Trend reversals in forex occur all the time. Reversals will occur as long as there are trend. This simple concept is the basis of many trend and trend-reversal strategies and trading tools. Now it’s just a matter how trader can use the correct tools to spot reversals, and trade the trend. One of many reversal indicators is the Lucky reversal indicator. It has several unique features that set it apart from other forex trend reverser indicators.
What is the Lucky Reversal Indicator
The Lucky reversal indicator tells you when the trend has changed from an uptrend into a downtrend or vice versa. The indicator gives signals in the form blue and red arrows that are followed by wavy horizontallines. The market is in an uptrend, while the red arrow signals a market reverse.
The Lucky reversal indicator has another feature that isn’t obvious at first glance. This is the white square that appears whenever the indicator suggests a temporary or possible reversal.
The main flaw in the Lucky indicator
Lucky’s reversal indicator stands out from other trend reversal indicators. It is a lagging indicator so traders can’t trade reversal breakouts.
Trading has been frustrated by the inability to spot the beginning of trend reversals. Backtesting the indicator will show that bullish and bearish signals occur at the pivot points for major trend reversals. Below is an example. As soon as the arrow appears, you’ll see that price seems reverse to itself.
However, the indicator will only be visible on a live market if the market has reversed. Only after the market has completed a reversal, the arrow indicating a reversal appears on the chart. This indicates that the Lucky indicator for reversal lags.
Trading Strategies Lucky Reversal Indicator
It is best to use the Lucky reversal indicator in conjunction with other trading tools. The strategy may also include indicators and market structures such as support and resistances, chart patterns, candlestick patterns, and so on.
We will combine the Lucky indicator and the Moving Average indicator to help you create your first trading strategy.
1. Combining the Indicator with The Moving Average Indicator
The Lucky indicator will be displayed, along with two moving averages. You can leave one of the moving averages as is. But, change the period for the other to 20. You can also change the color to distinguish it from the other moving average. The default moving average is our fast moving average. The 20 MA is our slower moving average.
Next, wait for the Lucky indicator’s buy or sell signal. This indicator is slow so don’t trade it. We want to trade entry opportunities that are in the direction of Lucky’s reversal indicator. These are the reasons we have these two moving averages.
If our trend reversal indicator indicates an uptrend, it is important to only buy when the fast MA crosses the slow moving average to its upside. You should not sell before the Lucky reversal indicator changes to the red. If our reversal indicator is giving a downtrend signal you should only sell when it crosses the slow-moving indicator.
Trading The Lucky Indicator Signs
The Lucky indicator often displays the white square when there is a chance of a reversal. The white square stays at the same position, but price moves. The white square will change to either an uptrend signal or a downtrend signal when a trend reversal has been confirmed. Make the trade when the white square changes from a buy signal to a sell signal at the end of the candle.
You can buy a trade when Lucky confirms an uptrend and sell if Lucky confirms a decline.
The best way to determine your take-profits for each trading strategy is to establish price targets. Do not wait for any indicator to give you an opposite signal before exiting the trade.
When setting your stop loss, remember to never risk more than what you can afford. The rule of thumb is not to risk more than 2% of your capital when trading. With this in mind, you can use any method to set your stop loss.
Lucky indicator’s positive side is that price rarely crosses to the other side of its lines once it has drawn its wavy lines. This indicator can be used to set your stop loss, but not all situations will offer you the best risk to reward ratios.
For Whom Is The Lucky Reversal Indiator Best?
For professional and intermediate forex traders, the Lucky reversal indicator works best.
Forex traders who are beginners and have a good understanding of lagging indicators may be able to use this indicator, but they should exercise caution. They will need to be able to recognize forex trend reversals in order to get the most out of this indicator.