100 SMA Mean Reversal Bounce Forex Day Trading Strategy – MT5
<p>The forex market trends for only about 20% of the time and ranges for about 80% of the time. Although these figures are not an exact figure, but this is probably the widely accepted estimate of how the market behaves. If you would observe the market closely, you would somehow agree that the market does not trend too often, and although the market does not behave in an exact ranging pattern, it does somehow chop around just as much. So, should we just wait for the market to trend? This is what many successful trend following traders do, but this is very difficult to implement. Many traders would get bored waiting for an opportunity based on their trading strategies, so they would often aimlessly click on a trade which does not meet their trading strategy. It would be somewhat easier if traders would have a means to systematically trade the forex market even during slow chugging markets with unclear trends.</p>
<p>One way to trade the forex market during a non-trending type of market is to trade using a mean reversal type of strategy. Mean reversals often work during non-trending markets because price action tends to go back and forth allowing for small gains here and there. Then, at times price action would breakout in the opposite direction allowing for even bigger gains.</p>
<p>Here, we would be looking at how we can trade based on a mean reversal type of strategy using the Stochastic Oscillator, the engulfing pattern, and the 100-bar Simple Moving Average (SMA) line.</p>
<h2><strong>100 SMA Line</strong></h2>
<p>Although mean reversal strategies usually produce high probability trade setups when traded in a ranging or non-trending type market, context is still very important. It is still very important to understand where the mean reversal trade setup took place. Was it on a support or resistance area, a supply or demand zone, or whatnot?</p>
<p>The 100-period Simple Moving Average (SMA) is a widely accepted long-term trend line which could also act as a dynamic support or resistance line.</p>
<p>As a long-term trend direction indicator, traders would identify trend direction based on where price action generally is in relation to the 100 SMA line. The slope of the 100 SMA line also gradually follows the direction of the trend. In an uptrend, price action is typically above the 100 SMA line while the 100 SMA line slopes up. In a downtrend, price action would usually be below the 100 SMA line while the line slopes down.</p>
<p>As mentioned above, the 100 SMA line can also act as a dynamic support or resistance level. It is common to see scenarios wherein price would keep bouncing off the 100 SMA line as if it was a support or resistance level.</p>
<p>We will use the 100 SMA line as an area of dynamic support or resistance where price might bounce off from. As an added bonus, doing so would also allow us to trade with the long-term trend bias while trading a mean reversal setup on the short-term.</p>
<h2><strong>Engulfing Pattern</strong></h2>
<p>The Engulfing Pattern is a high probability reversal candlestick pattern.</p>
<p>This pattern is formed by two candles, with the second candle reversing against the first candle that its body completely engulfs the body of the first candle.</p>
<p>A bullish engulfing pattern has the first candle as a bearish candle, while the second candle is a bullish candle that closes above the open of the first candle.</p>
<p>A bearish engulfing pattern on the other hand has a bullish first candle, and its second candle is a bearish candle which closes below the opening price of the first candle.</p>
<p><img class="alignnone size-full wp-image-65215" src="https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-1.png" alt="100 SMA Mean Reversal Bounce Forex Day Trading Strategy – MT5 1" width="977" height="481" srcset="https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-1.png 977w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-1-300×148.png 300w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-1-768×378.png 768w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-1-324×160.png 324w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-1-648×320.png 648w" sizes="(max-width: 977px) 100vw, 977px" /></p>
<p>This pattern is a good indication of a possible reversal because it tells us that momentum has shifted drastically that price would completely reverse on a prior period.</p>
<h2><strong>Stochastic Oscillator and the Engulfing Stochastic</strong></h2>
<p>The Stochastic Oscillator (SO) is a widely used momentum-based indicator which is widely used to identify overbought and oversold market conditions.</p>
<p>The SO plots two lines that oscillate within the range of zero to 100. Momentum direction and momentum reversals are usually based on how the two lines interact and crossover. The direction of the reversal is based on which direction the faster line is crossing the slower line.</p>
<p>The SO range also has markers at level 20 and 80. SO lines below 20 are indicative of an oversold market condition, while SO lines above 80 are indicative of an overbought market condition. Crossovers occurring on these areas tend to be high probability mean reversal signals.</p>
<p>The Engulfing Stochastic is a custom technical indicator which is based on the Stochastic Oscillator and the Engulfing Pattern. This indicator identifies engulfing patterns which are formed while the Stochastic Oscillator lines are overbought or oversold. It plots an arrow pointing up to indicate a bullish engulfing pattern, and an arrow pointing down to indicate a bearish engulfing pattern.</p>
<p><img class="alignnone size-full wp-image-65214" src="https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-2.png" alt="100 SMA Mean Reversal Bounce Forex Day Trading Strategy – MT5 2" width="977" height="672" srcset="https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-2.png 977w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-2-300×206.png 300w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-2-768×528.png 768w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-2-218×150.png 218w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-2-436×300.png 436w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-2-100×70.png 100w" sizes="(max-width: 977px) 100vw, 977px" /></p>
<p>Bullish reversal signals that form while at an oversold condition and bearish reversal signals that form while at an overbought condition are typically high probability mean reversal signals. As such, we will trade only these types of signals coming from the Engulfing Stochastic indicator.</p>
<h3><strong><em>Bullish 100 SMA Mean Reversal Bounce Setup</em></strong></h3>
<ul>
<li>Price action should generally be above the 100 SMA line.</li>
<li>Price action should retrace towards the 100 SMA line.</li>
<li>The Stochastic Oscillator lines should be below 20 as price action touches the 100 SMA line.</li>
<li>Enter a buy order as soon as a bullish engulfing pattern forms and the Engulfing Stochastic plots an arrow pointing up while oversold.</li>
<li>Set the stop loss at the support below the entry candle.</li>
<li>Close the trade as soon as price action shows signs indicating the end of the short-term trend.</li>
</ul>
<p><img class="alignnone size-full wp-image-65213" src="https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-3.png" alt="100 SMA Mean Reversal Bounce Forex Day Trading Strategy – MT5 3" width="977" height="672" srcset="https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-3.png 977w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-3-300×206.png 300w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-3-768×528.png 768w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-3-218×150.png 218w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-3-436×300.png 436w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-3-100×70.png 100w" sizes="(max-width: 977px) 100vw, 977px" /></p>
<h3><strong><em>Bearish 100 SMA Mean Reversal Bounce Setup</em></strong></h3>
<ul>
<li>Price action should generally be below the 100 SMA line.</li>
<li>Price action should retrace towards the 100 SMA line.</li>
<li>The Stochastic Oscillator lines should be above 80 as price action touches the 100 SMA line.</li>
<li>Enter a sell order as soon as a bearish engulfing pattern forms and the Engulfing Stochastic plots an arrow pointing down while overbought.</li>
<li>Set the stop loss at the resistance above the entry candle.</li>
<li>Close the trade as soon as price action shows signs indicating the end of the short-term trend.</li>
</ul>
<p><img class="alignnone size-full wp-image-65212" src="https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-4.png" alt="100 SMA Mean Reversal Bounce Forex Day Trading Strategy – MT5 4" width="977" height="672" srcset="https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-4.png 977w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-4-300×206.png 300w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-4-768×528.png 768w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-4-218×150.png 218w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-4-436×300.png 436w, https://www.forexmt4indicators.com/wp-content/uploads/2020/11/100-SMA-Mean-Reversal-Bounce-Forex-Day-Trading-Strategy-MT5-4-100×70.png 100w" sizes="(max-width: 977px) 100vw, 977px" /></p>
<h2><strong>Conclusion</strong></h2>
<p>This type of mean reversal strategy contradicts other mean reversal strategies. This is because some mean reversal strategies trade on reversals towards the moving average line. This approach would be good if the market were totally flat and ranging. However, if the market has a slight long-term trend bias, mean reversal setups tend to have a shorter travel distance making it less efficient as a trade setup. This strategy on the other hand takes a different approach. It trades mean reversals assuming that there is still a long-term trend bias and trades in that direction allowing for possible high yielding trades.</p>
<p><h3><span><strong><br />
Forex Trading Strategies Installation Instructions</strong></span></h3>
<p>100 SMA Mean Reversal Bounce Forex Day Trading Strategy – MT5 is a combination of Metatrader 5 (MT5) indicator(s) and template.</p>
<p>The essence of this forex strategy is to transform the accumulated history data and trading signals.</p>
<p>100 SMA Mean Reversal Bounce Forex Day Trading Strategy – MT5 provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.</p>
<p>Based on this information, traders can assume further price movement and adjust this strategy accordingly.</p>
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<h3><strong>How to install 100 SMA Mean Reversal Bounce Forex Day Trading Strategy – MT5?</strong></h3>
<ul>
<li>Download 100 SMA Mean Reversal Bounce Forex Day Trading Strategy – MT5.zip</li>
<li>*Copy mq5 and ex5 files to your Metatrader Directory / experts / indicators /</li>
<li>Copy tpl file (Template) to your Metatrader Directory / templates /</li>
<li>Start or restart your Metatrader Client</li>
<li>Select Chart and Timeframe where you want to test your forex strategy</li>
<li>Right click on your trading chart and hover on “Template”</li>
<li>Move right to select 100 SMA Mean Reversal Bounce Forex Day Trading Strategy – MT5</li>
<li>You will see 100 SMA Mean Reversal Bounce Forex Day Trading Strategy – MT5 is available on your Chart</li>
</ul>
<p><span><em>*Note: Not all forex strategies come with mq5/ex5 files. Some templates are already integrated with the MT5 Indicators from the MetaTrader Platform.</em></span></p>
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