The idea behind this strategy is to use the Rainbow MA as an area to wait for pullbacks on. But first, we would have to identify if we are on a trending market or even at the start of a trend.
To identify a trend, we would be using a couple of rules. First, the Rainbow MA should be in agreement with the intermediate trend, the 50-period Exponential Moving Average (EMA). It should be on the correct side of the 50 EMA. Then, the price should be pulling away from the Rainbow MA to the direction of the trend. Lastly, as price pulls away, the Rainbow MA would have a tendency to fan out, so it should be fanning out wide enough. Then we wait for the pullback.
The pullback and entry will be simple. We will wait for the price to pull back and close inside the Rainbow MA, then wait for it to exit and close towards the direction of the trend. This indicates the resumption of the trend. If this happens, then we pull the trigger and watch the price run.
Indicators
- RainbowMMA_09 (Sky Blue)
- RainbowMMA_10 (Gold)
- 50 EMA (Magenta)
Timeframe: 5-minute chart
Currency Pair: any major pair
Trading Session: London or New York session
How to trade with Sonic Wave Forex Day MT4 Trading Strategy?
Buy (Long) Trade Setup Rules
Entry
- The Rainbow MAs should be above the 50 EMA
- Price should come from above the Rainbow MAs
- The Rainbow MAs should be fanning out
- Wait for price to retrace and close inside the Rainbow MAs
- Enter a buy market order as price closes back above the Rainbow MAs
Stop Loss
- Set the stop loss at the fractal below the entry candle
Exit
- Close the trade on profit as price enters back and closes inside the Rainbow MAs
Sell (Short) Trade Setup Rules
Entry
- The Rainbow MAs should be below the 50 EMA
- Price should come from below the Rainbow MAs
- The Rainbow MAs should be fanning out
- Wait for price to retrace and close inside the Rainbow MAs
- Enter a sell market order as price closes back below the Rainbow MAs
Stop Loss
- Set the stop loss at the fractal above the entry candle
Exit
- Close the trade on profit as price enters back and closes inside the Rainbow MAs
How to download and install an indicator?
In order to install the indicator on your MT4 platform, you need to follow these steps:
- Click on the “Download Indicator” button located at the bottom of the screen.
- Save the file to your computer.
- Extract and move the files into the MT4>Indicator folder of the MetaTrader4 software file directory.
- Restart your Metatrader platform.
- Navigate to “Indicators.”
- And select the “Sonic Wave Forex Day MT4 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.
