ok so, i have been live trading for a few weeks, before then i demo’d my strategy and it went ok, i have since created a new strategy which i plan to use on the daily chart, any ideas or criticisms would be much appreciated, so my strategy is as follows:
indicators;
150 day MA
3 period RSI
stochastic settings at 6,3,3
for a buy:
moving average must be below price
rsi must be in over sold below 25
stochastic must be in oversold and made a bull crossover
go long on next candle
I would do the opposite for a sell, and then my take profit is when stochastics hit the other side, my stop loss will be the recent swing low. i have been learning about trading for over a year and i am happy with this strategy but i would like some peoples opinions on it and any ideas you may have.
thanks for reading this guys.
I’ve always been drawn to simple strategies like this that have a very objective entry set-up and clear rules for exit. This is simple and I like it but two points -
I think you’re already into over-complication by using both RSI and stochastics: one or the other would do just fine and my preference (though I confess I don’t actually use off-chart indicators) would be stochastic: the 6,3,3 setting gives you a short-term trigger and you respect the longer term trend by using the 150EMA: the RSI adds nothing
more seriously, indicators like both of these two inherently lag the market and are prone to give lots of whipsaw entry signals: but lag on 6,3,3 stochastic should be only a session, maybe less: you have to have the account strength and mental resilience to stand these factors: the danger is being seduced into earlier entry to avoid the lag: getting whipsawed can seduce you into a wider stop than the recent swing high/low, which would be slow account suicide.
thank you for your swift response and your good ideas, i understand what you mean about the whipsaw effect, i started to test it on the 1 hour time frame and it was not very effective, but so far on the daily it seems to tally up well. I do try to wait untill i see a crossover in the stochastics, and i also try to make sure that the next candle indicates that the price action could be moving in my favour. i keep thinking about only using one oscillator, but i really like the confirmation of the 2 combined. thanks for your input you have given me a bit more confidence to move forward with my strategy.
Hello mashembo,
I was using something similar at my strategy in the past but my only disagreement is about the Relative Strength Index (RSI). Why you buy when RSI is in the oversold area? You are waiting to slope up and then buy or not?
Bro, one of the hidden secrets to speculating is that nobodies opinion matters for jack !@#$!. The only thing that matters is your account balance. If it goes up then your onto something. If it goes down then you need to figure out why and real quick. Is it your system, or just the wrong instrument and/or market conditions.
My advice, if this is how you see the market then always see it this way. Don’t let somebodies opinion change that. Best of luck.
sorry yes i failed to mention that as you say the rsi does have to show that it too has started to reverse and the stochastic also has to start to reverse and make a crossover. its nice to know you have used something along the same lines, thanks.
hey man, i tottally see what you mean i suppose everyone has there own way of doing things at the end of the day and every trader has their opinion, i just wondered if for some reason there was a flaw in this strategy that could be generally agreed on as this is just a strategy in the making for future ventures. thanks for your input, you guys have all helped my motivation to keep trading many thanks peace.
The flaw probably won’t be in your strategy, rather the market conditions you apply it in. Most strategies will work in “the right” market conditions. The hard part is sticking to a strategy for 3 to 5 years to understand these two words, market conditions.
this is something i have not actually put much thought into to be honest. i guess i would always want to make sure that i was trading with the trend and make sure there were no upcoming fundamentals that could impact the price action. thanks for bringing this up i will definatley do more research on market conditions.