Forex Trading Strategy with GMMA

This forex trading strategy is a trend following system. Its unique approach to the forex market will give us a great understanding of market movements and allow us to see that what happens is not random but an underlying order behind price movement. Through practicing these exact trading rules with which the forex trading strategy was designed, you will get a more clear picture of the market and begin to reap the financial rewards.

The forex trading strategy is unique in that it doesn't attempt to predict the future but rather a tool that helps you to recognize the current trend and lets you go with the current flow. Mastering the system will give you confidence because you won't need to keep up with the economical events, trying to figure out the meaning of numbers, or opinions of experts.

Timeframe

We can use this forex trading strategy from 5 minute chart up to monthly charts for all forex pairs.

The forex trading strategy includes the following indicators:

Signal Arrows [Cross between EMA(4) AND ema(8)]
MACD (5,35,5)
Laguerre

Slope Direction line (The direction is shown as red for a downtrend and blue for an uptrend.)

Pivot Points (We use pivot points to find intraday support/resistance levels.)

Guppy Multiple Moving Averages (GMMA)

The Guppy MMA is a combination of moving averages and is optimized to allow for smoother and more accurate moving averages that are not easily spiked by sudden market movements.

The Guppy Multiple Moving Averages indicator consists of 3, 5, 8, 10, 12 and 15 EMA for the short term moving averages (traders) and 30, 35, 40, 45, 50 and 60 EMA for the long term moving averages (investors).

In our modified guppy we use 5 different colors for each different type of trader. When you are trading it is important that you know the underlying trend, hence you have to know what other traders are doing. Using the colors you are able to tell what other market participants are up to and as such make better trading decisions.

Yellow- short term traders (Mainly going for quick pips and not interested in holding positions)

Orange- short term traders (Those hold on the positions a little longer than the yellow)

Blue- mid term traders (Mainly swing traders, usually hold on the positions longer than previous 2)

Green- long term traders (Will hold on to their positions longer than mid and short term traders) 5. Red- long term traders or investors (They hold on to their position the longest)

The MMA reveals the relationship between short term traders and investors. Traders (yellow and orange) probe for weakness in the underlying trend and always lead the next trend or current trends. As they are going for quick profits, they are in and out of the market very quickly.

Investors on the other handare slow to move. However for a trend to succeed, the support of investors (red and green) is essential.

As a trend trader, you will be looking for situations where all the traders agree on the direction of the market (Yellow, Orange, Blue, Green & Red moving averages). If all the traders are in agreement, then that is the direction to trade. Any disagreement means you do not trade.

By correct interpretationof the MMA, you will be able to identify the trend, possible trend exhaustion and also possible trend changes. Overall, you will be able to make better trading decisions.

Buy Rules

First we wait for a long signal alert.

The green lines must be above the red lines! Green, Red and Yellow lines must agree and head up. All the lines must be going in the same direction!

Laguerre line must cross the 0.15 from below and head up.

When you get the signal, MACD must be above 0. This is important!

Stop Loss

We can use a stop loss, 5 points plus spread, below recent low, or 20 points on default pairs and 25 point on more volatile pairs such as the GBP pairs and crosses.

Exit from a Long Position

When you open a trading position you can then choose to close half of the position on the first pivot point and let the other half run till the slope direction line goes red or you can choose your own method and close positions at pivot points or when slope direction line goes red after a move.

Sell Rules

First we wait for a short forex signal alert.

The green lines must be below the red lines! Green, Red and Yellow lines must agree and head down. All the lines must be going in the same direction!

Laguerre line must cross the 0.75 from above and head down.

When you get the signal, MACD must be below 0. This is important!

Stop Loss

We can use a stop loss, 5 points plus spread, above recent high, or 20 points on default pairs and 25 point on more volatile pairs such as the GBP pairs and crosses.

Exit from a Long Position

When you open a position you can then choose to close half of the position on the first pivot point and let the other half run till the slope direction line goes blue or you can choose your own method and close positions at pivot points or when slope direction line goes red after a move.

Breakouts

Although we avoid trading breakouts, the guppy MMA shows us exactly when this is happening. Once a breakout has occurred whereby the yellow lines cross the red lines but the green lines are still below the red, we would expect the yellow lines to retrace back. This is the point where we would be waiting to place our new positions in the direction of the new trend. Please note that you do not place trades during a breakout but after the prices have retraced which is denoted by the green and red lines changing positions.

Long Breakout

The red lines had been above the green lines then the yellow crossed the red lines and soon the price retraced to the other lines. The green are now above the reds and they show a long trend.

Short Breakout

The red lines had been below the green lines. This was indicating a long trend. Then the yellow lines crossed the green and red lines. Once the green lines have been below the red lines we can say that we are in a short trend now and we can wait for forex signals.

Is very important the positions of green lines and red lines. For a trend to be considered long the green must be above the red lines, and for short the green lines must be below the red lines.

False Breakouts

If the yellow or orange color lines cross the reds but the green lines still remain in their previous direction, then we are most likely facing a false breakout. For a trend change all lines especially the greens must change positions with the reds. You should especially be careful with volatile pairs such as GBPUSD.

Is possible that some traders to don’t have the indicators but wish to test the forex trading strategy. They can send us a simple note through our website and 'contact us' page, writing simply the name of the forex trading strategy and we will send the template and the indicators.

Important : All investors should know that any forex trading strategy before implementing in a real account needs to be tested in a demo account in order to be fully understood.

Also, all traders should be aware that extraordinary events occurring in the forex market very often, and is likely to alter the financial results of a forex trading strategy.