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The Entropy trading system is based on the principle of following the market. Suitable for any currency pairs. Optimal time frames H1 and H4. The system has two indicators. The first is the well-known Bill Williams Alligator. The Alligator indicator consists of three moving averages displayed on the price chart. Under certain conditions, this indicator pretty accurately shows the direction of movement. But on the flat market and on small time frames it often gives false signals. In the Entropy system, this drawback is eliminated by the fact that Alligator signals are confirmed by the Entropy Math indicator. In this strategy, this tool determines the strength of the market movement.
The Entropy Math indicator is displayed in a separate window of the Metatrader terminal. On his chart, a red histogram shows an increase in growth above the level of 0.001 and an increase in decline below the level of -0.001.
Both indicators are available for download in the Indicators section.
Indicator settings.
Applying both indicators to the chart of the trading asset on which you intend to use this strategy, configure the parameters of these indicators as follows:
For the Alligator indicator, set the values - 26, 26, 16, 16, 10, 10, according to the location of the parameters.
In the Entropy Math indicator, set the value to 16 for the NumBars parameter.
Rules for opening a BUY:
1. The main condition for purchases arises when the price rises above all three lines of the Alligator indicator.
2. The green line of the Alligator's Lips and the red line of the Alligator's Lips should cross up the blue line of the Alligator's Jaws
3. The histogram of the "Entropy Math" indicator should be in the area above the level of 0.001.
Rules for opening a SELL:
1. The first condition for potential sales arises when the price falls below the Alligator indicator.
1. The green line (Alligator's lips) and the red line (Alligator's teeth) should cross down the blue line of the Alligator Jaws
3. The histogram of the Entropy Math indicator should be in the zone below the level of 0.001.
Stoploss and Takeprofit
Stoploss should be set at the nearest maximum (for sales) or the nearest minimum (for purchases) from the place of deal opening. It does not use a take-profit. Instead, take profits by moving the stop loss in steps equal to the distance from the opening price of the transaction to the originally set stop loss at the extreme. For example, if after opening a deal and setting a stop loss at the nearest extremum, its value is 250 points - if the price moves in the direction indicated by the deal, move the stop loss every 250 points, thus protecting the profit received. Also, for these purposes, the use of a trailing stop is perfect. This is even more convenient than rearranging stop-loss manually.
Conclusion
This trading strategy is a very popular system among traders. It has been tested by time and, to this day, has been successfully used by many traders. One successful transaction sometimes over-covers several unprofitable trades due to the protection of profits by using a trailing stop or step-by-step movement of a stop loss. Adhering to the clear rules of money management, working with this system can bring good results that will make your deposit grow.
