appropriate to place sell orders on the desired currency pair.
- If the light sea green line of the ROC custom indicator surges below the 0.00 horizontal signal level as exemplified on Fig. 1.1, bears are said to be claiming the session, hence a sell alert is duly recommended.
Suggested Stop Loss for Sell Entry: Place stop loss above the upper channel band.
Suggested Exit Strategy/Take Profit for Sell Entry
Exit the sell trade if the following trading conditions are met:
- If while a bearish trend is on course, a candlestick is seen to open and close above the blue upper boundary of the Envelopes custom indicator (see Fig. 1.1), bears are said to be closing their positions more and more, hence an exit or take profit stance is recommended.
- If the light sea green line of the ROC forex indicator climbs above the 0.00 horizontal level, bear strength is said to be diminishing, therefore an exit or take profit stance will suffice.
Sell Trade Example: EURCAD, H1 Chart
Fig. 1.1
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MT5 Trading Indicators Used For This Strategy
The Price Rate of Change (ROC) Metatrader 5 forex indicator is used to gauge cyclic price movement, a phenomenon that is attributed to the change in investors’ sentiment, along with market control tussle between the bulls and bears.
The Envelopes Metatrader 5 indicator is a trend indicator that is built after the moving averages and is also tagged a Moving Average Envelopes.