Blade Oscillator Pivot Forex Trading Strategy

Introduction

The strategy to be discussed today is a method of trading the pivot point levels with a customized indicator known as the Blade Oscillator. The Blade Oscillator can be downloaded by clicking here. There is also a template file which can be added to the template folder.

The strategy is based on price action momentum. Price action has the capacity to either stall at a pivot point, or to break beyond that pivot point and aim for the next one. The blade oscillator helps us identify the points when price action has a momentum to either push for a break of a pivot, or to reverse and push in the opposite direction.

The strategy will only be used on the 1-hour and 4-hour time frames, and will be traded exclusively on the AUDUSD, GBPUSD and EURUSD.

Indicators
The indicators used here are:

  1. The automatic pivot point calculator
  2. The Blade oscillator
  3. 3-period linear weighted moving average (yellow colour in our chart examples)

Please ensure that the files in the zipped folder are attached correctly as follows:

  1. Click File -> Open Data Folder on your MT4 client
  2. Add the .mq4 and .ex4 files to the MQL4 -> Indicators folder.
  3. Add the tpl file to the Templates folder.
  4. There is a .dll file which is the protection file for the indicator. This file is inserted into the Libraries folder.

Restart the MT4 platform and you are good to go.

The Strategy

This strategy is hinged on the Blade oscillator. The Blade oscillator has a blade line (white dotted horizontal line in the indicator window), and has an oscillator line which turns red when the market is bearish and blue when the market is bullish.

There is also a short-term linear-weighted moving average (3LWMA) and the pivot points. You will be looking for an opportunity to trade based on the colour change of the Blade oscillator and the position of price to the pivot points as well as the moving average. The trades are therefore setup as follows:

1) Long Trade

The long trade setup occurs when we have the following conditions:

  • The oscillator line is above the blade line (which is at zero) and is blue in colour.
  • The price action is bouncing off the moving average and a pivot point.

When these two parameters are seen on the chart, then you can enter long on the asset.

Blade_long

In this snapshot which is a one hour chart for the GBPUSD, we see the oscillator line crossing the blade line (white dotted line at zero point). Something also happens here. The candle closes at the S1 level, just above the yellow moving average line. This gives a bullish bias to the trade. The next step is therefore to open a long trade at the opening price of the next candle. We can see how price action took right off from there.

Stop Loss and Take Profit Settings

The stop loss is set at a few pips below the pivot point from where the trade is taken. In this example, this is the S1 level. The Take Profit is set at the trader’s discretion and several parameters can be used to dictate this. One parameter is to close the trade manually when the Blade oscillator line starts to turn back towards zero. At other times, the appearance of a candlestick which will serve as another reversal signal can be used as the closing signal.

2) Short Trade

The short trade setup occurs when we have the oscillator line going below zero and changing colour to red. At the same time, we look for when price closes at or just below a pivot point, and just below the moving average line. This is a bearish signal and the trader can then go short at the open of the next candle.

Blade_short

In this snapshot which is a one hour chart for the GBPUSD, we see the price action closing just below the S1 pivot point, and just below the moving average at the same time that the Blade oscillator is red in colour and below the zero line. This is a bearish bias and the trader is expected to open a short trade at the opening price of the next candle.

Stop Loss and Take Profit Settings

The stop loss is set to just above the pivot point from which the trade is set, which in this case is the S1 pivot. The Take Profit is set at the trader’s discretion and several parameters can be used to dictate this. One parameter is to allow the oscillator to head back up to the zero point from where the trade can be closed manually. A reversal candlestick can also serve as the Take Profit point. Whatever parameter is used, the take profit should be at least two or three times the stop loss level.

Conclusion

The strategy works very well when all the rules are followed. Traders should try to ensure that the strategy is practiced on demo before being applied to a live account.

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