ERXGen Filter indicator or Tokyo Explosion System
Good afternoon, ladies and gentlemen, Forex traders!
Today we will consider one very interesting strategy based on a temporary pattern. We will trade with the money of Europeans, analyzing the trade of Asian traders. The task will be facilitated by the auxiliary indicator ERXGen Filter, which implements most of the calculations for the TS.
“Tokyo Explosion” is suitable for those who prefer measured trading - 1-2 entries per day and signals that are easy to interpret.
Platform: MetaTrader 4
Currency pairs: EURUSD, GBPUSD, EURJPY, GBPJPY, EURAUD, GBPAUD, EURCAD, GBPCAD, EURNZD, GBPNZD, USDCHF, GBPCHF
Trading Time: Tokyo Session
Recommended brokers: Alpari, RoboForex, Exness
ERXGen Filter indicator
The developer of the trading method is a trader from the UK. You can learn more information about trading on this strategy and various setups from its profile on the MetaQuotes forum.
The basis of the trading system is probably the familiar “London Explosion”. Entrance to the market is also carried out during the London session, however, we will measure the price range for the period of Asian trading. In fact, the difference is not only in the entry time - the strategy took into account the errors of the predecessor and added an analysis of the previous trend movement:
- During the current week (last 2 days) there should be a clear trend. Let me remind you that an uptrend is a series of rising peaks and troughs, a downtrend, on the contrary - a series of declining highs and lows. This refers to the maximum and minimum of the entire daily range;
- The range of the Tokyo session (marked in green) should be small - less than half of the entire range of the previous day. That is, during the Tokyo session of the current day, the price should be in a narrow channel, the range of which should not exceed 50% of the distance covered by the price for the previous day;
- In this case, the channel should be located either in the upper third and aboveeither in the lower third and below from the range of the previous day.
Further, the price can save the started direction of movement, or turn around - any option suits us.
The upper green line determines the maximum price during the Tokyo session, the lower red line - the minimum. Also, the indicator displays signals on 12 major currency pairs on the chart, so you do not have to monitor all pairs individually.
The strategy uses two approaches - conservative (2, 4) and aggressive (1, 3). With a conservative approach, you lose some of the signals when the price, breaking through the level, continues to move without stopping. In return, you get less false breakdowns and a more profitable entry point.
With an aggressive approach, we set two stop orders above and below the current price: Buy Stop at the upper border of the channel +5 points, Sell Stop at the lower border of -5 points. When one of the orders is triggered, the second one is deleted.
For a conservative transaction, we are looking forward to breaking one of the borders, after which we set a limit order exactly at the channel border - Buy Limit in case of a purchase and Sell Limit in case of a sale. That is, first we wait for the breakdown, and then enter the rollback to the channel line.
When trading with system signals, be careful, as signals can be both in trend and against it. Actually, in our case, the counter-trend signal is no less reliable than the trend signal. To do this, we use a filter of 5 points - to avoid false channel breakdowns.
Stop-loss is set beyond the opposite channel border +5 points in addition. The minimum take profit should be equal to 25 points. At the same time, take profit should never be less than stop loss.
Of course, this does not make the system bulletproof. Therefore, do not neglect additional methods of analysis. Look at the break of the Pivot or Fibonacci levels - this will serve as an additional signal to enter the trade. Also, the signal is considered more reliable if, at the same time as the session level, a round price level has been broken.
You can download the indicator from the app store for MetaTrader. You can do this directly from the terminal, for which you need to follow 3 simple steps:
- Go to the “Market” tab of the terminal window;
- In the search field, enter the indicator name - “ERXGen Filter”;
- We go to the product page by clicking on the first item in the list of results.
On the product page, click “Download” - the download of the indicator to the terminal will begin.
As soon as the download is finished, that is, “Installation is complete” appears, the indicator will appear in the “Market” section of the navigator window. You can close the shop window on this.
To start the indicator, simply drag “ERXGen Filter” from the navigator window onto the chart of the instrument.
First, go to the “General” tab, and make sure that the indicator is allowed to import functions from DLLs and external experts.
After that, go to “Input Parameters” - here are all the basic settings of the indicator.
- The currency pair ticker suffix of your broker, if any. For example, “EURUSDecn”;
- Important! The difference in hours between the local time of the terminal (what is indicated in the market overview) and GMT. For more information on how to set the clock offset correctly, see the article “How to set the correct GMT offset”;
- Duration of the Tokyo session (7 by default);
- The color of the labels on the chart;
- Showing the price range for the current and three previous days;
- Display on a graph of a matrix of signals in 12 pairs. The table indicates compliance or non-compliance with the 3 conditions of the strategy;
- Conclusion on the chart of reference information.
The comment in the upper left corner of the graph is unique for each pair and displays information about the current signal - observing three system rules:
- RULE 1: presence or absence of a trend. To comply with the terms of the strategy, there must be one of two values: “Up Trend” (uptrend) or “Down Trend” (downtrend). A value of “Not Trending” means that there is no clear trend in the market;
- RULE 2: price spread for the Tokyo session is “OK” or “Not OK”. OK means that the range is less than 50% of the amplitude of the previous day;
- RULE 3: position of price congestion relative to the previous day. OK means that the Tokyo session area is either in the upper or lower third of the range.
The table below displays:
- Current day of the week;
- Local computer time
- Adjusting the time relative to the broker's time zone;
- Current spread and average price range;
- The maximum and minimum of the Tokyo session and the variation in prices in points;
- Opening and closing times of the Tokyo session.
Currency pair: EURUSD. Here we will try to use a conservative approach, that is, we will enter the market when testing the level again. To do this, we need to wait for the breakdown of one of the boundaries of the channel, and then set a limit order in the corresponding direction.
The price has broken through the support level, which means we set Sell Limit at the support level (red line). We set stop loss 5 points above the upper level of the channel (green line). Stop loss is 25 points, take profit set identical. As you can see, the profit has been achieved, despite the fact that the deal is counter-trend. The main thing when trading against the trend is not to set too much take profit (exceeding stop loss), or use a trailing stop.
Currency pair: USDCAD. The trend is downward, as can be seen from the successively lowering highs and lows of the previous two days. This time we’ll try to enter immediately after the breakdown of the level, that is, using an aggressive approach. To do this, set two stop orders: Buy Stop +5 points above the green line and Sell Stop -5 points from the red line.
In this case, Buy Stop worked - the opposite order is immediately deleted. Stop loss is 38 points, at the same distance we set take profit. Note that the price has not reached either take profit or stop loss. So - if the position did not close before the end of the day by stop or take - close it manually, regardless of the financial result.
The Tokyo Explosion strategy is a successful rethinking of familiar tactics. At the same time, the ERXGen Filter indicator greatly simplifies the task, automatically doing almost all the necessary calculations, except, perhaps, the size of take profit and stop loss. In fact, for trading you just need to keep one chart open with an indicator installed, where signals for 12 currency pairs will be displayed - ideal for calm and measured trading within a day.