In trading, confluence pertains to having several strategies, signals, indications or trade setups that indicate that price is moving in a certain direction. There are several sources of indications regarding price that could be a part of a confluence of signals. It could be from a price pattern or candlestick pattern. It could also come from a crossover of price action and a moving average line, or a crossover of two moving average lines.
Trading based on confluences is probably one of the most effective ways to trade the forex market. This is because trading based on confluences allows traders to trade with confidence knowing that there are several factors indicating that price is moving in a certain direction rather than making trade decisions based on a single signal.
Technical indicators are a great source of indications that can be used to support a confluence of signals, which can form a robust trading strategy or trade setup. This is because technical indicators can objectively show an indication without second thoughts. The signals it produces are not subjective. Traders do not need to second guess themselves whether or not what they are looking at is indeed a good trading signal. Strategies using complementary technical indicators which help to identify several technical factors can trade with a relatively high degree of win probability, which is one of the main factors for a winning trading strategy.
Advanced ADX is a custom technical indicator which is based on the Average Directional Movement Index (ADX) indicator.
The classic ADX indicator makes use of positive and negative Directional Movement (DM) lines. Crossovers between the +DM and -DM are identified as an indication of a possible trend reversal. It also computes for the strength of the trend based on the ADX line.
Although the classic ADX indicator is very useful and effective, it could also be confusing to new traders.
The Advanced ADX indicator simplifies it by plotting bars based on its underlying interpretation of the ADX. These bars change color to indicate the direction of the trend. Green bars indicate a bullish trend, while red bars indicate a bearish trend.
Traders can use the changing of the color of the bars as a signal for a trend reversal in confluence with other signals.
Relative Vigor Index
The Relative Vigor Index (RVI) is an oscillator type of technical indicator which identifies trend and momentum based on an underlying mathematical computation of historical price movements.
The RVI plots two lines which oscillate freely around its median, zero. Positive lines generally indicate a bullish bias, while negative lines indicate a bearish bias.
Of the two lines, the faster moving line is colored green, while the slower line is colored red. Crossovers between the two lines could also be interpreted as a momentum reversal. Green line above the red line indicates a bullish momentum, while red line over the green line indicates a bearish momentum.
Traders can also use these reversal signals in confluence with various divergences, whether hidden or regular. These indications can produce signals with a higher probability.
3 MA Cross with Alert
3 MA Cross with Alert is another custom technical indicator which is used to identify trend direction based on an underlying set of modified moving averages.
This indicator is a signal indicator which identifies trend direction based on the crossing over of multiple moving average lines. It then plots an arrow pointing the direction of the new trend as soon as it detects a trend reversal. Traders can use the arrows plotted as an entry trigger based on a trend reversal signal.
Advanced ADX and Vigor Index Confluence Forex Trading Strategy is a simple trend reversal strategy based on a confluence of the above-mentioned technical indicators.
First, the 3 MA Cross with Alert indicator should plot an arrow pointing the direction of the new trend. However, these signals may sometimes be too early and might need more confirmation.
Advanced ADX indicator should confirm the trend reversal by changing the color of the bars corresponding to the direction of the new trend.
Lastly, the RVI oscillator lines should crossover confirming the direction of the new trend.
Confluences between these signals that are closely aligned can be used as valid trend reversal signals.
- Relative Vigor Index (default)
Preferred Time Frames: 30-minute, 1-hour, 4-hour and daily charts
Currency Pairs: FX majors, minors and crosses
Trading Sessions: Tokyo, London and New York sessions
Buy Trade Setup
- The 3 MA Cross with Alert indicator should plot an arrow pointing up.
- The Advanced ADX bars should change to green.
- The green RVI line should cross above the red line.
- The RVI lines should cross above zero.
- These bullish reversal signals should be closely aligned.
- Enter a buy order on the confirmation of these conditions.
- Set the stop loss on a support below the entry candle.
- Close the trade as soon as the 3 MA Cross with Alert indicator plots an arrow pointing down.
Sell Trade Setup
- The 3 MA Cross with Alert indicator should plot an arrow pointing down.
- The Advanced ADX bars should change to red.
- The green RVI line should cross below the red line.
- The RVI lines should cross below zero.
- These bearish reversal signals should be closely aligned.
- Enter a sell order on the confirmation of these conditions.
- Set the stop loss on a resistance above the entry candle.
- Close the trade as soon as the 3 MA Cross with Alert indicator plots an arrow pointing up.
This simple trading strategy which is based on a confluence of multiple trend reversal and momentum signals tend to work very well.
Trade setups, although not perfect, has the potential to produce high yielding trades with a relatively high degree of win probability.
Traders can also use it in confluence with other indications coming from price action, candlestick patterns, and bounces of supports and resistances.
Forex Trading Strategies Installation Instructions
Advanced ADX and Vigor Index Confluence Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator(s) and template.
The essence of this forex strategy is to transform the accumulated history data and trading signals.
Advanced ADX and Vigor Index Confluence Forex Trading Strategy provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.
Based on this information, traders can assume further price movement and adjust this strategy accordingly.
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How to install Advanced ADX and Vigor Index Confluence Forex Trading Strategy?
- Download Advanced ADX and Vigor Index Confluence Forex Trading 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 strategy
- Right click on your trading chart and hover on “Template”
- Move right to select Advanced ADX and Vigor Index Confluence Forex Trading Strategy
- You will see Advanced ADX and Vigor Index Confluence Forex Trading Strategy is available on your Chart
*Note: Not all forex strategies come with mq4/ex4 files. Some templates are already integrated with the MT4 Indicators from the MetaTrader Platform.
Click here below to download: