Trend following strategies are one of the most powerful strategies available to traders. It offers traders the opportunity to make trades that have the potential to generate the high returns. If trend-following strategies are used with the right filters that take into account the long-term trend, use exit strategies that enable profitable trades, and use precise entries with high probability, they can actually make big profits.
The Trend Cloud Forex Trading Strategy is a trend following strategy that attempts to tick all of the above boxes. Trades are executed that are aligned with the long-term trend, profitable trades can be executed, and entries with a high probability are used. It uses a combination of custom indicators that meet these requirements.
Trend Manager indicator
The Trend Manager indicator is a custom indicator that acts as a zone marker. Visually, those familiar with the Ichimoku cloud indicator would notice its similarity to the Ichimoku cloud function.
Basically, it looks like a cloud that changes colors when the trend changes. Blue shading represents a bullish market condition, while red shading represents a bearish market condition.
The trend manager indicator also serves as support and resistance. The price would tend to bounce off when visiting the area. Since the trend manager indicator represents the medium term trend, the trend tends to be reversed when the price penetrates and breaks through it.
FX Trend Power Indicator
FX Trend Power is a custom indicator that tries to predict the trend and shows traders the general medium term trend direction. To do this, a colored line is drawn in the window below the price diagram. When the market is bullish, the indicator draws a blue line. On the other hand, when the market is bearish, it draws a gold line.
Trading strategy concept
The Trend Cloud Forex Trading Strategy is a trend following strategy that adapts to the long-term trend while using precise entries. In this way, the strategy allows traders to have an improved likelihood compared to most trend-following strategies.
To adjust trades to the long-term trend, the strategy uses the 200-period Exponential Moving Average (EMA). This moving average is often used by professional traders as a tool to determine the long-term trend. To determine the trend using the 200 EMA, we will identify the price location in relation to it. When the price is generally above 200 EMA the market is said to be bullish while the market is said to be bearish when the price is generally below that. While the 200 EMA is a long-term trend and usually doesn't change direction too steeply, it is still important to note the slope of the 200 EMA. Trends tend to be stronger when the 200 EMA is falling. Hence, only trade configurations with a significant slope should be traded while avoiding flatter 200 EMAs as this may indicate that the trend is not as strong.
The entries are based on the two custom indicators, the Trend Manager Indicator and the FX Trend Power Indicator. Individually, these two indicators seem to generate decent trading signals. However, when used together, the trading signals generated appear to have better win rates. The FX Trend Power indicator usually responds sooner than the Trend Manager indicator. As such, we would look at it to determine possible input signals. Then we wait for the Trend Manager indicator to match the Forex Trend Power indicator. Trades would be initiated once these two indicators coincide with the direction of the 200 EMA.
The Trend Manager is not just an entry signal. It also acts as a support and resistance zone. Trades usually invalidate when price penetrates them. Hence, we will place our stop losses on the other side of the Trend Manager indicator and let the trade run until the stop. This ensures that we can stay in trading until the trend subsides.
- 200 EMA (gold)
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 (Long) Trade Setup
- The price should be above 200 EMA, indicating a bullish long-term trend
- The Trend Manager indicator should be above 200 EMA
- The FX Trend Power indicator should display a blue line that indicates a bullish medium-term trend
- Enter a buy order as soon as the trend manager indicator turns blue, confirming the start of the bullish medium-term trend
- Set the Stop Loss under the Trend Manager indicator
- Follow the stop loss below the Trend Manager display until it is stopped
Sell (Short) Trade Setup
- The price should be below 200 EMA, indicating a bearish long-term trend
- The Trend Manager indicator should be below 200 EMA
- The FX Trend Power indicator should display a gold line indicating a bearish medium term trend
- Enter a sell order as soon as the Trend Manager indicator turns red, which confirms the start of the bearish medium-term trend
- Set the Stop Loss above the Trend Manager indicator
- Track the stop loss above the Trend Manager indicator until it is stopped
This strategy is a trend following strategy with a decent win ratio and a high reward-to-risk ratio. Most trend following strategies tend to have a low win ratio. This is likely because most trend following strategies act in either direction without considering the long-term trend. Trend-following strategies are only profitable if they usually have a good risk-reward ratio.
However, the Trend Cloud Forex Trading Strategy has a better win rate than most trend following strategies while still having a very good reward to risk ratio. It usually gives returns of 4: 1 and higher.
Forex Trading Strategy Installation Instructions
The Trend Cloud 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.
The Trend Cloud Forex Trading Strategy offers the ability to spot various peculiarities and patterns in price dynamics that are not visible to the naked eye.
Based on this information, traders can assume further price movements and adjust this strategy accordingly.
Recommended Forex Metatrader 4 trading platform
- Free $ 30 to start trading right away
- 2nd deposit bonus up to $ 5,000
- Unlimited loyalty program
- Award winning forex broker
Click here for the step-by-step XM Trading Account Opening Guide
How do I install the Trend Cloud Forex Trading Strategy?
- Download Trend Cloud 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 trade chart and hover over "Template".
- Move right to select the Trend Cloud Forex Trading Strategy
- You will see that the Trend Cloud 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.
Click below to download:
Get download access