ADX, RSI, EMA Envelope Reversal Scalp Tools

Hi, this is a refined version of a scalping reversal system that I had developed and posted previously. The post can be found here with many other alerts and indicators.

I will present the basics again to assist in understanding the specifics. This has mostly been used to trade forex, but I know that I had adapted it for MSFT on one of the link posts. I will later present the confirmation and extended technical tools, along with alerts, indicators, and Metatrader profiles in coming posts. The Metatrader profiles are a plug and play presettings, just install the indicators in the proper folder of the program files ( experts-indicators). Most of my original work was done on VT trader. I also have some unreleased complex, but very nice alert indicators I made for VT. I stopped working with VT due to the inconsistent data feed. I have traded live and taught this system with profitable results. It is useful that you can review the back filled charts and see clearly the results.

Due to this being part of a more complex system, I will decide about how many versions of the profiles, templates and indicators I will post. An additional note is that I prefer to use the USA (not UK but that may work also) version of forex.com Metatrader. If you are having problems with any of the profiles or specialty indicators use their free platform. They have some special attributes, like FXF attached to their symbols. Some of their platforms also have indices, stocks, and commodities to use this system with. It also offers many of the exotic crosses that I like to monitor. Also I trade on oanda. for the reasonably tight spreads. This is a scalping system, so beware of the large spreads on some pairs especially in the low volume hours.

The basics for the 5 minute scalp includes the 50 ema in magenta, and the 2 ema 50 envelopes (yellow). The inner envelope is set at the deviation of .018 (near 18 pips) for AUD or NZD crosses ; or .015 (15 pips ) for most all other crosses. The outer yellow envelope has the deviation of .036 for AUD or NZD crosses. 030 for most all other pairs.

I have attached a 5 minute NZD/USD chart. There are a few ways to look for the trade set up. First is that if the price has been below the 50 ema magenta for 4 hours or more, when price first comes up to the inner envelope above the 50ema; trade short back to the 50 ema. This is shown in the down trends of “A” and “C” .

As a confirmation that the downward trend is still powerful enough to make the short trade I introduce the ADX 60 (aka the Average Directional Movement indicator). If the yellow ADXR (main line- not the DMI ) is above the 12 level when the price crosses above the 50 ema, I consider it a valid set up. Of course the set up is basically the same for the upward trend. Price above the 50 ema for 4 hours, enter long when price falls to touch the inner lower envelope. The ADX rises with trend strength; it is not a normal oscillator indicator. Very important, make sure that the ADX level is still high from the major trend, not risen due to the reversal.

As for many scalping systems, beware of market openings, major news, or post weekend trend continuances. Also be aware of powerful trend reversal formations like double bottoms, triangles, or tight channels. A late entry can be used.

In an effort to find more trades, I show trend B. The price crosses the 50 ema many times, but the ADX level was still high when the price passed below the 50 ema previous to touching the lower inner envelope. As you can see, the long position trade back to the 50 ema was still profitable.

I like to add positions to this trade as the price moves against me, as in trend B. Also it is good to leave some runner positions as in trend B, the price exceeded the 50 ema by 36 pips. I use the outer envelope as a general stop loss, but since I am incrementally adding positions, I am flexible with my stops, especially after a long trend, a fast bottoming reversal, and a high ADX level.

I will later add other guides to assist with runners and exits at key levels. Daily pivots, 14 ema, 200ema, and a 650 ema.

Other posts will follow with attachments and alerts, so watching the charts is minimized. There are also other confirmation tools and strategies that I will share. Questions and improvements are welcomed. I am also going to post a major thread on correlation trading with some advanced programming that I developed, so keep an eye out for that if that interests you.

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