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In conditions of high volatility of financial markets, traders and investors are increasingly looking for tools that will help minimize risks and increase profits. One of these tools is indicator signal averaging, which combines technical analysis and market psychology. In this article, we will analyze how this strategy works and consider its application in the ELDER 2.0 trading system.
What is signal averaging and why should you pay attention to it?
Signal averaging is a method in which a trader distributes his positions into several parts, opening them in accordance with the signals of technical indicators. This approach allows you to reduce the influence of emotions on decision-making, reduce risks and increase the probability of successful transactions.
Advantages of signal averaging:
1. Risk reduction: the market is unpredictable, and sharp price fluctuations can lead to significant losses. This averaging allows you to allocate capital, minimizing losses during periods of high market volatility.
2. Increase in profit: the use of effective indicators helps to determine the optimal entry and exit points for each of the orders, which increases the chances of successful trades.
3. Easy to use: the strategy does not require complex calculations and is accessible even to novice traders.
Key indicators for signal averaging
For successful implementation of the strategy, it is important to pay special attention to the indicators in the strategy. Let's recall the three main tools that are used in the ELDER 2.0 system.
1. Chande Momentum Oscillator (CMO)
The CMO measures the strength of a trend and shows values from -100 to +100.
- Buy signal: CMO falls below -50 (oversold zone).
- Sell signal: CMO rises above +50 (overbought zone).
2. Bollinger Bands
This indicator shows volatility and support / resistance levels.
- Buy signal: the price goes beyond the lower band.
- Sell signal: the price goes beyond the upper band.
3. Stochastic Oscillator
Stochastic helps you determine overbought and oversold conditions, and also allows you to enter a trade on a return price movement.
- Buy signal: the %K and %D lines cross level 20 from the bottom up.
- Sell signal: the %K and %D lines cross level 80 from top to bottom.
ELDER 2.0 strategy - how it works
The ELDER 2 .0 strategy combines the above three indicators, which allows traders to make more informed decisions. Let's take a closer look at its mechanics.
Indicator Settings:
1. Chande Momentum Oscillator (CMO):
- Timeframe: M15.
- Signals: buy at CMO < -50.
2. Bollinger Bands:
- Timeframe: M15.
- Signals: buy when the price goes beyond the lower band.
3. Stochastic Oscillator:
- Timeframe: M5.
- Signals: buy when crossing level 20 from the bottom up, sell when crossing level 80 from the top down.
Completion of the transaction:
To exit the trade, the Stochastic signal is used on the M15 timeframe: crossing the level of 80 from top to bottom indicates the exhaustion of buyer's forces and serves as a signal to close the position.
A more detailed description of the operation of this combination of indicators can be found in one of the previous articles:
TOP-3 effective indicators in trading
Advantages of the ELDER 2.0 strategy
- Risk reduction: the allocation of capital and the use of multiple indicators for each order help to minimize the time spent on making a trade.
- Signal accuracy: the combination of CMO, Bollinger Bands and Stochastic increases the probability of successful trades.
- Emotional stability: the strategy helps to avoid impulsive decisions, which is especially important in conditions of high market volatility.
Let's see what results ELDER 2.0 showed us
To evaluate the effectiveness of the ELDER 2 strategy, backtests were performed on historical data. The results showed that the strategy demonstrates stable returns with moderate risks.
For a more detailed analysis, see the results of backtests:
ELDER 2.0 BB SPOT LONG UNI (+53% per annum on spot)
https://veles.finance/share/QnPTv
ELDER 2.0 BB SPOT LONG SATS (+70% per annum on spot)
https://veles.finance/share/IYtLI
This data confirms that ELDER 2.0 can be an effective tool for traders who want to improve the efficiency of their trading. Strategy indicators allow you to smooth out market fluctuations and increase the company's profit. However, it is important to remember that no strategy guarantees 100% success. Market conditions are constantly changing, and traders need to adapt, analyze data, and approach trading consciously.
If you are willing to take the time to study the indicators and follow the strategy in a disciplined manner, ELDER 2.0 can become your reliable assistant on the way to successful trading.
