Slope Direction Line Crossover & Trail Forex Strategy
Crossover strategies are proven to be good strategies that allows traders to enter a trade when a trend is confirmed to have ended and would have a high chance of reversing. However, even though these types of strategies are used entering and exiting trades, it is usually not used to protect profits.
This simple strategy is based on a simple crossover of two indicators while using the same indicator to protect profits or exit trades.
The Slope Direction Line
The Slope Direction Line indicator is an indicator that assists in identifying trends, which is based on 80 periods. The slope direction line is also a smoothed trend indicator which gives it a less reactive characteristic. It also has an added feature wherein the Slope Direction Line changes color as the angle of the slope changes. An upward sloping Slope Direction Line would be colored light blue, while a downward sloping Slope Direction Line would be tomato colored.
Given these characteristics, the Slope Direction Line would be our intermediate trend indicator.
The sMAMA Trend Indicator
On the other hand, the sMAMA trend indicator is a combination of two fast moving and reactive lines. The faster line is colored blue, while the slower line is colored red. These two fast moving lines of the sMAMA trend indicator will be our basis for our short-term trend.
The Buy Setup – Entries, Stop Losses & Exits
This strategy will be based on the crossing over of the three lines and the confirmation of the intermediate trend.
Entry Rules – Buy Setup
The red and blue lines of the sMAMA indicator is crossing over the Slope Direction Line going above it or is already above it.
The faster blue line is over the slower red line.
The Slope Direction Line is colored light blue indicating that the intermediate trend is sloping upwards.
These conditions indicate that the trend is confirmed to have changed and that price is being pressured up. Once these rules are checked, a buy setup could be entered.
Stop Loss: The stop loss should be placed on the most recent swing low where price could take off from.
Trailing Stop Loss: The stop loss should be trailed just a few pips below the Slope Direction Line as soon as the trade is already in profit even if stopped out on that area.
On this trade, price was contracting creating a small ranging structure at the bottom of the chart. As price started to punch through the minor resistance, the blue and red lines of the sMAMA indicator also crossed over the Slope Direction Line. However, the Slope Direction Line still hasn’t changed to light blue. As soon as the Slope Direction line changed color, the intermediate trend was also confirmed, and price broke off the minor range rallying upwards. This trade risked only 33 pips, while gaining 305 pips, on the H4 chart. This swing trade had more than 1:9 risk reward ratio. Even if only 1% of the account was risked on the stop loss, the account would have gained 9% in a single trade.
The Sell Setup – Entries, Stop Losses & Exits
Entry Rules – Sell Setup
The red and blue lines of the sMAMA indicator is crossing below the Slope Direction Line or is already below it.
The faster blue line is below the slower red line.
The Slope Direction Line is colored tomato indicating that the intermediate trend is sloping downwards.
Stop Loss: The stop loss should be placed on the most recent swing high where price could drop from.
Trailing Stop Loss: The stop loss should be placed a few pips above the Slope Direction Line as soon as the trade is in profit even if stopped out in that area.
This trade also came from a range, contracting right after a downtrend. However, price did resume its downtrend. The Slope Direction Line first changed color indicating that the intermediate downtrend might resume. However, that time the red line still hasn’t crossed the Slope Direction Line. As soon as the red line crossed below the Slope Direction Line, the trade was entered. Price did have a minor retracement after the entry but soon after, the downtrend resumed.
The stop loss for this trade risked 59 pips, however it gained 150 pips on the H1 chart. That would be a 1:2.5 risk reward ratio. If 1% of the account was risked, the account would have grown 2.5%.
This strategy has its pros and cons.
Like most crossover strategies, the trade is entered not at the optimal point where price reversed, but a few candles after that. This is because this strategy would have the trader wait for the confirmation of an intermediate trend reversal prior to entering the trade. At times, this would cause a wide stop loss, which might affect the risk reward ratio. This is usually the case when a long reversal candle is part of the reversal candlestick pattern. The advantage is that the trend is entered on a confirmed trend change. This means that it is more likely that the trade would be profitable if the market doesn’t enter a range.
Another setback would be that the strategy would not work in a ranging market. Price may whipsaw both indicators, giving false signals. However, if on a ranging market, other strategies may be employed.
Its main advantage though is that since the profit is exited using a trailing stop based on the Slope Direction Line, if the market starts to trend, the whole rally or drop would be captured. It is only when the trend has ended, when the trade is stopped out in profit.
Overall, if used correctly during trending markets, this strategy would be very profitable.
How to install Slope Direction Line Crossover & Trail Forex Strategy?
Download Slope Direction Line Crossover & Trail Forex 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 system
Right click on your trading chart and hover on “Template”
Move right to select Slope Direction Line Crossover & Trail Forex Strategy
You will see Slope Direction Line Crossover & Trail Forex Strategy is available on your Chart