Trading is a game of probability. One of the better advantages of trading is the higher likelihood that the price will move in your favor and not against it in the near future. Otherwise, you would end up holding a trading position at a loss, hoping that the price would reverse and go in your favor. On the other hand, if the price initially moved in your favor, you would have some leg room to let the price move around and not worry about it.
Aroon Quantile Bands' Forex trading strategy takes into account the chances of a trade going your way within a few candles.
The Aroon oscillator display
The Aroon indicator was developed by Tusar Chande in 1995. This indicator should indicate when the trend is most likely to change. The speed at which the price reaches its highs and lows is determined.
The standard aroon indicator consists of two components: Aroon Up and Aroon Down. Each line measures the number of days since the high and low point within a certain period and is then divided by a preset number of periods. This creates two lines that swing up and down and sometimes cross. These crossovers indicate the point at which the trend is very likely to reverse.
The Aroon oscillator has the same function, but differs considerably from the standard Aroon display. The Aroon oscillator determines the difference between the two lines and records it as a histogram bar. Whenever the Aroon Up line is above the Aroon Down line, the Aroon Oscillator prints a positive histogram. However, if the Aroon Down is above the Aroon Up line, the Aroon Oscillator prints a negative histogram bar. This considerably eases the eye as an indicator and at the same time offers the advantage of being able to measure how far the lines are apart. If the lines are further apart, the trend tends to be stronger theoretically. Based on a strong trend, you would also have an idea if the trend slowed down because the histogram bars would be smaller.
The quantile bands
The idea of quantiles comes from the field of statistics. Quantiles are basically intersections that divide a range into intervals with equal probabilities.
This idea, borrowed from the statistics, was transferred to the trade in order to identify the trend based on the movement of the quantiles.
The quantile bands consist of three lines. The middle quantile and two outer quantiles. The trend is identified by how these lines move. In an upward trend, you would find that all three quantiles are moving up, while in a downward trend, all three quantiles are moving down.
Trading strategy concept
This strategy uses these two probability-based indicators to identify points where the market tends to reverse.
The Aroon oscillator is used to determine an entry point at which the price would be more likely to trade immediately, usually within 5 candles. Reversal strategies can sometimes be difficult to figure out, and many reverse trade setups can take quite a long time to get the price in your favor. With the Aroon oscillator, we can do reverse trading setups that would be more likely to make profits earlier.
The quantile bands, on the other hand, are used to identify trades that are more likely to reverse. This is pretty accurate because the quantile bands themselves are based on probabilities and statistics.
Indicators:
- Quantile_bans_3
- Aroon_Oscillator_v1
Time window: 1-hour and 4-hour charts
Currency pair: Only major and minor pairs
Trading session: any
Buy (Long) Trade Setup
entry
- The Aroon oscillator should start printing blue Dodger bars, indicating a strong upward trend
- The quantile bands should fall off
- The centerline of the quantile bands should change to lime green, indicating the likely beginning of an upward trend
- Place a purchase order at the confluence of the above terms
Stop loss
- Set the stop loss below the center line of the quantile bands
output
- Close the trade as soon as the Aroon Oscillator histogram turns white, indicating a weaker trend
Sell (Short) Trade Setup
entry
- The Aroon oscillator should print red bars, indicating a strong bearish trend
- The quantile bands should fall off
- The centerline of the quantile bands should change to sand brown, indicating the likely beginning of a downward trend
- Enter a sales order at the confluence of the above conditions
Stop loss
- Set the stop loss above the center line of the quantile bands
output
- Close the trade as soon as the Aroon Oscillator histogram turns white, indicating a weaker trend
Conclusion
This strategy is based on probabilities. In fact, both indicators emphasize the likelihood of observing the market. This enables us to conduct reverse transactions with high probability that could go in our favor.
Installation instructions for forex trading strategies
Aroon Quantile Bands' Forex trading strategy is a combination of Metatrader 4 (MT4) indicator (s) and template.
The essence of this forex strategy is to transform the accumulated historical data and trading signals.
Aroon Quantile Bands' Forex trading strategy offers the opportunity to recognize various peculiarities and patterns in price dynamics that are not visible to the naked eye.
Based on this information, traders can accept further price movements and adjust this strategy accordingly.
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How do I install Aroon Quantile Bands Forex Trading Strategy?
- Download Aroon Quantile Bands Forex Trading Strategy.zip
- * Copy mq4 and ex4 files into your Metatrader directory / Experts / indicators /
- Copy the tpl file (template) into your Metatrader directory / templates /
- Start or restart your Metatrader client
- Choose the chart and time frame in which you want to test your forex strategy
- Right-click on your trading chart and move the mouse pointer over "Template".
- Move right to select Aroon Quantile Bands' Forex trading strategy
- You will see that Aroon Quantile Bands' Forex trading strategy is available on your chart
* Note: Not all forex strategies come with mq4 / ex4 files. Some templates are already integrated in the MT4 indicators of the MetaTrader platform.
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