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:
- Click on “Download Indicator” button located at the bottom of the post.
- Save the file to your computer.
- Extract and move the files into MT4>Indicator folder of the MetaTrader4 software file directory.
- Restart your Metatrader platform.
- Navigate to “Indicators.”
- 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.
