We have covered a lot of Forex trading strategies on this website, all of them with their merits. Some are easy to understand because they rely on visuals, and others are simple and use a few indicators. As for this one, it is different because it has several technical indicators, most of which are custom-made. However, once you learn their purpose, you will see how effective this system is at identifying precise trading opportunities.
The cycle extremes trading strategy makes use of several technical indicators, all of which work together to signal trading opportunities.
Cycle kroufr extremetus and cycle kroufr
These will be the main indicators for this trading strategy, and they both appear at the bottom of the Forex charts online, in the indicator window. The first one, cycle kroufr extremetus, is represented by green and red dots, which alternatively signal buying and selling opportunities. Filling the gap between these red and green dots is the cycle kroufr indicator, which is represented by a purple line.
Together, they act as oscillating indicators. When the markets are below level 20 on the cycle kroufr, you know the markets are in oversold conditions, and you should start looking for buying opportunities. However, you will need to wait until the cycle kroufr extremetus displays a green dot when you place the buy order. The opposite occurs when the cycle kroufr indicator is above level 80 when markets are overbought, and you sell when a red dot from the cycle kroufr extremetus appears.
In the same indicator window as the first two indicators is the ANTIALLIGATOR indicator, and this one is represented by vertical red and blue lines. Its function is to tell the momentum in the markets and to help determine the strength of the trend. It is an unusual indicator in that it signals a buying opportunity when it turns red and a selling opportunity when it turns blue. Why? Because it measures market sentiment.
For example, when the ANTIALLIGATOR displays a tall blue line, it means there has been a lot of buying activity in the markets, and perhaps the markets are overbought. In that case, you should expect prices to go down, hence looking for selling opportunities. The height of this indicator is the one that shows momentum, whereas a taller ANTIALLIGATOR is a stronger signal.
Besides the vertical bars in the indicator window, this indicator will produce arrows on the main window. Blue arrows appear at the end of an uptrend, signaling a possible downtrend, while red arrows appear when a downtrend is ending, showing possible buying opportunities.
Ravi base and adaptive RSI
These two indicators will also be in the same indicator window as the previous three. The adaptive RSI, as you can tell from the name, is a modified version of the standard RSI indicator. The main difference is the period which it covers. If you remember a previous article on the best technical indicators, you will know the function of the RSI indicator. It tells market momentum and sentiment, indicating overbought conditions when trending above 80 and oversold conditions when below 20. With the adaptive RSI, though, the period used in the calculation is longer, producing more dependable signals.
As for Ravi's base, it is the dark blue line hinting at trading opportunities when a ‘cross’ occurs. When Ravi's base is below the cycle kroufr line, the markets are bullish, and when it is below the cycle kroufr line, markets are bearish. The cross that occurs when Ravi base crosses cycle kroufr is the trading signal. For when it crosses upwards, selling opportunities should be sought and vice versa.
On a second indicator, a window will be 3 types of stochastic oscillators, standard stochastic, stochastic color, and stochastic X-8. The first stochastic, the standard version, is represented in the light green line, and it functions just like the normal stochastic indicator, only it’s a single line instead of two. When it’s trending below 20, look for buying opportunities, and when above 80, selling opportunities.
The second, stochastic color, is meant to highlight when markets are overbought and oversold, just like the standard version, only in color. The stochastic X-8 is made up of 8 lines, and its role is to signal changes in market direction. When the lines are ‘squeezed’, then look for possible trend reversals, otherwise, the markets are still trending in one direction.
Moving average and Bollinger bands
These will be on the main trading window. Bollinger bands are meant to provide points of take profit and stop loss. In a previous article on uncommon technical indicators, we described how prices stay within the Bollinger bands. Therefore, your points of take profit and stop loss should be around the Bollinger bands where trends turn. (Risk-management on Forex)
As for the moving average, it is meant to identify long-term trends, which is why it has a long, 100-period.
Putting it all together
Now that you know what all the indicators in this Forex trading system are for, it’s time to see how they all work together. Let’s do this through an example of actual Forex trading platforms.
In the image above, we can see two excellent trading opportunities. Point A, is the perfect buying opportunity because most of the indicators in this trading system come together.
The first signal comes from the ANTIALLIGATOR on the main window, which gives us a red arrow pointing upwards. Then, in the first indicator window, we see the green dot from the cycle kroufr extremetus and a red vertical bar from the ANTIALLIGATOR. The adaptive RSI is below 20, and a cross between the cycle kroufr and the Ravi base occurs.
In the second indicator window, we see a squeeze from the stochastic X-8, while the two other stochastics are in oversold territory. On the main trading window, prices touch the Bollinger bands and bounce off them.
At point B, the opposite signals are received, starting with the downward pointing blue arrow by ANTIALLIGATOR and when the markets touch the upper Bollinger band. A red dot from the cycle kroufr extremetus appears and a blue vertical bar is also formed. Down to the stochastics, there is another squeeze seen by the stochastic X-8 while it is in overbought territory.
The beauty of this trading system is that it is very often accurate and has a very high success rate. Besides, it can be used both by scalpers to make money and even by long-term investors who want to manage capital. I have also used it when there is an announcement of economic news, and the indicators still react to the rapidly shifting volatility. That way, you don’t have to keep a very close eye on the economic calendar Forex since the indicators in this trading system will react to the news just as quickly and alert you to trading opportunities. (Fundamentals of fundamental trading)
This Forex trading strategy requires that you know how to add the custom indicators above to your MT4 platform. If you don’t know how to do this, here is a quick video that clearly shows you how: