**Signal Arrows**

The alert is produced by a cross of two Exponential Moving Averages. Faster EMA is 4 and slower EMA is 8.

**MACD Histogram**

The default settings are (our system uses 5,35,5) :

* Slow moving average - 26 days

* Fast moving average - 12 days

* Signal line - 9 day moving average of the difference between fast and slow.

* All moving averages are exponential.

The signals from the MACD indicator tend to lag price movements. The MACD Histogram attempts to address this problem by plotting the distance between MACD and its signal line. Because of this, the histogram signals trend changes well in advance of the normal MACD signal. It however should not be used alone, therefore we have other indicators to confirm our signal.

**Volatility Channel**

This is a technique that measures volatility. It consists of 34 EMA high and 34 EMA low. It is not really a part of the system, but I like to see it, especially if I look for confirmation on longer time frame.

**Laguerre**

This is an advanced form of RSI indicator. The Laguerre Transform provides a time warp such that the low-frequency components are delayed much more than the high-frequency components. Globally, latest bar data has more weight than previous bar data a bit like an exponential moving average.

**Slope Direction Line**

The name says is it all. Its a line that measures the slope of the trend and direction as well. The direction is shown as red for a downtrend and blue for an uptrend.

**Pivot Points**

Traders use pivot points to find intraday support/resistance levels. Pivot points are found by a simple calculation which involves the open, high, low and close for the previous day of any particular stock or index. It is said that when a price hovers below a pivot or pivot support/resistance and breaks up through it then its a buy signal (or vice versa for a sell signal). Or if the prices are above the pivot it is considered bullish and if they are below then bearish. The most common way to use pivot points are as reference points for entering trades if your other favorite indicators are also giving the same directional signal. Market Makers can use the pivot points to create a market by shifting the price around between levels to entice buyers or sellers of a stock into a trade. This can best be seen on low volume trading days as the prices fluctuate between the calculated points.

In our system we mainly use pivots for exits. You don’t need to know these calculations as they are automatically calculated in the software, its more just for informational purposes

**Guppy Multiple Moving Averages GMMA**

The Guppy MMA is a combination of moving averages and is optimized to allow for smoother and more accurate moving averages that are not easily spiked by sudden market movements.

The biggest fallacy of basic moving average crossover systems is that they can and will be very choppy when markets are not trending. At the same time when using basic crossovers systems the traders have little or no idea of underlying trend. Is the trend continuing or is it about to end. The Guppy MMA will answer all this questions and will give you the reason why you entered the trade so you can improve on your trading skills.

The importance of this indicator can not be emphasized enough! You must agree with what it is that it is telling you. The original guppy method was created by Darryl Guppy and is called the guppy. The original consists of 3,5,8,10,12 and 15 EMA for the short term moving averages (traders) and 30,35,40,45,50 and 60 EMA long term moving averages (investors).

The time frame is not important with this indicator, in the Trend Follower system we use it in 5 minute markets, but it can be used anywhere from 1m to monthly charts. It is just as accurate in any time frame. In our modified guppy we use 5 different colors for each different type of trader. When you are trading it is important that you know the underlying trend, hence you have to know what other traders are doing. Using the colors you are able to tell what other market participants are up to and as such make better trading decisions.

1. Yellow - short term traders (Mainly going for quick pips and not interested in holding positions)

2. Orange - short term traders (Those hold on the positions a little longer than the yellow)

3. Blue - mid term traders (Mainly swing traders, usually hold on the positions longer than previous 2)

4. Green - long term traders (Will hold on to their positions longer than mid and short term traders)

5. Red - long term traders or investors (They hold on to their position the longest)

The MMA reveals the relationship between short term traders and investors. Traders (yellow and orange) probe for weakness in the underlying trend and always lead the next trend or current trends. As they are going for quick profits, they are in and out of the market very quickly. Investors on the other hand are slow to move. However for a trend to succeed, the support of investors (red and green) is essential.

As a trend trader, you will be looking for situations where all the traders agree on the direction of the market (Yellow, Orange, Blue, Green & Red moving averages). If all the traders are in agreement, then that is the direction to trade. Any disagreement means you do not trade. By correct interpretation of the MMA, you will be able to identify the trend, possible trend exhaustion and also possible trend changes. Overall, you will be able to make better trading decisions.

The system is taken from:

Make Money With Forex Trading SystemTREND FOLLOWER SYSTEMTime frame: 5 minutesTrading time: From EU open until US closeRecommended Forex Pairs: USD/JPY, USD/CHF, GBP/USD, EUR/USD, USD/CAD, AUD/USD, EUR/JPY and GoldComponents of The SystemThe indicators are:

a) Signal Arrows

b) MACD

c) Volatility Channel

d) Laguerre

e) Slope Direction line

f) Pivot Points

g) Guppy Multiple Moving Averages (GMMA)

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