Sonic R System is a trading strategy popular both among experienced traders and beginners, who have jointed Forex market quite recently. The strategy had been created long time ago and was immediately recognized by traders, although some of them have made some changes and alterations to it. As a result today, we can find various descriptions of this strategy, which we cannot cover in this article.
Instead, we will review the original Sonic R System strategy; however, before we start our discussion, it is necessary to highlight some moments, which shall be taken into account when using this strategy in trading:
- This strategy is used only for trading in the American and European sessions and not acceptable for Asian markets with low volatility.
- It is better to trade major currency pairs with the USD, Euro or Pound.
- Use 15-minute timeframe for trading.
- Sonic R System implies pending sell or buy orders.
- Before the news releases all transactions shall be closed, no matter whether they have been profitable or not.
Now, we can put the indicators on the chart.
The main indicator used in the strategy Sonic R System is the dragon. This indicator is not included in the standard list in the terminal; it can be difficult to load it from the Internet. The question arises where to get it. In fact, it is not a problem: a dragon is a composite indicator, consisting of three moving averages with different settings:
- Upper red line on the chart is ЕМА with the period 34 is applied to the HIGH.
- Lower red line is ЕМА with the period 34 is applied to the LOW.
- White line between two red lines is ЕМА with the period 34 is applied to CLOSE.
After settings of all three moving averages, we will have an indicator that will be constantly crossed by the price, giving us signals for opening transactions. Next indicator is one more moving average line, which is marked green on the chart above. It has the period 89. This indicator helps to determine the global trend and filter out low quality signals. If the price is below this line, all signals to buy are regarded as false and shall not be used for opening positions.
The other indicator we are going to use is MASD with default settings. We will use it to confirm signals; in some cases we may not use at all. We shall also place Pivot points, or use a special indicator instead. It can be AutoPivot and we have it on the chart.
First of all, it is necessary to determine the direction of the global trend. On the chart, the price is below the green moving average with the period 89, so we will not pay attention to buy signals, given before the price has crossed this line. The price constantly crosses the «dragon» in both directions; therefore a position can be opened when the price goes beyond the lower red line and the candle closes outside this indicator. When this happens, a pending order is placed, in our case it will be a sell order placed 3-5 points below the shadow of that candle, which closed below the boundaries of the dragon indicator.
If the order is activated, it is likely that the price will continue to move further in this direction and this is the basic of Sonic R System strategy.
We can see on the chart that MACD has confirmed this signal, as its signal line crossed the zero level from top to bottom and the histogram has been built on the opposite side.
It is recommended to place protective orders at the last highs or lows or at the Pivot levels formed after price reversal. Traders shall remember about strong levels of support and resistance and if they are close to the pending orders, they can be slightly adjusted. However, this is a topic of the other article.
If you want to test and use this strategy for trading go to the аrchive here.