Forex Cobra System

The Forex Cobra System uses the ADX and SMAs to identify the direction of the trend. In this guide, we’ll mention the system and how you can trade it.

What is the Forex Cobra System?

Forex Cobra System is a popular trend-following trading system that uses two simple moving averages (SMAs) and the Average Directional Index (ADX) indicator to identify the direction of the trend.

The basic idea behind the system is to identify the direction of the trend using two SMAs and to confirm the trend’s strength using the ADX indicator.

The two SMAs used in the Forex Cobra System are the 50-period SMA and the 100-period SMA. However, you can set the period of SMAs according to your preference. These moving averages are calculated by taking the average closing price of the last 50 and 100 periods.

These two moving averages are used to identify the direction of the trend, with the 50-period SMA acting as the short-term and the 100-period SMA acting as the long-term trend.

The ADX indicator is used to confirm the strength of the trend. It is calculated by taking the difference between two other indicators: the positive directional indicator (+DI) and the negative directional indicator (-DI). The ADX ranges from 0 to 100.

Forex Cobra System
Forex Cobra System

Forex Cobra System Strategy

To use the Forex Cobra System, you can look for buy signals when the 50-period SMA crosses above the 100-period SMA and the ADX indicator is above 25.

Conversely, you can look for sell signals when the 50-period SMA crosses below the 100-period SMA and the ADX indicator is above 25.

Although the combination of ADX and SMAs works well, you can include other indicators for further signal confirmation.

The strategy works well on all timeframes. However, looking for the signals on longer timeframes is better to reduce any false signals.

Buy Signal

  • The 50-period SMA should cross above the 100-period SMA.
  • The ADX should be above 25.
  • Wait for the price to go upwards and then enter the trade.
  • Place a stop-loss at the recent low.
  • Set take-profit at the recent high or exit the trade when the longer SMA goes above the shorter one.
Forex Daily High Low Strategy buy signal
Forex Daily High Low Strategy buy signal

Sell Signal

  • The 50-period SMA should cross below the 100-period SMA.
  • The ADX should be above 25.
  • Wait for the price to go downwards and then enter the trade.
  • Place a stop-loss at the recent high.
  • Set take-profit at the recent low or exit the trade when the longer SMA goes below the shorter one.
Forex Cobra System sell signals
Forex Cobra System sell signals

Forex Cobra System Pros & Cons

Pros

  • The system is easy to understand.
  • It uses two indicators to confirm the direction of the trend.
  • It can be applied at any timeframe.

Cons

  • The system may not work in ranging markets.

Conclusion

The Forex Cobra System is a trend-following trading strategy that uses two SMAs and the ADX indicator to identify and follow trends in the forex market. The use of two indicators limits the potential false signals.

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