Setup and Indicators for Metatrader;
- Timeframe 1 Hour Chart
- Pair GBPUSD or other currency pair
- CCI 20 (Commodity Channel Index, Period 20, Typical Price)
- EMA34 High, EMA34 Close, EMA34 Low. This three EMA-s will be treated as one indicator called The Wave. We will call them Wave-top, Wave-middle and Wave-bottom.
The Wave is a great tool that helps us to determine the trend. This is description to determine trend using The Wave;
Uptrend: The price has already crossed the Wave upward and the price is above the wavebottom at this moment.
Downtrend: Similarly, the market is trending down if the price is below the the Wave-top.
Long Entries
- Be sure that the market is trending up.
- Price was above the Wave for some time. (above the Wave-top)
- Price entered the Wave. Price was above the Wave and then crossed the Wave-top downward.
- CCI crossed +100 line upward; A POSSIBLE LONG ENTRY SIGNAL on the next candle open. This is a good signal to go long on the next candle open. But be careful...
- “Five bars check” rule. Check that CCI was below the +100 line for at least five bars before the cross.
- Check that the market is trending up now. Check that the price is above the Wave-bottom as with the first rule.
- Buy now! If all above is filled, buy as new candle opens.
Simply said, price entered the Wave and then returned back up. But this sentence sounds too subjective. We have put it all into mechanical rules that are easy to follow.
Don't enter the market when you “feel” that the price is going up again. Some traders do so, but they get stuck when the price plunges lower! Don't rely on the standard breakout system. The breakout may be false. Enter only if CCI crossed the line! Look at the picture carefully. Do you see that we have entered the market before the breakout... before the crowd?! Do you see the great advantage of the MagicBreakout strategy?
Short entry:
- CCI crossed the -100 line downward.
- Look at CCI when the candle has closed. Was it above the -100 line for at least five bars? Is it below the -100 line now? If yes, continue to the next step. We have to check market conditions. Is price trending down? Is price below the Wave-top? (Stick with our definition! Don't let your feeling or intuition to define the trend! Trend definition is a mechanical task here, although sometimes counterintuitive.) If yes, go to the next step.
- Do you see a valid swing pattern? Train your eyes on the first few trades and you will see the swing pattern subconsciously without reviewing the rules. Review: price was below the Wave and then entered the Wave (in other words, price crossed the Wave-bottom upward). OK?
- Sell now! And prepare your exit targets...
Exit rule
Plan your trade, trade your plan. Let's assume we have opened a long position. We must take care about
profit target and stoploss right after entry.
- Place the first profit target (sell-limit order) at 1.618 Fibonacci level;
- Place the second profit target (sell-limit order) at 2.0 Fibonacci level;
- Place stoploss (sell-stop order) at 0.0 Fibonacci level.
As the price hits our first target, close a half of the position (so we recommend you to trade at least two
lots/minilots). As the price hits our second target, sell the rest. Place stoploss just two pips below the
0.0 level. The low acts as support and if broken, the trend is probably over.
Exit from a short position:
- Place the first profit target (buy-limit order) at 1.618 Fibonacci level;
- Place the second profit target (buy-limit order) at 2.0 Fibonacci level;
- Place stoploss (buy-stop order) at 0.0 Fibonacci level.
More complete instruction please download and read free Magic Breakout Forex Strategy eBook
