Stop Getting Fooled By Fake Trades: Discover The Top TradingView Indicator You Didn’t Know About

By
Leah Sirama
-
27
396



Filtering Out Fake Signals in Trading

You know the feeling of frustration you get when your strategy gives you a signal to trade you open a position but then the price immediately reverses and triggers a stop loss if this happens to you regularly you definitely need to watch this video because today I will reveal how I filter out the majority of fake signals given by any strategy in a way you haven’t seen before

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So we’re currently on the EUR/USD on the five-minute timeframe. Let’s build a simple trading strategy using only two indicators.

So, for the first tool, let’s add the Follow Line indicator. The one that you’re looking for is this one by Dread Blitz. For the second tool, let’s search for MACD Plus 200 SMA strategy. The indicator was created by Chart Art.

Now, let’s make some slight adjustments to the settings of these indicators. Open the settings of the Follow Line indicator and disable the trend line. The next step is to open the settings of the MACD Plus SMA and uncheck some options in Style as well.

The Follow Line indicator is the one that prints these blue and red signals on a chart. A blue label is a signal to buy, a red label is a signal to sell. On the other hand, we have SMA Plus MACD indicator which consists of two parts, the colored SMA and the bar colors. If the price is moving below the SMA and the SMA is red, the price is in a downtrend. In addition, if the bars are red in color, the selling pressure is very strong. When the bars become blue, it signals a consolidation phase where sellers usually start taking their profits, resulting in a price correction. Conversely, when the SMA is green and the price is moving above it, the market is in an uptrend.

Now, once we know how these indicators function, let’s build a simple trading strategy with these tools. This is a trend-following strategy that includes four rules. The conditions for a Buy trade are as follows: first, the Follow Line indicator issues a Buy Signal; second, the price is closed above the SMA; third, the SMA is green, and fourth, the price bar is green as well. The most important thing is that all these conditions must be met at the same time when the signal is issued. For the opposite, you do the same but for the Sell trades.

Even though we have these simple rules in place, the strategy works pretty well but it’s definitely not ideal. This is due to the fact that such a strategy does not work in a Range Market where the amount of fake signals can lead to serious drawdowns. So how can we eliminate all these fake signals and make sure that we only take high-quality trades?

In order to solve this problem, we need to add one more tool to the chart, the QQE MT4 indicator. This one was created by Glass. The QQE, or Quantitative Qualitative Estimation, is primarily based on the Relative Strength Index and smoothed with a Wilder’s smoothing method. It consists of two lines, the QQE line which is the main line, and the Signal Line. This indicator is super versatile and can identify the trend, overbought or oversold levels, and entry and exit points.

For our strategy, we’ll use this tool in a very effective and unique way. To confirm a long trade, all the rules that I mentioned previously must be met. In addition, the QQE yellow line must be over the red line. This condition confirms a bullish trend. However, there is still one more rule in place that no one knows about yet, so make sure you pay close attention.

To confirm the momentum of the price action to the upside, you need to take a look at the yellow line. You can see the line is often making highs and lows. So what you want to do is to simply draw a line from the most recent high to the current value. The next question is how do you find the recent high? Look at the last time when the QQE was being bullish, meaning the yellow line was above the red line, and then find the peak that happened during this time. The ultimate confirmation for a long trade would be to have this trend line pointing upwards. If the line is flat or pointing downwards, do not enter the trade.

For this strategy, we will target two times the risk. Do the opposite for sell trades. First, wait for the sell signal issued by the Follow Line indicator. At the same time, the price must be closed below the SMA. The SMA and the bar column must be red. The QQE yellow line must be below the red line. And now, draw the line from the recent low the yellow line has made to the current value. The key is making lower lows which confirms our entry.

By the way, traders, you can make the Follow Line indicator a bit faster by unchecking the ATR filter. Right away, we can see that we get more signals. Now, let’s find some more signals given by the strategy. Pay close attention to these examples.

Here we see a long entry with all the basic conditions met. The QQE confirms the bullish trend with the yellow line making new highs. On the other hand, we see that all these buy signals that appeared during a range market were not confirmed, and this is exactly how you eliminate all these fake signals. The indicator only leaves the high-quality ones, which is what we want.

However, no strategy is perfect and we still have some losing trades, but those do not happen that often. Overall, the results are pretty good. Definitely give this QQE method a try. You can apply it to any trend-following strategy, and I’m sure the results will be really good.

Thanks for watching this video. I hope you found it useful. If you want to see more high win ratio strategies, check out this playlist.


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