Reversal Trend with Donchian Bands

Reversal Trend with Donchian Bands uses Donchian Bands and Moving Averages along with MACD in order to establish a trend following trading strategy. This forex trading system generates trade signals based on Moving Average crossovers and filters them with other supportive indicators.

Reversal Trend with Donchian Bands can be applied to trade all kinds of forex currency pairs available in the market. Furthermore, this system fits great with all sorts of timeframe charts within the MetaTrader 4 platform.

Reversal Trend with Donchian Bands Overview

Install Reversal Trend with Donchian Bands at your MT4 terminal and load it at the chart. Once you’re done, your trading chart will appear like the following image:

Reversal Trend with Donchian Bands Overview

Reversal Trend with Donchian Bands Anatomy

Reversal Trend with Donchian Bands Anatomy

  • Donchian Bands 1, 2 & 3: These bands are used to define the dynamic support/resistance levels of the market. Donchian Bands 1 and 2 are good for short-term trading thus applicable to M1 to M15 charts. Donchian Bands 3 works great on intraday and daily timeframe charts.
  • 10 & 21 LWMA: These are 10 and 21-day period Linear Weighted Moving Averages which are used to plot the crossover trend signals. 10 LWMA moves above 21 LWMA is defined as the bullish crossover. Oppositely, 21 LWMA moves above 10 LWMA represents the bearish crossover signals.
  • MACD: MACD is a well-known indicator among the momentum based traders. In this system, this indicator has been applied as a trade signal filter. MACD value turns positive and its fast-MA turns blue to signal the buy entry along with the bullish momentum. A negative MACD with red colored fast-MA represents the sell signal following the bearish thrust of the current market momentum.

Also Read: Best Forex Trading Strategy

Reversal Trend with Donchian Bands: Buy Conditions

Reversal Trend Buying Conditions

  • The price level is supported by the lower Donchian Bands
  • 10 LWMA moves above the 21 LWMA
  • MACD turns positive and the fast-MA turns blue
  • Buy triggers when the above conditions are met
  • Set stop loss below the current LWMAs levels
  • Exit long/take profit whenever 21 LWMA moves above 10 LWMA and the fast-MA of MACD turns red

Reversal Trend with Donchian Bands: Sell Conditions

Reversal Trend Selling Conditions

  • The price level is resisted by the upper Donchian Bands
  • 10 LWMA moves below the 21 LWMA
  • MACD turns negative and the fast-MA turns red
  • Sell triggers when the above conditions are met
  • Set stop loss above the current LWMAs levels
  • Exit short/take profit whenever 21 LWMA moves below 10 LWMA and the fast-MA of MACD turns blue
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I have been actively trading stocks and currencies since April 2012. Besides trading with my personal money I am a technical analyst in a mutual fund which has Rs. 1 billion in assets under management. At my leisure, I love attending live music, traveling, and partying with friends.

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