Long-term trending markets or currency pairs are one of the best conditions to trade in. During such conditions, trade direction is easier to determine. Not knowing where price is going gives traders a symmetrical risk-taking condition. This means that traders are on a 50:50 chance of having a winning trade, much like having a coin toss. This is not a profitable way to trade. Traders should not be gamblers. Taking a chance on a 50:50 proposition is not what we want. Taking trades knowing that there is a high probability that a trade would go your direction gives us better chances. A 50:50 chance could now be 60:40. That might not sound much but that is enough to allow a trader to consistently profit from the market.
The Trend Squeeze Forex Trading Strategy is a strategy that is aligned with the long-term trend, which allows traders to have a positive expectancy on each trade. This strategy trades on accurate mid-term trend retracement entries while still being aligned with the long-term trend. This allows traders to have a relatively higher probability trade which could also trend quite strongly on the direction of their trade.
The 200-period Exponential Moving Average
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Moving Averages are one of the most commonly used technical indicators that traders use in order to identify trend direction. One of the most common way traders do this is identifying the location of price in relation to a moving average. Traders consider the market to be bullish whenever price is above the moving average line while the market is considered bearish if price is below the moving average.
There are an infinite number of moving averages that a trader could use depending on their preferences or whims. Different traders could have different opinions of the market based on the type of moving average that they are using. This in turn could result in a market which has no clear market bias.
However, there are specific moving averages that are commonly used by many traders. These moving average lines represent a specific trend and many traders watch it in order to make a sense of what the market is doing. One of which is the 200-period Exponential Moving Average (EMA). This moving average is commonly used to determine the long-term trend direction. In fact, many traders use it to filter out trades that are not in agreement with the long-term trend.
Squeeze Light Indicator
The Squeeze Light indicator is an oscillating indicator which is based on the Bollinger Bands and the Moving Average Convergence and Divergence (MACD).
This indicator is an excellent momentum-based trend following indicator which helps determine the mid-term trend direction. It is a type of oscillating indicator which prints histogram bars on a separate window. Positive histograms indicate that the market’s bias is bullish while negative histograms indicate that the market’s bias is bearish. This indicator also conveniently paints the histogram bars based on how it reads the market trend’s direction and strength. Lime histograms indicate a bullish trend, while red histograms indicate a bearish trend. Blue histograms on the other hand are painted on bars where the indicator reads a weak or non-trending market condition.
Hull Moving Average
The Hull Moving Average (HMA) was initially developed by Allan Hull. This moving average line a smoothened type of moving average. This provides for a moving average line that has less false signals provided during a choppy market environment.
It is also quite unique as it changes color whenever it detects a trend change. This is based on the direction of the slope of the moving average line. Lines that are upward sloping are painted lime indicating a bullish trend while lines that are sloping down are painted red indicating a bearish trend. This feature could also be used as an entry signal.
Traders typically use this indicator to determine the mid-term or long-term trend due to its smoothened nature. However, its parameters could also be tweaked to the traders liking.
This trading strategy is a strategy that trades on mid-term retraces during a long-term trend. This is done by taking trades whenever price retraces towards the 200-period EMA. This will also usually coincide with price action entry strategies such as flags and pennants or breakout of supports and resistances, which are typically formed whenever price is retracing towards the 200 EMA.
In order to time our entries more accurately, we will be using the confluence of the Squeeze Light indicator and the Hull Moving Average line. These two indicators are set to determine the mid-term trend. These indicators will temporarily change colors during the retrace. Trade entries are taken as soon as the color of the Squeeze Light and Hull Moving Average line agrees with the long-term trend direction.
- oT_S_Ra-Signal_Line (Hull Moving Average Line)
- Period: 50
- 200 EMA (green)
Timeframe: preferably 1-hour, 4-hour and daily charts
Currency Pairs: preferably major and minor pairs
Trading Session: Tokyo, London and New York
Buy Trade Setup
- Price action should be above the 200 EMA indicating a bullish long-term trend
- Price action should retrace towards the 200 EMA
- The Hull Moving Average should turn red during the retrace
- The Squeeze Light indicator should print negative histograms during the retrace
- Enter a buy order as soon as the Hull Moving Average changes to lime and the Squeeze Light indicator’s histogram changes to lime indicating a bullish trend reversal
- These bullish signals should be somewhat aligned
- Set the stop loss at the support level below the entry candle
- Close the trade as soon as the Hull Moving Average turns red
- Close the trade as soon as the Squeeze Light indicator prints a negative histogram
Sell Trade Setup
- Price action should be below the 200 EMA indicating a bearish long-term trend
- Price action should retrace towards the 200 EMA
- The Hull Moving Average should turn lime during the retrace
- The Squeeze Light indicator should print positive histograms during the retrace
- Enter a sell order as soon as the Hull Moving Average changes to red and the Squeeze Light indicator’s histogram changes to red indicating a bearish trend reversal
- These bearish signals should be somewhat aligned
- Set the stop loss at the resistance level above the entry candle
- Close the trade as soon as the Hull Moving Average turns lime
- Close the trade as soon as the Squeeze Light indicator prints a positive histogram
This trading strategy is a profitable trading strategy. These retraces do typically occur during long-term trends and many traders wait for these trade setups to occur. Price action traders in particular wait for these retraces towards the 200 EMA, which usually forms a diagonal support or resistance of better yet a flag or pennant continuation pattern. Some traders also wait for price to actually tough and reject the 200 EMA. However, there are also many instances when the retrace is not deep enough in which case price action would not be touching the 200 EMA.
Trade this strategy in conjunction with some basic price action setups. This strategy should return a consistent profit if used on the correct market condition, which should be a long-term trend.
Forex Trading Strategies Installation Instructions
Trend Squeeze Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator(s) and template.
The essence of this forex strategy is to transform the accumulated history data and trading signals.
Trend Squeeze Forex Trading Strategy provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.
Based on this information, traders can assume further price movement and adjust this strategy accordingly.
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How to install Trend Squeeze Forex Trading Strategy?
- Download Trend Squeeze Forex Trading Strategy.zip
- *Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
- Copy tpl file (Template) to your Metatrader Directory / templates /
- Start or restart your Metatrader Client
- Select Chart and Timeframe where you want to test your forex strategy
- Right click on your trading chart and hover on “Template”
- Move right to select Trend Squeeze Forex Trading Strategy
- You will see Trend Squeeze Forex Trading Strategy is available on your Chart
*Note: Not all forex strategies come with mq4/ex4 files. Some templates are already integrated with the MT4 Indicators from the MetaTrader Platform.
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