Conservative forex strategy, using conservative tools (CCI – commodity channel index) and moving averages to enter and exit the position. Strategy follows trend which enables high risk reward ratio (up to 1:20). Entering the position is improved by using candle signal instead of conservative CCI exits overbought/oversold zone approach.
It is suitable to use it in higher timeframes, as a long term investment strategy. Therefore, it is also suitable to use fundamental market analysis to avoid holding the position after change of fundamentals.
Used forex indicators:
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Smoothed moving average (SMA) 35, green
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Smoothed moving average (SMA) 80. red
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Commodity channel index (CCI) period 21
Forex strategy rules:
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SELL:
Green SMA 35 is trending below red SMA 80. This will be considered to be downtrend and we will enter only short positions.
CCI 21 rises above 100 line into the overbought zone. We wait for first bearish candle to close below the lows of at least three consecutive previous candles. This will signalize end of an upward correction and we will enter the trade short immediately on new candle open. Stop loss is placed at the top of a formation. One pip above its high.
Take profit: After price travels distance that equals distance between entry ant stop loss, we move our stop loss to break even.
Full target profit:
Once EMA 35 crosses EMA 80 upwards.
CCI falls below -100 line and buy signal occurs. We will not enter long while green SMA remains below red SMA, just exit the short position.
BUY:
Green SMA 35 is trending above red SMA 80. This will be considered to be uptrend and we will enter only long positions.
CCI 21 falls below - 100 line into the oversold zone. We wait for first bullish candle to close above the highs of at least three consecutive previous candles. This will signalize end of a downward correction and we will enter the trade long immediately on new candle open. Stop loss is placed at the bottom of a formation. One pip below its low.
Take profit: After price travels distance that equals distance between entry ant stop loss, we move our stop loss to break even.
Full target profit:
Once EMA 35 crosses EMA 80 downwards.
CCI rises above 100 line and sell signal occurs. We will not enter short while green SMA remains below red SMA, just exit the long position.
NOTES to the forex strategy:
Using SMA triggered exit will keep you waiting through many corrections opposing your position, often times exiting the trade at fraction of maximum profit that reached while you were in trade. In volatile forex market it is often times a better bet to use opposing CCI signal as exit method. However, do not enter the trade if it is not confirmed by correctly lined SMA.
