Less "noise", more trends on the M5 timeframe
- VFX Blog
- Strategies
Market "noise" is the main problem of successful trading. How to understand this reversal or just a reaction to the news? Is big candle shadows an increase in volatility or market maker speculation? The first way to remove the "noise" is to increase the timeframe and option expiration. The next thing for any long option strategies is to install indicators that show the "true” trend.
Trading platform
Select a broker in the vfxAlert program, and register by E-mail/Password:
Select a demo account to test long options trading. We always do this before placing it on a real account. The strategy can also be used on M5-M15 timeframes. Then set the expiration of 10 candles.
Trading strategy
This strategy for is simple, and accessible to novice traders - basic knowledge of trend indicators, and candlestick patterns is enough, and what is signal filtering.
Long option strategy characteristics:
Type: Trend
Timeframe: Any in the range M1-M5. In our case, M1 is used, but with an increasing period of analysis, the accuracy of the signal increases.
Trading asset: Any currency Forex pairs and cryptocurrency. The main requirement is a fixed (2-3 points) spread and no hidden fees.
Trading time: All trading sessions.
Recommended expiration: 10 - 15 min.
Used indicators :
- Heiken Ashi. A variant of candlestick analysis in which data for calculating the body and shadows is used for additional smoothing of past prices. Thus, the market “noise” is removed, and only trends are visible. These candles are also called "Candlestick Moving Average".
- Alligator. The Bill Williams indicator will determine the current trend or its absence. This is a triple moving average with a different slope relative to the current price. Sideways movement of all lines indicates the absence of a trend; we remain out of the market.
For more information about the types of trading signals or indicators, see the vfxAlert blog. After installing the indicators on charts:
What does signal setting mean? vfxAlert immediately shows signals for all timeframes and strategies. We need only reversal and with expiration time of at least 5 minutes. To do this, select the desired options in the "Settings" -> "Filter" section.
Trading signals:
- UP (CALL) option. Alligator lines are directed upwards, and the price is higher. At least three up candles on Heiken Ashi.
- DOWN (PUT) option. Reverse conditions: price below downward Alligator, three down candles on Heiken Ashi.
The additional best trading signal will be breakdowns up or down of all Alligator lines with the fulfillment of Heiken conditions.
Additionally, we configure signal filters in the vfxAlert program. See the video for more details:
Signal example
The image shows an example of a signal for a long put option. All the lines of the Alligator are directed downwards far from each other. This means that the market is a downtrend on the junior and senior timeframes relative to the working one.
Heiken Ashi Also shows strong signals. Four down candles below the Alligator, among them a strong reversal Doji candlestick pattern after which the movement continued.
On the opening candle, there is a possibility of a rollback, but the distance to the Alligator line and its behavior gives a high probability of profit. You can open the DOWN option.
Recommendations about use …
- What are trade signals Power in vfxAlert settings? This parameter shows what percentage of profitable trades there were in the past according to the current data of the signal strategy indicators. Choose only medium and strong signal. For more information about calculating the Power value, see the vfxAlert website.
- The strategy works on all types of trading analysis, except news trading. Even Heiken Ashi cannot properly smooth out the news momentum and there will be a false signal.
Let`s summarize.
Heiken Ashi candles will be the best option for long option trading. Only the trend is visible, reversal patterns are located as close as possible to the reversal points. The additional Alligator allows you to see the situation on several timeframes and trade on rebounds.
The main thing is to correctly determine the types of signal filters for trading only strong positions. Then you can get a stable and "calm" profit on any asset.