The Xmaster Formula Indicator is widely used by traders for identifying entry and exit points based on market momentum and trend changes. While the exact rules can vary depending on the version of the indicator, there are some general trading rules and guidelines you can follow when using the Xmaster Formula for trade decisions. These are typically based on the indicator’s visual signals, such as arrows, bars, or color changes.
Xmaster Formula Indicator V2 for MT4
Xmaster Formula Indicator V1 for MT5
Xmaster Formula Indicator V2 for MT5
Buy Signal (Long Entry)
Signal Type
- Green Arrow or Blue Color Change (depending on the version) typically indicates a Buy signal.
Conditions
- The green arrow appears below the price chart, indicating a potential upward price movement.
- Price is generally above a key support level or a trendline that confirms an upward trend.
- Momentum indicators or additional signals (like RSI or MACD) may also show bullish conditions.
Entry
- Open a long (buy) position when the green arrow appears.
- The best time to enter is after confirming that the market is in an uptrend or when the price is breaking above resistance.
Sell Signal (Short Entry)
Signal Type
- Red Arrow or Red Color Change (depending on the version) typically indicates a Sell signal.
Conditions
- The red arrow appears above the price chart, indicating a potential downward price movement.
- Price is generally below a key resistance level or trendline that confirms a downward trend.
- Momentum indicators or additional signals (like RSI or MACD) may also show bearish conditions.
Entry
- Open a short (sell) position when the red arrow appears.
- The best time to enter is after confirming that the market is in a downtrend or when the price is breaking below support.
Exiting a Trade: Take Profit / Stop Loss
Take Profit
- Set take profit targets based on the next key support or resistance levels, or use a risk-to-reward ratio of 2:1 or 3:1.
- For example, if your stop loss is 50 pips away from your entry point, set your take profit 100 pips or more away (depending on the volatility of the asset).
Stop Loss
- Set your stop loss just below/above the entry signal in case the market moves against you.
- A good rule of thumb is to place the stop loss near the last support (for buy trades) or resistance (for sell trades).
- Some traders use a fixed pip distance or ATR (Average True Range) to determine where to set their stop.
Confirmation with Additional Indicators
While the Xmaster Formula Indicator provides entry and exit signals, confirming these signals with other technical indicators can help avoid false signals. Consider using:
RSI (Relative Strength Index)
- Use RSI to confirm momentum. For example, if the Xmaster Formula signals a buy, ensure that the RSI is above 50 and ideally moving higher (for bullish momentum).
- Similarly, for sell signals, ensure that RSI is below 50 and ideally moving lower.
MACD (Moving Average Convergence Divergence)
- Look for MACD crossovers to confirm a trend. A buy signal is stronger if the MACD line crosses above the signal line, and a sell signal is stronger if the MACD line crosses below the signal line.
Moving Averages
- A 50-period or 200-period moving average can act as dynamic support and resistance levels. For buy signals, ensure the price is above these averages (indicating an uptrend), and for sell signals, ensure the price is below.
Filter with Trend Direction
Trend-following approach
- Only take buy signals in a strong uptrend and sell signals in a strong downtrend.
- To identify the trend, use trend indicators like moving averages, trend lines, or the Average Directional Index (ADX).
- Avoid trading when the market is ranging or consolidating (sideways movement), as the Xmaster Formula can provide false signals in choppy markets.
Timeframe Considerations
Short-Term Timeframes (1-minute, 5-minute charts)
- Xmaster Formula can work well for scalpers or day traders on lower timeframes. However, due to the volatility, you may get false signals, so be extra cautious.
- Always confirm signals with other indicators and keep tight stop losses.
Medium to Long-Term Timeframes (30-minute, 1-hour, 4-hour, Daily)
- Xmaster Formula signals on higher timeframes tend to be more reliable. The trend is more established, and the signals can lead to larger moves.
- Look for pullbacks or corrections in the market before entering a trade on higher timeframes.
Trade Management
Scaling In/Out
- If your position is profitable, consider adding to it (scaling in) when the Xmaster Formula shows continuous buy signals in a strong uptrend.
- Similarly, scale out of your position when you approach your profit target or when the trend starts to show signs of reversing.
Avoid Overtrading
- Don’t overtrade or take every signal. Make sure the signal aligns with the overall trend and market conditions. Sometimes, the Xmaster Formula may give false signals, especially in ranging or volatile markets.
Example of a Trade Setup
Buy Signal
- The Xmaster Formula shows a green arrow below the price.
- The RSI is above 50, and MACD is positive (bullish crossover).
- Price is above a support level or a moving average (confirming an uptrend).
- Open a buy trade at market price.
- Set a stop loss below the last support level.
- Set a take profit at a key resistance level or use a 2:1 risk-reward ratio.
Sell Signal
- The Xmaster Formula shows a red arrow above the price.
- The RSI is below 50, and MACD is negative (bearish crossover).
- Price is below a resistance level or a moving average (confirming a downtrend).
- Open a sell trade at market price.
- Set a stop loss above the last resistance level.
- Set a take profit at a key support level or use a 2:1 risk-reward ratio.
Final Thoughts
- The Xmaster Formula is a great tool for helping traders identify entry and exit points, but like all indicators, it’s not perfect.
- Combining it with other indicators, following strict risk management rules, and understanding market conditions will help you trade more effectively.
- Always practice on a demo account first to refine your strategy before going live.
