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Stoch EMA Filter Forex Trading Strategy

Amandeep Sonewane | Jun. 12, 2019
Stoch EMA Filter Forex Trading Strategy

You can now download the Stoch EMA Filter Forex Trading Strategy for free on AtoZ Markets indicators gallery

Stoch EMA Filter Forex Trading Strategy is the type of strategy that could be considered as a mean reversion strategy. However, even though it is a mean reversion strategy, we will also be taking into account the direction of the long-term trend.

To have a logical bias as to the direction of the trend, we will be using the 200 Exponential Moving Average (EMA). This is because the 200 EMA is a moving average that many traders look at. The more traders use it, the more reliable it is.

Also, since overbought and oversold conditions, or mean reversion strategies, as a whole, are mostly extreme market conditions we would be needing to look at the longer-term direction of the trend, rather than the short-term to allow for the signal to take place. Having an overbought or oversold condition coincide with a very short-term trend direction are only very few.

Timeframe: any

Currency Pair: any

Session: any

How to trade with Stoch EMA Filter Forex Trading Strategy?

Buy Setup:

  • Price should be above the 200 EMA signifying that the long-term direction bias is bullish
  • Allow the stochastic oscillator to go below the 20-level signifying oversold conditions
  • Wait for the main stochastic indicator line (solid line) to pierce the signal stochastic indicator line (broken line) going up
  • Enter the trade at the close of the signal candle

Stop Loss: A few pips below the fractal formed by the initial up-thrust of price.

Exit: Close the trade as the stochastics lines reach the 70-level.

Sell Setup:

  • Price should be below the 200 EMA signifying that the long-term direction bias is bearish
  • Allow the stochastic oscillator to go above the 80-level signifying overbought conditions
  • Wait for the main stochastic indicator line (solid line) to pierce the signal stochastic indicator line (broken line) going down
  • Enter the trade at the close of the signal candle

Stop Loss: A few pips above the fractal formed by the initial down-thrust of price.

Exit: Close the trade as the stochastics lines reach the 30-level.

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 “Stoch EMA Filter 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.