In this article, as you might have guessed from the title, we will consider an effective long-term forex strategy that I have tested on the tester for some time and I want to share its results with you. In addition to standard technical tools, the system includes one non-standard and significant one for its implementation, namely the Fisher indicator. Before proceeding with the description, I will briefly outline the points that we will consider in detail: what are the basic principles and rules of trading on a long-term strategy, the use of the Fisher tool and its description, the results of testing this system and recommendations for its further use.
So, trading on a long-term forex strategy should take place on 3 time periods (timeframes) in the following sequence:
Choose any currency pair, for example, we will take the popular EUR / USD.
To implement all the rules of trading on a long-term strategy, we need the following indicators:
And the Fisher indicator with a period of 10 (for the H1 chart).
Since this indicator is new on the Forex blog, I will conduct a short review to clearly understand the principles of its operation.
The Fisher indicator is a simple technical tool, the mathematical calculations of which are based on the ratio of the local price extremes of the current time period to the previous ones. In general, it shows the main direction and strength of the current trend in the market, and also signals a reversal of this trend.
The Fisher indicator consists of one parameter "period", which means the number of the last Japanese candlesticks, which are used to calculate local price extremes. It follows from this that the higher this parameter is, the more candles will participate in the calculation and the more accurate the indicator's indicators will be, as a result, there are fewer false signals for analysis. But it is also pointless to set too long a period, since there will be a delay in the signals from the Fisher indicator.
Therefore, since we will analyze the long-term forex strategy on relatively large timeframes, and enter a position on the lower-order timeframe (H1), the period 10 for the Fisher indicator is optimal for us.
So, we have figured out the instruments, now we can proceed to reviewing the rules for analysis and trading sequentially on each of the timeframes.
Place all technical instruments on three charts in the trading terminal (D1, H4, H1, respectively).
As mentioned above, the main trend in the market is determined by the chart on D1. The rules by which we will determine are based on moving averages, i.e. if the fast MA1 is strictly above the slow MA2, then the trend in the market is considered to be upward; if on the contrary - MA1 is lower than MA2 - the downtrend in the market.
Going further, after defining the main trend for a long-term strategy, go to the 4-hour chart (H4). Here we must wait for the price correction or rollback from the main trend on D1, that is, the MA1 moving average on this timeframe should cross MA2 from top to bottom and be below it, respectively.
This signals the trader that a rollback in the market has begun and it is necessary to switch to the H1 timeframe to determine the point of entry into the market.
On the hourly chart (H1), we open a Buy position when MA1 is above MA2 and the Fisher indicator is above the 0 mark (i.e., the bars will be colored green).
The stop loss order must be placed at the level of the nearest local minimum (only so that it is not too close to the opening of a position). When setting take profit, you can be guided by 2 options:
To open Sell positions for a long-term strategy, we use the same rules only for a trend in the opposite direction, i.e. for the downstream.