BB Wave Trading System
In this article we will present a trading strategy based on customized indicators for MetaTrader 4. It is actually a system for medium-to-long-term operations (graphics H4 and 1 D) which can be useful for traders who prefer these time frames because of their lower market noise and have the patience to wait for input signals.
It is a strategy with 2 variants, a trend tracking, which logically has a greater potential for benefits, and another to take advantage of movements against trend, ie corrections of trends, which also have a good potential.
The system is based on the approach of Raghee Horner, which is a proven method developed by this famous trader to use moving stockings in order to detect the prevailing trend of the market. As such, it can be used in virtually any market. The author bases its strategy on the use of 3 exponential moving averages of 34 periods, calculated on the maximum price, minimum and closing. The use of these moving stockings is not random, because it is a Fibonacci-based EMA. The concept is both simple and interesting.
Something that can also be interesting for the trader is that the candles in the system show when the market has a bullish, bearish or neutral behavior.
As always, it is recommended to test the system in a demo account before you risk real money.
The custom flags and the MetaTrader 4 template are included at the end of the article.
System rules
This system is recommended primarily for daily and 4-hour graphics.
It can be used in any currency pair.
Part One: Rules for tracking trends
This part is based on the Raghee Horner's 34 ema.
The rules for opening positions are as follows:
Buying positions: A long position is opened when the price action is above the line of the Raghee Horner 34 ema Verde and the candles are green.
Sales positions: A short position is opened when the price action is below the line of Raghee Horner 34 EMA Red and the candles are red.
The blue candles are neutral and therefore it is recommended to stay out of the market.
Note:
-It is recommended that the charts of 1 hour, 4 hours and daily are in sync.
Part Two: Rules for countertrend operations in a daily chart
The rules for opening countertrend positions are as follows:
The price action must be within the second and third deviations.
For purchase positions the RSI must be below 30 and WR% below-80. For sales positions, the RSI must be above 70 and WR% above-20. These are levels that indicate a possible exhaustion of the movement.
We wait for the RSI and WR% to move in the opposite direction from the overbought/oversold areas before performing the countertrend operation on the daily graph or 4 hours. However, this does not ensure that the oscillation/trend is going to reverse. It is important to remember that Bollinger bands and oscillators can remain overbought/oversold for long periods of time.
System Example
In the image above we see an example of a purchase signal for an operation in the same direction as the market trend and a sales signal to open a position in the opposite direction to the upward trend.
In the signal that is produced in the direction of the trend, green candles are observed that close above the exponential moving average of 34 periods calculated on the maximum price (green line), which indicates that we are facing a movement of upward trend that are likely to continue.
In the countertrend signal, it is observed that the price has risen with strength and is between the second and third deviation of the Bollinger bands. In addition, the RSI and WR% indicators are emerging from overpurchase areas, increasing the likelihood of a bearish countertrend movement.
Final considerations
When you open positions in favor of the trend, it is important to take into account the levels of the Bollinger bands for the outputs. For the first profit-taking goal, you can use the middle level of Bollinger bands while the second profit-making target can be placed in the second or third diversion of Bollinger bands.
You can download the template and custom indicators the strategy in the following links:
Note: template files (TPL) are placed in the Templates folder, while the custom flags (.exe and mq4) files must be copied to the indicators folder.
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