Trading the trend is probably one of the easiest ways to make money trading forex. Trading with the trend means trading with less resistance as this implies trading towards the market flow. The question is how do we exactly identify the trend direction.
Here we will discuss a strategy that uses an indicator that is very effective in identifying the trend direction.
The SuperTrend indicator is a custom technical indicator designed to help traders determine the direction of the forex pair's trend. Against this background, the SuperTrend indicator can best be described as a trend following technical indicator.
The SuperTrend indicator is calculated based on the Average True Range (ATR). The ATR is a major reason for how the SuperTrend indicator identifies the trend direction.
One of the most popular methods that traders use to identify the trend direction is to look for reversals that move a certain distance against the current trend direction. For example, a trader can hypothesize that a trend has reversed if the price movement counteracts the current trend by more than three times the current ATR. If the price reverses more than three times the ATR, the market is expected to reverse. The same concept is adopted by the SuperTrend indicator.
The SuperTrend indicator draws a line on the price chart to show the direction of the trend. A lime line below the price movement shows an upward trend, while a red line above the price movement shows a downward trend.
The distance of the line can also be adjusted based on the multiplier.
Trend reversals are indicated by the SuperTrend indicator, which is based on the shift of the line and the change of its color. Traders can use this as a trend reversal entry signal.
The SuperTrend line can also be used as the basis for setting up a subsequent stop loss.
Average true reach
The Average True Range (ATR) is a basic volatility indicator that traders can use to objectively measure the volatility of a currency pair.
The ATR average simply identifies the range of movement of each price candle based on pips. The pip range of each candle is then averaged within the specified time period.
The result can be used to assess the volatility of the market at a particular point in time.
The trading strategy
This trading strategy is a simple trend reversal strategy based on the signals provided by the SuperTrend indicator. However, instead of capturing each signal generated by the indicator, trading configurations are filtered based on a long-term trend.
The long-term trend is identified using the 200-period simple moving average (SMA). The long-term trend direction is based on the general location of the price movement in relation to the 200 SMA line and the slope of the 200 SMA line. Trades are only taken in the direction of the trend.
The input signals are based on the shift of the SuperTrend line and the change of its color. Trend reversal signals that correspond to the direction of the long-term trend are considered valid.
The ATR is then used as the basis for the stop loss, since the SuperTrend line is also based on the ATR.
- 200 SMA
- Average true reach
Preferred time frames: 30-minute, 1-hour, 4-hour and daily charts
Currency pairs: FX majors, minors and crosses
Trading Sessions: Meetings in Tokyo, London, and New York
Buy trade setup
- The price movement should be above the 200 SMA line.
- The 200 SMA line should rise.
- The SuperTrend line should change to lime and fall under the price movement.
- After confirming these terms, place an order.
- Set the stop loss to 3 times the ATR.
- Close the deal as soon as the price closes below the SuperTrend line.
Sell Trade Setup
- The price movement should be below the 200 SMA line.
- The 200 SMA line should drop.
- The SuperTrend line should turn red and go beyond the price movement.
- After confirming these terms, enter a sales order.
- Set the stop loss to 3 times the ATR.
- Close the deal as soon as the price closes above the SuperTrend line.
This trading strategy is a basic trend reversal strategy based on the SuperTrend indicator. In fact, there are many traders who only trade based on the SuperTrend indicator.
However, this strategy tries to improve the already effective SuperTrend indicator by adapting trading configurations to the long-term trend and filtering out trades that do not match the long-term trend. This greatly increases the likelihood of successful trade building as the price usually moves in the direction of the long-term trend.
Installation guide for Forex Trading Systems
The SuperTrend Indicator Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator (s) and template.
The essence of this forex system is to transform the accumulated historical data and trading signals.
The SuperTrend Indicator Forex Trading Strategy offers the possibility to recognize various peculiarities and patterns in price dynamics that are invisible to the naked eye.
Based on this information, traders can accept further price movements and adapt this system accordingly.
Forex Metatrader 4 trading platform
- Free $ 30 to start trading immediately
- No deposit required
- Your account will be automatically credited
- No hidden terms
How do I install the SuperTrend Indicator Forex trading strategy?
- Download SuperTrend Indicator 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
- Choose the chart and time frame in which you want to test your forex system
- Right-click on your trading chart and move the mouse pointer over "Template".
- Move right to select the SuperTrend Indicator Forex Trading Strategy
- You will see that the SuperTrend Indicator 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.
Click here to download:
SuperTrend indicator forex trading strategy