Every day we hear the terms market boom or market crash. These terms refer to the strong upside or downside trends. The Boom and Crash Spike Detector is one indicator that helps you detect market reversals and strong trends. This way we can be ready for the market booms and not get caught on the wrong side of the market crash!
What is the Boom and Crash Spike Detector?
Here’s how the boom or crash reversal indicator looks on the chart.
This is no rocket science. You see a bomb icon at the top or bottom of a trend. These icons point to a potential trend reversal.
Boom and Crash Strategy
Now, let’s see how we can trade the indicator. While placing the indicator on your chart, you will see the following settings:
Although the default settings are recommended, you may play around with the period or step depending on your trading style. Increasing the period or step will reduce the number of signals. However, the accuracy may increase. You can also change the colors of icons.
Trading with the Boom and Crash indicator is simple. You may look for a bearish reversal in a strong uptrend. You can enter the short position as soon as the indicator gives a sell signal. Similarly, you may find a bullish reversal in a bearish trend. I actually prefer to wait and confirm my entry with price action or other technical indicators. I would not want to blindly take all of the boom and crash signals to be on the safe side.
Buy Signal
Here’s the strategy to find a long signal:
- Choose a higher timeframe to avoid noisy signals.
- The market must have a running downtrend.
- Enter the long position when the bomb icon appears below the trigger candle.
- Put the stop-loss below the immediate support level or exit in loss if the indicator repaints.
- You could put the take profit order at twice the distance of entry to stop-loss.
- Alternatively, you may exit the position in profit when a bearish reversal sign appears.
Sell Signal
Here’s the strategy to find a short signal:
- Choose a higher timeframe to avoid noisy signals.
- The market must have a running uptrend.
- Enter the short position when the bomb icon appears above the trigger candle.
- Put the stop-loss above the immediate resistance level or exit in loss if the indicator repaints.
- Put the take profit order at twice the distance of entry to stop-loss.
- Alternatively, you may exit the position in profit when a bullish reversal sign appears.
Boom and Crash Indicator Pros & Cons
Pros
- The boom and crash indicator is quite simple to understand.
- The risk to reward ratio can be quite high if you time your entry and exit well.
- The backtest data shows high accuracy and winning rate.
Cons
- The indicator may repaint. So, the backtest data may not represent the true picture.
- Requires further confirmation to avoid getting too many false signals.
Conclusion
The Boom and Crash Spike Detector indicator can work well with any currency pair and timeframe. However, the indicator may repaint. Therefore, you should run a forward test on demo before going with a live account. This will give you a feel for how the Boom and Crash indicator works without taking any risks.
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.
