Hi everyone, I’ve been signed up to BP for quite sometime but I’ve not traded much since I lost real money last year. Recently I’ve been demo trading again and just wanted to ask for some advice. Originally I had a capital of £1000 to trade daily charts… after unfortunate events of me jumping into trades at the worst moments, I did eventually lose it all…
My strategy I have been following is the SMA crossover, originally 21 / 6 and basically buy and sell when the crosses occur. I have been thinking about teaming that with the RSI and ADX so that I can see if there are overbought or oversold situations and whether the trend is strong enough.
The problem I have is I was wanting to try investing only £100 this time and trading on lower time frames 1h / 4h to have smaller stops than I did on the daily, but I do know £100 isn’t that much at all in FX.
I use DailyFX.com’s TradingView to sort of give me a good idea when these MA crossovers confirm as there is an “MA Cross” that actually generates on the chart when the crossover is confirmed. If I was to do a trade after the cross, would it be wiser to wait to see if the trend confirms and jump in a little later than right at the beginning? And would this strategy be do-able with such a small capital?
Actually its tiny amount to trade, you won’t be able to expect to make any decent profit from it assuming you don’t take excessive risk or blow your account by gambling. Using reasonable take profit and limiting losses, focusing on the long-run you can expect to make 10-20% monthly or 10-20 bucks/month. Breaking this rules will probably lead to quick defeat, so I’d recommend you to play demo while saving up money for bigger deposit.
MA cross-overs are easy to learn about, clearly identifiable on charts and can give frequent signals. However, they are notoriously prone to generating late entry signals. Plus, if you use an MA XO for entry and then only exit when you get a reversed MA XO, your account will soon empty.
Adding an on-chart indicator also seems attractive but off-chart indicators are generally held to be less reliable than price action interpretation. So, if your MA XO signal is about 70% reliable and the indicator signal you use is also about 70% reliable, at worst you could end up with a 49% aggregated probability of a winning trade: better to toss a coin.
You could filter your entries to allow trades only in line with a longer MA, say 50, 100 or 200. Or wait for 1 session before entry. Always use a stop defined by the TA.
e.g. EUR/USD gave 2 buy signals on 6/21SMA XO’s in last 3mths: price did not violate the lows of the two days in question so though this is a lame methodology at least you should not have lost money on these.
I did actually look at an MA crossover setup from babypips of 200/100. would that type of setup be better for daily/weekly trading?
I seem to have made more profits than losses on the demo if I jump in to the trend around 2-3 bars… but there is also a chance of a whipsaw effect which would probably stop out if I did daily. I’ve started to watch videos and gain as many tips from websites as I can and I know that sometimes I should wait for the previous bar/candle to close and to look at the direction of the daily/weekly trend and only trade in the way the market is going.
Frankly, Forex trading is not all about Moving Average crossover trading strategy, yes you can use popular sites, but don’t follow their trading setups so blindly! In my educational sessions, I followed almost all of them, then I made a combo technical and fundamental trading skill! Now I don’t follow anyone! But, nice move on demo! Try to understand how to use indicators to find out valid technical points of current market!
All MA XO signals suffer from being late. Short MA’s give more signals and are not so late but have high whipsaw rates. Longer MA’s give fewer signals and are very late but probably have equally high whipsaw rates. That’s just how it is, they’re a poor signal. They’re not as bad as some academic studies make out, where they programmed their system to enter on one XO and hold until the reverse XO, which is plainly bonkers, but they’re still poor, changing the time-frame doesn’t improve them.
A trend that is just starting isn’t a trend yet. Try getting into a short pull-back that is just ending in a smooth, lengthy trend. Though long trends are rare in the major FX pairs right now, I suppose its due to geo-political craziness. I’ve had to move back into stocks for good trends (up).
I personally believe that MA crossovers [I]can [/I]be very effective for judging [B][I]entries[/I][/B], but can be extremely costly if used for your [I]exits [/I]as well. Basing a trading method purely on crossovers for both entry [U]and [/U]exit will not work in the long term. Just think about it, there are programmes that can back test these simplest of simple methods for every combination of every type of MA for every time period you could imagine from ticks to years. And if there was even one crossover pair that worked consistently, everyone would know it by now.
The problem is that crossovers only work when the pair is trending strongly and smoothly. But there are always long periods when it is consolidating and oscillating in a range and that is when the damage is done - both financially and psychologically.
I know that many will argue against fixed target levels, but I feel in your case, having such a small capital to risk, if you are going to use a method with crossover entry then it might be worth considering using a fixed limit/stop ratio. Of course, any nominal limit/stop levels have to be considered and tweaked according to the current set up to make them sensible - and if the sensible stop ends up too far away then just skip that trade. The objective with an equity of £100 is surely to slowly build your capital with a minimal risk of serious damage. Sure, you will miss out on the occasional big moves, but at this stage, small but consistent gains might be the safer way.
If you can select pairs that are currently active, choose your trading times to match the most suitable market times, and include some kind of filtering (mavbe RSI)…and set your targets humbly and your stops at sensible levels with respect to the characteristics of the pair’s price action generally, then you may be able to make progress. (oh, and avoid chasing markets and big candles on the crossovers! One has to be very disciplined and very selective and only go for the optimal set-ups for this kind of trading and always remember not to get frustrated when missing a good opportunity - there is [I]always [/I]another one and there is no rush…
But personally, I have to add that I don’t think any TA method really works well as a stand-alone without your own brains being applied. I always believe that one must really understand and study one’s market thoroughly to be able to appraise current situations and only then rely totally on your TA to confirm, or otherwise, if and when to enter a trade.
But, as has already been suggested, your latitude for mistakes is extremely tight and it would be wise to trade and develop your method in demo to achieve consistency before doing this live. With this kind of trading approach, one bad decision can easily destroy a week’s work!
Just some personal ponderings to stimulate your own thinking!
Thank you everyone, appreciate all the information. I’ve only got a varied amount of knowledge in the markets and will probably demo for quite some time to try and build a decent capital. I have tried doing support and resistance too and then if the candle breaks through either the S/R then I look to trade on a breakout, but again, I only have a varied knowledge on this.
I wonder if there could be some sort of change for ‘Break even’ in that with original version, sometimes we will have a take profit of, say, 100, and the generator wants to use a BE of 1000. Would there be a way to control BE or define a maximum or a range.?
Hello.
I’m plaing with web EA Studio and it’s interesting…
But was any users of EA Studio or FSB Builder got a real profits using that robots? Any public monitorings of real accounts?
