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Forex Indicator Trend Magic

Trend Magic is a custom indicator that combines CCI and ATR in what turns to be quite similar to a moving average in the chart. Simple, the line turns red when CCI readings are below -50 (which points for a dominant bearish trend) and blue, when CCI is above 50, suggesting then a bullish continuation in the pair. The ATR indicator is added to step the line towards the price. 

Despite it could be use to set a trading strategy by itself, a filter should be added to this indicator, preferably a trend indicator to confirm the bias. I recommend an ADX with trend confirmation on readings above 30. 

The basic trading strategy with this indicator is waiting for a color change. If the indicator is blue and turns red, a candle opening below it, will point for a sell, while if red, and turning blue, a candle opening above the indicator is necessary to buy the cross under study. Is also useful to set stops, as a color change, or a candle opening in the opposite side of the indicator, will suggest we are in the wrong side of the market, and a trend change is nearby.

The main disadvantage is that it usually repaints, and waiting one extra candle to take the trend may catch us near a top or a bottom. Filtering with mentioned ADX could be a solution for this, and of course trends following dominant trend should be favored as tend to give more profitable signs. Another way to confirm a movement, is review smaller time frames before taking a trade on the time frame we set for trading: if the indicator has already changed color, and offered sings in smaller time frames, then our current signal should be consider stronger. The indicator is hardly useful to detect a trend change.

 

Trading spot currencies involves substantial risk and there is always the potential for loss. Your trading results may vary. 

 

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