A tunnel strategy for trading on the forex market is a multicurrency trading system for which the recommended time interval is considered from the one hour chart (H1), but if desired, it can be used on charts from M15. When trading on shorter intervals, it should be clearly understood that more false signals will be encountered.
This strategy uses the following standard indicators:
1.Exponential Moving Average EMA (Period 18) – should be colored red;
2. Exponential Moving Average EMA (Period 28) – must also be colored red;
3. Moving Average Linear Weighted – WMA (Period 5) – should be colored blue;
4. Moving Average WMA (Period 12) – yellow;
5. RSI indicator (21).
-The tunnel, consisting of two red lines, is formed by the EMA moving averages, the periods of which are 18 and 28. With their help, the beginning and the end of the trend are determined.
– When it is necessary to enter a trend, the WMA moving averages with periods of 5 and 12 will be indicated. Thanks to them, you can also determine the strength of the existing trend.
There are the following rules for concluding a deal using this strategy:
A trade should be opened only when the red tunnel has narrowed significantly on the chart or the red lines have crossed.
A buy deal should be concluded at the moment when the average WMA, the periods of which are 5 and 12, cross the red tunnel formed from two EMAs upwards.
The strongest signal is considered the moment when the set 5-period WMA moving average crosses the 12-period WMA upwards.
The RSI indicator for buying should be above the value of 50.
In a situation where the middle 5 and 12 WMA cross the red tunnel formed by two EMAs from top to bottom, you should enter into a sell deal.
A particularly strong signal is indicated by the moment when the middle 5 WMA and 12 WMA are suppressed from top to bottom.
The RSI indicator for selling should be below 50.
Basic rules for closing a trading position:
The end of the trend is indicated by the following signals:
– long positions – when the price peaks on the chart and the WMA (5) moving average crosses the WMA (12) from top to bottom. In this case, it is necessary to close a trading position at the current market price.
short positions – when the price has bottomed out on the chart and the WMA (5) moving average crosses the WMA (12) average from the bottom up. In this case, it is necessary to close a trading position at the current market price.
It is also necessary to immediately close a trading position immediately after the boundaries of the red tunnel cross each other or there has been a significant narrowing. This moment is a clear sign of a trend reversal.
Close a trade position after this signal appears, open in the other direction (reverse).
You should not close the trade until the red tunnel lines cross each other.