Lindecourt MX Trading Strategy

Introduction to the Lindecourt MX Trading Strategy

This forex strategy is a trend following strategy designed to allow traders to follow an existing trend with the simple moving averages, and to obtain confirmation from a momentum oscillator, the Commodity Channel Index. This strategy is known as the Lindencourt MX trading strategy, and is executed on all currency pairs using the 15-minute time frame only.

Indicators Used:

The indicators for this strategy are as follows:

  1. Commodity Channel Index with period settings changed to 5.
  2. 7-period simple moving average (black)
  3. 21-period simple moving average (blue)
  4. 84-period simple moving average (red)
  5. 336-period simple moving average (gold)

You have to adjust the settings of the indicators as indicated. You may use the Ctrl + I button to call up each attached indicator so you can adjust the colours and line thickness.

The 84SMA and 336SMA are used to confirm the direction of the trend.

The Strategy

Two conditions must be fulfilled before the trades are initiated.

  1. The 7-period moving average must cross above the 21-period moving averages (long trade) or must cross below the 21-period moving average (short trade). Allow the candle to close to ensure that the cross has really occurred and that the moving averages did not just tangle around themselves (range-bound).
  2. The zero line is critical to the CCI signal. The indicator line must have crossed above the zero line for a buy signal, and below the zero line for a sell signal.
  3. The CCI cross above or below the zero line has a 15-minute error window. This means that this cross may occur 15 minutes before the moving average cross or 15 minutes after the cross.

Once you have these in place, it is time to go to the trades.

1) Long Trade
The Long trade setup occurs when:

  1. The 84SMA should be seen to be pointing upwards to indicate an uptrend.
  2. The 7SMA crosses above the 21SMA. The candle must be allowed to close to actually confirm that the cross has occurred.
  3. The CCI is shown to be a positive value (i.e. has crossed above the zero line)

The long trade is then executed at the next candlestick’s opening price. We demonstrate this trade setup in the snapshot below:

Lindencourt_long

The snapshot shows the setup for this trade. The entry point is shown at 0.7747. We can see that the 84SMA is pointing upwards, telling us that the bias for the trade is to go long. The CCI level is at 103, which is positive and above the zero line. The long trade is initiated as shown, allowing for a 50 pip profit claim.

Stop Loss

The stop loss is set initially at 20 pips below the entry point, then adjusted to breakeven point when trade has gone 20 pips into profit territory.

Take Profit

The Take Profit level is set to a maximum of between 30 and 50 pips. In any case, the trader should actually set a trailing stop once the market has reached a profit level of 40 pips. Some traders prefer to use a situation where the price crosses back below the 7SMA, but this is not a reliable method.

Short Trade

The trader should go short on the asset when the following setup occurs:

  1. The long term moving averages are all above the price action, showing a bearish bias for the market.
  2. The 7SMA crosses below the 21SMA. The candle must close to confirm this.
  3. At the same time, check to see that the CCI has crossed below the zero line so that it is a negative value, and that this cross has occurred within a 15-minute window before or after the moving average cross.

The short trade is then executed at the next candlestick’s opening price. We demonstrate this trade setup in the snapshot below:

Lindencourt_short

We see the cross occurring and then CCI showing a negative value. We can also see that the 84SMA (red) is pointing downwards, which is a downtrend signal that confirms that the direction of the shorter moving averages cross and the trade should be in a downward direction.  The trade is initiated at the open of the next candle.

Stop Loss

The stop loss is initially set to about 20 pips once trade entry has occurred, but is then moved to breakeven point as soon as trade has gone 20 to 30 pips into profit.

Take Profit

The Take Profit level is set to a maximum of between 30 and 50 pips. In any case, the trader should actually set a trailing stop once the market has reached a profit level of 40 pips.

Conclusion

This strategy performs very well in a trending market, and less so in a range-bound market. This is a strategy that is only suitable for scalping. Failure rates are high and therefore traders using this strategy must thoroughly practice it on a demo account before being applied to a live account. The indicators are found on the MT4 Trends indicator category.

Leave a Reply