“Traffic lights” strategy is really simple and is based on several Moving Average indicators, as well as MACD. Recommended instrument — pair GPB/USD; recommended timeframe — H1. The strategy can be used as an intraday or medium-term one.
Here are required indicators:
- Moving Average (MA), period 120, method Simple, “Close”, red.
- Moving Average (MA), period 55, method Simple, “Close”, yellow.
- Moving Average (MA), period 5, method Exponential, “Close”, green.
- Moving Average (MA), period 24, method Exponential, “High”, “Low”, blue.
- MACD (24, 52, 18).
Trader can enter the market as soon as MAs have ranged similar to the traffic lights (red-yellow-green or green-yellow-red) and MACD indicator confirms the signal. That means, if Moving Averages give a signal to sell (Img.2), MACD histogram should be in negative zone. Otherwise, histogram should be in positive zone (Img.3).
Dashed MAs with period 24, Exponential method and applied to High and Low serve for the flat market confirmation. If MAs are not ranged by colors and stay within blue lines, it is not advised to open new trades. (Img. 4).
To confirm the trend on the H1 chart trader should check the direction of the price movement on higher timeframes. Stop Loss orders should be placed at the High/Low of the previous day plus 20-30 pips. Take-profits should be two times bigger than stop-losses, or the trade can be closed after 4-5 days of the fall/rise since the opening.