Trading strategies are usually divided into two categories: momentum trading strategies and mean reversal trading strategies.
Momentum trading strategies are those that are based on the trend. Momentum traders would typically try to find price moves that have moved significantly in one direction in a short period of time. This could also refer to trading due to the sudden change of direction.
Mean reversal strategies, on the other hand, refer to trading with overstretched price points under the assumption that the price would always return to its average price. If you think about it, so does it. Whenever the price seems to be at an all-time high, people usually avoid buying that product or item and sellers tend to sell it asap, which brings the price back down. However, if the price is too low, buyers will buy quickly to get the product at a discount, while sellers may drag it off the store's shelves, increasing the price again. The same goes for trading, only the price changes quickly and everything happens on a price chart.
These two types of trading strategies are usually a contradiction in terms. However, there are some special cases where a medium reversal entry can also be a momentum or trend reversal. The DeMarker Arrows Forex Trading Strategy is an example of this type of strategy.
The DeM indicator
The DeMarker indicator, also known as DeM, is an oscillating indicator based on highs and lows. The DeMarker indicator compares the minimum and maximum price average within a certain period of time. Then the results are displayed as a line that swings from zero to one with the center at five.
As a limited oscillating indicator, traders could objectively determine whether the price is viewed as overbought or oversold. In most cases, the oversold and overbought markers are set at 0.3 and 0.7. Whenever DeM is below 0.3, the market is usually considered oversold. If it is above 0.7, the market is considered overbought. This makes the DeMarker indicator useful for medium reversal strategies.
Commodity Channel Index
The Commodity Channel Index or CCI is another type of oscillating technical indicator that was developed by Donald Lambert in 1980.
The IHK is based on a simple moving average and a typical price, which is the average of high, low and near. The CCI is calculated so that 70% of the price is within +/- 100. Prices above or below this range can also be viewed as overbought or oversold. This also makes it useful as a medium flip tool.
However, transitions from negative to positive and vice versa could also be viewed as a trend reversal based on the shift in dynamics. This makes the IHK useful for traders who are reversing the trend.
Buy Sell Arrow Scalper Indicator
The Buy Sell Arrow Scalper indicator is a trend that follows the custom indicator. It shows the trend by drawing a line that follows the price movement and changes color when a trend change is detected. It draws a blue line when it detects an uptrend and a red line when it detects a downward trend. Bars are also drawn attached to the line to show the trend. The bars are placed below when the trend is bullish and above when the trend is bearish.
This trading strategy is a combination of a trend following and a medium reversal strategy based on the above indicators.
The DeMarker indicator is used to determine the market conditions that are most important to the medium reversal. Whenever the DeM is beyond its range indicating that the price may be either overbought or oversold, we should take note of that particular pair. We then wait for it to show signs of reversal based on the line crossing back within its range, which is 0.3-0.7.
The DeM mean reversal scenario should also closely match the trend reversal indicator of the CCI and the Buy Sell Arrow Scalper. The basis for the IHK would be the crossing of the IHK line from positive to negative or vice versa. On the other hand, the buy-sell arrow indicator reversal is based on the change in colors and the appearance of entry signal arrows.
- Commodity Channel Index
Time window: 1-hour, 4-hour, and daily charts
Currency pair: Major and minor pairs
Trading session: Meetings in Tokyo, London and New York
Buy Trade Setup
- The DeMarker line should cross above 0.3 from below, indicating a possible upward movement in the bullish mean
- The CCI line should be above zero, indicating a possible bullish trend reversal
- The buy-sell arrow indicator should change to blue and print an up arrow indicating a possible bullish trend reversal
- Place an order to buy at the confluence of the above conditions
- Set the stop loss under the Buy Sell Arrow Indicator
- When the Buy, Sell, Arrow indicator turns red and a down arrow prints, close the trade
Sell Trade Setup
- The DeMarker line should cross below 0.7 from the top, indicating a possible bearish mean reversal
- The CCI line should be below zero, indicating a possible bearish trend reversal
- The buy-sell arrow indicator should turn red and print a downward arrow indicating a possible bearish trend reversal
- Enter a sell order for the confluence of the above conditions
- Set the stop loss above the Buy Sell Arrow Indicator
- When the Buy, Sell, Arrow indicator turns blue and an up arrow prints, close the trade
This trading strategy is a high probability trading strategy because it combines both medium reversal and trend reversal conditions. When both market conditions coincide, only the likelihood of a trend change increases.
Although middle reversal and trend reversal strategies are not the same type of strategies, these two strategies could still be combined provided we use the right combination of indicators. While the three indicators have different functions in this strategy, they are still complementary indicators that work well together.
Trade management skills are still very important with this type of strategy in order to maximize profits. This includes moving the stop loss to breakeven at the right time and trailing the stop loss towards trades after each trend spike.
Forex Trading Strategy Installation Instructions
DeMarker Arrows 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 history data and trading signals.
DeMarker Arrows forex trading strategy provides the ability to spot various specifics and patterns in price dynamics that are invisible to the naked eye.
Based on this information, traders can assume further price movements and adjust this strategy accordingly.
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How do I install DeMarker Arrows Forex Trading Strategy?
- Download DeMarker Arrows Forex Trading Strategy.zip
- * Copy mq4 and ex4 files to your Metatrader directory / Experts / Indicators /
- Copy the tpl file (template) into your Metatrader directory / templates /
- Start or restart your Metatrader client
- Select the chart and timeframe in which you want to test your forex strategy
- Right click on your trading chart and hover over “Template”.
- Move right to select DeMarker Arrows Forex Trading Strategy
- You will see that the DeMarker Arrows Forex trading strategy is available on your chart
* Note: Not all forex strategies come with mq4 / ex4 files. Some templates are already built into the MT4 indicators of the MetaTrader platform.
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