T3 MA Forex Trading Strategy
The basic principle of this strategy is to use price action and some simple indicators to get an idea of where the price of the currency asset is heading, without having to use all manner of confusing indicators on the charts.
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Indicators
The indicators to be used for this strategy are as follows:
1) A simplified version of the Autopivot calculator which displays only the weekly pivot in addition to the regular support and resistance levels of S1, S2, S3, R1, R2 and R3.
2) A custom moving average indicator known as T3 MA. This is set to 6, and colour is adjusted to yellow for purposes of clarity on the charts.
3) The Parabolic SAR default indicator on the MetaTrader4 platform which is set to 0.05 to 0.5.
4) Another custom indicator known as FF Tunnel Slope, set to its default settings. This indicator is used on the daily chart to confirm the direction of the trend.
Time Frames
The time frame chart used for analysis is the daily chart and the hourly charts.
Daily Chart: The purpose of the daily chart is trend determination and it is on this chart that the T3 MA, parabolic SAR and FF Tunnel Slope indicators are applied to. What are the things to look out for on the daily chart when determining the trend of the currency asset?
1) Look at the parabolic SAR indicator which appears as tiny spots. As the trend is about to change, the spots of the indicator begin to come closer to the T3 MA as well the candlesticks, and ultimately changes position (from above to below when trend has changed from uptrend to downtrend, and from below to above the candlesticks when trend has changed from downtrend to uptrend).
2) The FF Tunnel Slope indicator resembles a histogram and therefore changes from positive to negative when the trend changes to a downtrend, and from negative to positive when the trend changes to an uptrend.
Hourly Chart: One the hourly chart, a change is made to the regular autopivot calculator to include the daily pivot point. If you click here, you will get access to an autopivot calculator that can plot the regular daily pivot as well as the weekly pivot points, in addition to the support and resistance points. In addition, one more indicator is added to the mix; the Bollinger Squeeze indicator. The T3 MA indicator is also adjusted to 13 (colour blue) and 21 (colour red) and added to the existing one set to 6 (colour yellow). The Bollinger squeeze indicator is able to indicate points where the Bollinger bands have squeezed without actually having the Bollinger band indicator itself on the chart to reduce chart clutter.
On the daily chart, the 13 and 21 T3 MAs are used as momentum indicators while the 6 T3 MAs are used to derive entry and exit points.
Trade Implementation
The following rules should be observed.
1) The parabolic SAR must be on the same side of the bars on both daily and hourly charts. If there is a conflict, do not trade.
2) The 6 T3 MA and 13 T3 MA must cross the 21 T3 MA for a trade signal to occur. Of course, an upward cross is a long entry signal and a downward cross is a short entry signal. Of course, this should accompany a change in the positioning of the parabolic SAR in the corresponding direction.
3) Exit the trade using the 6 T3 MA slope change as well as the change in the positioning of the FF Tunnel Slope histogram as guiding parameters.
Setting Stop Loss and Profit Targets
When setting a stop loss, it is better to set an arbitrary stop loss using a support (for buy) or resistance point (for sell) as guidance points. Once the trade has moved considerably into profit territory, use a trailing stop so that you can follow the movement of the currency asset till its logical conclusion.
Several factors can be used to judge the correct points at which to exit a profitable trade. These are as follows:
a) Utilizing a trailing stop which will work by chasing the market as it advances and halting when price starts to retreat so as to lock in profits. If the trailing stop is triggered by retreating prices, the trade will end in profit.
b) Slope change as indicated by the FF Tunnel Slope crossing from positive to negative territory (for long entry) or crossing from negative to positive territory (for short trades). This indicated change in trend and so tells the trader it is time to head for the exit door.
c) Use the support and resistance points as defined by the autopivot as points to exit long trades (at resistance) or short trades (as support).
This strategy is not as complex as it looks and if you have the indicators in place and put in some practice, you will eventually master the strategy.