The market is cyclical. And even if there are no identical waves, nevertheless, the general picture remains that allows to single out separate trend cycles in a long-term time period. Any increase inevitably follows a decline, and in the periodicity of the waves (maxima and minima) a statistical regularity can be found. The two indicators proposed below make it possible to build an income strategy based on the cyclical nature of the market. Based on wave statistics, they give signals after a reversal when a new strong direction appears.
Indicators used in the strategy:
- Cycle Koufer Extremus is an indicator of cyclicity that is already familiar to you from the “Stochastic Threads” strategy, which allows you to track the end of trend waves.
- TrendWave – we told about it recently. The indicator tracks trend cycles, noting a potential reversal. This is an oscillator with rather ambiguous feedback. However, there are no perfect tools, because safety net by the second indicator will not be superfluous.
Recall that you can get both indicators for free via email, indicating it in the comments after reviewing the strategy.
Trend Cycles: How to Make Money on Wave Theory
Both indicators used have a similar principle of operation, because their combination is quite effective. The recommended timeframe is M15, the currency pairs are classic (a combination of the US dollar, the euro and the British pound).
- TrendWave: WavePeriod (10), AvgPeriod (21). Levels (overbought and oversold boundaries): 60, 50, -60, -50.
- Cycle Koufer Extremus: the fast moving period is 12, the slow moving period is 24, Crosses = 50, Levels (85, 15).
Market entry buy rules:
- Cycle Koufer Extremus shows a point below the level 15 on the chart. The closer the point is to the zero level, the stronger the signal.
- TrendWave shows a BLUE point below the -50 level on the chart. If it is -60 and below – even better. In the interpretation of Bulls & Bears, this means that the Bulls line is crossing the Bears line from bottom to top (i.e., the signal for a strong bullish trend has appeared).
- In the last 10 candles, TrendWave did not show BLUE points below the -50 level.
At the next candle you can open a position. Foot length – 20-30 points. The target profit level is 20 points, after which 50% of the position can be fixed, the rest is insured by trailing.
Market Entry Rules:
- CKE shows a point on the chart above level 85. The closer the point is to the hundredth level, the stronger the signal.
- TrendWave shows a YELLOW point above the level of 50 on the chart. If it is 60 or higher, even better. In the interpretation of Bulls & Bears, this means that the Bulls line is crossing the Bears line from the top downwards (that is, the signal for a strong bearish trend has appeared).
- In the last 10 candles, TrendWave did not show YELLOW points above level 50.
At the next candle you can open a position.
Recommended but not perfect exit from the market. The task of the indicators is to catch the beginning of a new wave of the trend, because closing a deal depends on the psychology of the trader. Someone is willing to take risks and set a more distant take-profit, someone will prefer a short stop. The appearance of TrendWave points on earlier candles indicates that the previous trend is incomplete, because the deal does not open. There are questions – ask in the comments!