Trading with the trend is a very effective trading strategy. Trading with the trend helps traders follow the path of least resistance, which is significantly less challenging than trading against it. Traders execute trades based on where they believe the price is headed, rather than where it really is. The clearer the trend, the higher the number of traders who will want to trade in its direction.
Another effective strategy for trading the market is called short-term momentum trading. Like trend trading, in a sense. Trades are executed in the direction of recent price movements. Momentum trading, on the other hand, takes place over a considerably shorter time frame. This article presents the ASC Trend Indicator, an extraordinarily rare indicator. With the ASC Trend Indicator, you can trade with both trends and momentum, which can help to keep us on the right side of the market.
What is the ASC Trend Indicator?
The ASC Trend indicator is a straightforward tool for determining the trend’s general direction. It monitors price momentum and indicates the direction of the market. Additionally, the indication shows a reversal in trend. This indicator uses chart circles to signal potential buy or sell trades. Magenta and blue are the colors of the circles.
When prices are trending higher, a blue circle will emerge underneath the candle. In contrast, the downward motion is shown by a magenta circle placed above the candles. The indicator facilitates trading by indicating entry and exit points. A buy signal is represented by a blue circle, while a sell signal is represented by a magenta circle. The ASC indicator can give false buy or sell signals on lower timeframes, so it’s best to use it on higher timeframes instead.
How to install the ASC Trend Indicator?
- Download and extract the ASC Trend Indicator zip file.
- Copy the indicator and put it into the MT5 indicators data folder.
- Launch or restart the MetaTrader platform
- Choose the appropriate Chart and Timeframe to test your forex strategy.
- Select Indicator -> Insert -> Custom. Select the ASC Trend Indicator.
- The ASC trend indicator will appear on your chart.
ASC Trend Strategy
The blue circle is always at the bottom, whereas the magenta circle is always at the top. When the timeframe changes, the ASC trend indicator redraws the circles in a different pattern. It can be difficult to identify market trends in lower timeframes.
As you can see in the EUR/USD m5 chart, the appearance of multiple contradicting circles makes it very difficult to execute trades. Thus, it is advisable to look for signals on higher timeframes. Check out the H4 chart I’ve provided below. With the circles indicating the precise direction of the trend, traders can quickly and easily put their plans into action.
When one or more circles appear, it is time to get out of the trade. If, for instance, blue circles start to appear, it’s probably time to stop engaging in short positions. The opposite is true for the magenta circle; if it occurs, it is time to close off long positions. As an extra tip, wait for the trend to develop before diving in headfirst. This is due to the temporary nature of trends.
Keep in mind that the indicator can paint two adjoining circles in different colors. So, it’s best to wait until the trend is fully formed before getting into positions. Even on the higher timeframes there will still be false signals so I would look to confirm each trade with additional technical indicators and price action analysis.
Buy Signal
When the ASC Trend Indicator creates a blue circle on the chart, you could look to initiate a new buy trade order. We may consider putting the stop-loss orders below the support level set by the previous swing low, or anywhere else you want. To get out of the ASC Trend buy trade, we could use a pre-set profit goal or a favorable reward-to-risk ratio so one bad trade does not wipe out a run of winners.
The chart above for EUR/USD H1 displays a buy signal based on price momentum. Observe how a long position was opened at 1.05326 on the EUR/USD hourly chart above. The pair reached a peak of 1.07336, which is up to 200 pips in total.
Sell Signal
When the ASC Trend indicator paints a magenta bullet, you could place a sell trading order. We might look to set stop-loss orders above the swing high resistance level or wherever you usually set these orders according to your own forex money management. We could use an opposite ASC Trend signal for exit or a fixed take profit, again with a good risk to reward ratio so we can make the most of our winning trades. You could even use a break even or trailing stop to lock in profits and maximize the potential of each move.
The chart above for EUR/USD H1 displays SELL signals based on price momentum. Observe how a short position was opened at 1.05848 on the hourly chart of the EUR/USD currency pair. The pair reached a low point of 1.04418, which is over 140 pips in total.
More basic guidelines for the ASC Trend Indicator are as follows:
- Do not trade while the current bar is colored green.
- Don’t enter a trade if there’s a contradiction between the signals.
- Don’t enter a trade when the ASC Trend indicator shows indicators that are almost opposite each other (buy and sell).
- Do not enter a trade if the current signal bar is changing colors.
Conclusion
The ASC Trend indicator is a straightforward tool for determining the trend’s general direction. Also, the indicator points out key reversals that show the overall momentum of the market. There is no automation here; it’s a labor-intensive, hands-on process that’s not for the faint of heart. To top it all off, the indicator can be downloaded for free, making it accessible to all forex traders. If you follow these rules to the letter, you can trade with the trend and give your strategy that edge.
However, there will still be lots of false trading signals so you will need to make sure that you filter trades with additional chart analysis before taking a position. You will also need to have good money management and trading discipline, whilst keeping your emotions in check for optimal performance. Safe trading.
Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Read more about me.
