forex trading strategy Traffic light
This strategy, according to the creators, best shows itself on the time frame of the D1. This opinion is due to the fact that Traffic Light is a trend system, and the best results it shows during protracted trends. At lower time intervals, trends are significantly smaller and end earlier, and therefore our profits are significantly reduced. Having tested the Traffic Light in trade, we have made sure that high-quality signals come to both М5 and D1. The most important element for working on the strategy is the discipline of the trader and compliance with the rules of trade, and then profit will be possible without being tied to the time interval. You can use the Traffic Light on any currency pairs.
You will learn from this tutorial:
Rules for opening and closing transactions;
Let 's look at examples of how the strategy works on different currency pairs and time slots;
Why it 's so important to follow market entry rules.
Like any other forex trading strategy under consideration, it will require you to be attentive, focused, disciplined and strict to the rules of entry.
The authors of the system propose to use for trade any currency pairs, with a working time frame D1. After testing the work, we found out that the Traffic Light weekly trading system delivers a small number of profitable signals to enter the market, proportional to the selected time segment. The older the interval, the longer you have to wait for the deal to open. Profit can be made not only on day schedules, but even on hour schedules, but such a solution is connected with certain difficulties in implementation. In this article we will try to explain all nuances of trade in the instrument under consideration.
We will use 5 indicators: CCI; Trend Master; HMA modified; RSI; Goldminer 2. The myforex traffic light strategy divides the indicators into basic and auxiliary indicators. In order to enter the market, it is mandatory to have signals from the main indicators, while the absence of prompts from the auxiliary assistants will not be an obstacle to opening a deal. Auxiliary indicators help to improve the quality of entry, main indicators help to determine the moment of opening the transaction.
CCI and Trend Master indicators are auxiliary indicators in the system in question. They confirm the signals of the main indicator, HMA, RSI, Goldminer. In fact, each indicator used is self-sufficient, and can be used for trading as an independent tool. The Traffic Light strategy combined them into a single system to filter out false signals, and create additional filters for successful trading.
Typically, but not always, the HMA modified indicator is the first to signal changed market conditions. This indicator is an improved moving average, but it is much more convenient to work with. HMA changes color as the trend changes direction. The curve turns red when the price falls, and blue when it grows. After the HMA has sent a trading signal, we must analyze the data of the other instruments, as the change in color of all the main indicators is the basis for the start of trading.
For a growing, bull market, RSI custom must change color from red to yellow or green. The Traffic Light system got its name thanks to this assistant. It is responsible for determining the trend, as is the classic RSI, but has the form of a histogram. The yellow color of RSI custom means the same as the crossing of the classic RSI zero mark, the time of trend change. The yellow color of the indicator, like the yellow color of the traffic light, draws the attention of the trader to the need to concentrate on the events taking place.
To extract the highest quality signals, myforex Traffic Light strategy introduces an additional filter responsible for determining the presence of a trend. Goldminer 2 should help RSI custom correctly determine the existence of trend movement. The difference in indicator functions is that RSI custom indicates there is a trend, and Goldminer 2 indicates its direction, up or down.
Mandatory conditions for the growing, bull market, the traffic light system calls the change of colors HMA modified from red to blue, Goldminer 2 from red to blue, RSI custom from red to yellow or green. When all the basic conditions are met, the Trend Master indicator draws an arrow, confirming that the transaction can be opened. By and large, Trend Master signals change nothing for us, except what already known data confirm - there is a favorable moment for trade. All the conditions described will be relevant for both the growing trend and the downward trend.
The Traffic Light system uses another tool to confirm the accuracy of the findings. The Commodity Channel Index indicator or CCI shows the direction of the trend, as well as the sparse of the indicators and the readiness to start trending movement. Forex traffic light strategy requires that if other conditions are met, CCI cross the zero zone in the direction of the trend. This arrangement of the indicator graph indicates sufficient potential for currency exchange rate movements.
We recommend not to distinguish the indicators into basic and additional indicators, but to use strict rules for entering the market when all the listed conditions are strictly observed. The Traffic Light strategy very rarely delivers perfect combinations of signs, but thanks to this, each Traffic Light signal is able to make a good profit.
For sale, the myforex Traffic Light strategy recommends the following combination of signals:
HMA modified changed color from blue to red and points down.
RSI custom changed color from green to yellow or red.
Goldminer 2 changed color from blue to red.
The Commodity Channel Index is preparing to cross or is already crossing the zero zone.
Trend Master marked the entry point with a down arrow.
The deal must be closed when any of the main indicators reverse color.
Working on the investigated system, you will notice, sometimes the arrow Trend Master appears on the next, or a few candles, after the other indicators have reported the trading situation. Sometimes CCI is not where we would like it to be. Such inconsistencies in the ideal combination of signals used by indicators prevent market entry. The Traffic Light system is multifaceted, and due to the fact that each component of it is individually able to give qualitative signals for entering the market, profit can bring even a not ideal combination of indicators.
The Traffic Light system is positioned as a day strategy, but by testing it on clock charts and on М15 we have found out, it is possible to work on almost any time frame. The obstacle to profit at lower intervals is the lag of the trading model behind the price on the chart. Trend indicators generate a signal after generation of a trend. It takes time and part of the momentum of price movement. Also, the signal about closing the position is late, and the price has time to roll back while the indicators change color.
As a result, if the currency pair moves 70 points, half the profit will go away until you open and close the deal. The real profit for hourly schedules is 30-40 points. Quite not bad. On day segments the size of the profit increases significantly, but it is necessary to wait much longer for a favorable moment to enter the market.
If the Traffic Light strategy is the only tool in your trader arsenal, you 'll be bored working. But having in the race several similar, reliable and simple tools, will allow to carry out profitable work and regularly increase the own deposit.