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Forex trading system "VMA Trend Trading"
Learn to trade the trend using VMA
In this strategy, we are using the VMA indicator that is different from a regular SMA or EMA in that the VMA indicator have a variable of ADX worked into them. ADX measures the strength of trend, so basically we have a moving average that will move when prices are trending. When things are consolidating, the VMA will not move and may even go flat. This helps to solve the major problem of MA with its whipsaw nature. This strategy uses VMA 1 and VMA 4 in which VMA 1 uses ma length of 1 and adx length of 8 whereas VMA4 uses ma length of 4 and adx length of 8. Both indicators of VMA 1 and VMA 4 can go flat without crossing during sideway market and cross when the market is trending.
Details
Categories: Technical, Trend Following, Long-Term Trading, Metatrader Only
Timeframes: ANY, 4 Hour
Currency pairs: ANY
Trading sessions: ANY
Indicators used
- VMA
ADX_Lenght=8
Weighting=2.0
MA_Length=1
MA_Mode=1
Download VMA Indicator
- VMA
ADX_Lenght=8
Weighting=2.0
MA_Length=4
MA_Mode=1
- ATR
Period: 20
Entry rules
We open a sell order when the blue VMA line has cross below the pink VMA line. Vice versa, we open a buy order when the blue VMA line has cross above the pink VMA line as shown in the following picture.
Trade management
The takeprofit and the stop loss are described in the following exit rules.
Exit rules
The trade will exit by itself after we set the stoploss based on the ATR (20) and use a trailing stop of 3x ATR (20) as shown in the following picture.
Advantages
VMA helps to solve the problem of the whipsaw nature of moving average. It gives a very high probability rate of winning, in which the VMA remain flat during sideway market and move only during trending market.
Disadvantages
This strategy may results in some drawdown when the market is not trending strongly.
Metatrader 4 chart template files
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