FOREX DIVERSITY SYSTEM

Buy and Sell Rules from Forex Diversity System

Buy Rules:

  • Trend Identification:
    • Ensure both the larger and smaller time frames are in an uptrend. Use Trend Channel Indicator and RSI-bars indicator for confirmation.
    • Larger time frames provide stronger trend signals.
  • Entry Point:
    • Buy when a new support level is formed.
    • Confirm the entry with white candles, white RSI bars, and white AO bars above the 0 line.
  • Stop Loss:
    • Place the stop loss slightly below the last support level.
  • Exit Point:
    • Option 1: Exit after a new resistance is formed or when a resistance signal appears.
    • Option 2: Use a fixed number of pips as a target, which can be static or dynamic (e.g., twice the stop loss).

Sell Rules:

  • Trend Identification:
    • Ensure both the larger and smaller time frames are in a downtrend. Use Trend Channel Indicator and RSI-bars indicator for confirmation.
    • Larger time frames provide stronger trend signals.
  • Entry Point:
    • Sell when a new resistance level is formed.
    • Confirm the entry with red candles, red RSI bars, and red AO bars below the 0 line.
  • Stop Loss:
    • Place the stop loss slightly above the last resistance level.
  • Exit Point:
    • Option 1: Exit after a new support is formed or when a support signal appears.
    • Option 2: Use a fixed number of pips as a target, which can be static or dynamic (e.g., twice the stop loss).

Reversal Trading with Divergence:

  • Trend Divergence Detection:
    • Identify divergence between the price trend and the Awesome Oscillator (AO) indicator.
    • If price is in an uptrend but AO indicates a downtrend, prepare for a sell.
    • If price is in a downtrend but AO indicates an uptrend, prepare for a buy.
  • Entry Point:
    • For a reversal to downtrend: Enter a sell when AO bars become negative (below 0).
    • For a reversal to uptrend: Enter a buy when AO bars become positive (above 0).
    • Ensure corresponding candle colors match AO bars for confirmation (red for sell, white for buy).
  • Stop Loss:
    • Follow the same rules for placing stop loss as in trend-following trades.
  • Exit Point:
    • Exit the trade quickly after a new support/resistance level is formed.
    • Confirm exit with matching colors of price candles and AO bars.

Key Indicators and Tools:

  • Trend Channel Indicator: Monitors trends on multiple time frames without switching charts.
  • RSI-bars Indicator: Visual representation of the trend direction.
  • Support Resistance Detector: Identifies support and resistance levels to determine entry, exit, and stop loss points.
  • Awesome Oscillator (AO): Used for detecting divergences to identify potential reversals.

Summary:

  • Trade in the direction of the trend, using higher time frames for confirmation.
  • Use support and resistance levels for determining entry and exit points.
  • Implement divergence trading for reversal opportunities, ensuring fast exits.
  • Employ proper money management to minimize risk and protect capital.
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