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Flat Line Forex Trading Strategy

Jul 09, 2019
Download Indicator
Flat Line Forex Trading Strategy

You can now download the Flat Line Forex Trading Strategy for free on AtoZ Markets indicators gallery.

This trading strategy is a form of mean reversion trading that has three components.

First, we would have to know what is the mean or the average. There might be no other simpler way to identify the mean than a Simple Moving Average (SMA). For this strategy, we will be using the 50-period SMA. We will use it to identify if the market has a tendency to trend or is flat. What we are looking for is a relatively flat 50 SMA. We would also be using it as a target, knowing that price would always come back to the mean.

Then, we would have to know if price has jumped high enough. The best way to do this is to use some form of bounded oscillator with a clearly defined overbought and oversold level. For this, we will be using a Stochastic Oscillator, and will be looking for extremes as price pulls away from the 50 SMA.

Lastly, we would need to have an idea if price is showing signs that it has reached its peak and might be starting to go back to the 50 SMA. To do this, we will have to identify candles with long wicks. Wicks are signs of price rejection. It is formed because the market has quickly reversed its sentiment in a very short time, in one candle. Candles with long wicks are good, but it would be better to have a proper pin bar candle. This will be our entry signal.

Indicators:

  • 50-period SMA (Gold)
  • Stochastic Oscillator
    • %K: 13
    • %D:5
    • Slowing: 5

Currency Pair: any

Timeframe: any

Trading Session: any

How to trade with Flat Line Forex Trading Strategy?

Buy (Long) Trade Setup Rules

Entry

  • The 50 SMA must be relatively flat
  • Price must be below the 50 SMA
  • Stochastic Oscillators must be below the oversold level
  • Enter a buy market order on a candle that has a long wick at the bottom that corresponds with the above rules.

Stop Loss

  • Set the stop loss a few pips below the low of the candle.

Exit/Take Profit

  • Option 1: Close the trade as price crosses over the 50 SMA.
  • Option 2: Close the trade at the close of the first bearish candle above the 50 SMA.

Sell (Short) Trade Setup Rules

Entry

  • The 50 SMA must be relatively flat
  • Price must be above the 50 SMA
  • Stochastic Oscillators must be above the overbought level
  • Enter a sell market order on a candle that has a long wick above it that corresponds with the above rules.

Stop Loss

  • Set the stop loss a few pips above the high of the candle

Exit/Take Profit

  • Option 1: Close the trade as price crosses over the 50 SMA
  • Option 2: Close the trade at the close of the first bullish candle below the 50 SMA

How to download and install an indicator?

In order to install the indicator on your MT4 platform, you need to follow these steps:

  1. Click on “Download Indicator” button located at the top right corner of the screen.
  2. Save the file to your computer.
  3. Extract and move the files into MT4>Indicator folder of the MetaTrader4 software file directory.
  4. Restart your Metatrader platform.
  5. Navigate to “Indicators.”
  6. And select “Flat Line Forex Trading Strategy” template to apply it on the chart.

 

Note: This indicator was developed by T. Morris. AtoZ Markets does not carry any copyrights over this trading tool.

 
Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.

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