MBFX Trading Strategy

Author

Tobias Robinson

Tobias is a UK director and partner at Investing.co.uk. He provides commentary on the financial markets in the UK and supports the testing team with first-hand observations from over two decades of active trading.

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Fact Checker

William Berg

William is an experienced investment writer with a history in forex trading software localization and IPO consultancy. He contributes as an author and fact-checker for established financial websites.

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The MBFX forex trading strategy is one of the trading strategies that employ the price action system of analysis to create trading signals. Created by a 27-year veteran of forex trading, this strategy is a simple but very effective way of trading the markets.

The strategy runs on the principle of price reversals. It utilises two forex indicators to detect periods when the markets top out to create a possible selling area, and when the markets bottom out to create a region of buying. To put it very simply, the strategy tells the trader to buy when the price touches the green bars of one of the indicators, and to sell when the price touches the red bars of one of the indicators.

Indicators

The MBFX trading system utilises two indicators namely:

1)    Currency meter

2)    MBFX Timing Indicator

The currency meter is used to detect which currencies are suitable for trading. Generally speaking, this strategy suits trending currencies very well. When using the currency meter to test the suitability of a currency for trading with the MBFX strategy, check to see if the price action of the currency is able to get to both extremes of movement, as depicted by the bars of the currency meter. These bars are red on top, green below and blue in the middle. If a currency is able to achieve this, then it can be traded with the MBFX strategy.

The MBFX Timing Indicator is the cornerstone of the strategy. It appears in an indicator window under the currency asset chart. It works by changing colours like the lights at a traffic stop. It turns from green to yellow to red as the price of the asset moves from the oversold to overbought zones, and from red to yellow to green as price moves from the oversold zones to overbought zones. These colour changes serve as the signal to the trader to pull the trigger. We will discuss how to take trades using the colour changes later in the article.

Time Frames

This strategy can be used to trade short, medium and long term time frames.  If you are a scalper, then you will find this system useful in picking out points at which sell and buy scalps can be done with greater accuracy than most systems around. The 1 minute chart is the time frame for the scalpers.

If you are a day trader, then the 30 minute and hourly charts are there for you.

However, the 4hour and daily charts serve as the charts of choice, with trading accuracy approaching 98% and of course, with more profits to pull in due to the wide range of price on these charts.

Entry Rules for Long Trades

The trader should go long when these two parameters are satisfied:

1)    Price action candle has kissed or cut the green curved lines on the chart.

2)    The MBFX Timing indicator has changed colour from red to yellow, or from yellow to green.

Entry Rules for Short Trades

The trader should go short when these two parameters are satisfied:

1)    The price action candle has kissed or cut the red curved lines on the chart.

2)    The Timing indicator has changed colour from green to yellow or from yellow to red.

In this strategy, there is no room for impatience. The trader must wait for the price action candles to do their job, and then enter the trades at the open of the next candle.

Here’s a note of caution to traders. The real success behind the system is in using money management for all trades. The MBFX trading strategy employs a 2:1 profit to risk ratio, which means that even if a trader has an equal number of winning and losing trades, the trader will still make money. Problems only arise when all money management rules are thrown out of the window, so that disproportionate exposure to the market now tilts the profit to risk ratio markedly in favour of risk, meaning that a lesser number of losers is required to offset the greater number of trade winners. This is a situation the trader must avoid at all cost.

The beauty of this system is that unlike most other systems that use the price action method of analysis, the blue line on the chart serves as the profit target for all trades, whether buy or sell. This gives the trader a clear visual depiction of what needs to be done in terms of profit potential.

The entire MBFX strategy is commercially sold and comes with the complete suite of indicators. The trader should try as much as possible to use this system first on demo, and then on a small volume live account such as the no-deposit account which provides real market conditions at zero risk to the trader.