TrendLover

Trading Systems Free Forex Trading Systems
1

Over the years I have seen many gurus come and go. Some crash and burn in a spectacular way, others slip out the back door quietly when their teachings fail. So let’s get one thing straight: I am not a guru. I am however the boss of this thread and as such I will not tolerate bad behavior of any sort.

Ok, now we got that sorted…

I decided to share my system. But to be honest, it’s not mine. I just assembled parts from other skilled people I’ve learned from over the years. As will be obvious I’ve borrowed the basic structure from Captain Currency, aka Andy Perry, who runs an excellent thread on this forum. I have also learned and borrowed concepts from Courtney D. Smith as well as from the Turtle Traders. And of course the Technical Templates threads also found on this forum are goldmines. These are just a small selection of the traders and books I’ve learned from, the full list would require a thread of its own…

TrendLover is a multiple timeframe system. As the name suggests it attempts to always trade in the direction of the trend. So, the first step when looking for a trade is to determine the trend, if any exists.

We apply a 60SMA to the two timeframes above our trading timeframe. Ie, if we want to trade the 4H timeframe we will then apply a 60SMA to the Daily and the Weekly timeframes. The system is built to fit Metatrader 4 and due to the sequence of different timeframes offered I’ve made some adjustments to which higher timeframe SMAs should be relevant to each trading timeframe.

So, to recapitulate, the first step involves finding an instrument where price is either above or below both of the higher timeframe SMAs.

The second step is to identify a retracement against the higher timeframe trend. We now operate on the trading timeframe. Here we apply a Stochastic indicator with settings: 14, 3, 3

If the price is above the higher timeframes’ SMAs, then we wait for the Stochastic on the trading timeframe to turn below 20, aka into oversold territory. We don’t care about Stochastic crossovers or wait for it to exit the oversold area again or anything else. All we care about is seeing the indicator close below 20.

Once this happens the next indicator comes into use, the Donchian channel. I will not explain what the Donchian channel or any other indicator does. If you don’t know then there are excellent resources just a google away.

The Donchian channel is set to a period of 10. We now place a pending order one pip or so above the upper Donchian channel, while making sure that the potential entry point is located above both higher timeframe SMAs.

We now keep moving the pending long order along with the Donchian channel until it either activates, or until the entry point sinks so low that it is no longer above both higher timeframe SMAs.

The one point that requires some discretion is the placement of the initial stop loss, I will get into this in a future post. Once the trade activates we will either be stopped out by the initial stop loss or by the lower Donchian channel which we will use as our trailing stop loss.

There are some other options for early exits that we will also discuss in a future post.

The beauty of this system is that it is scalable, ie it works for trading the 4H as well as the 5min timeframes.

I use a few modified indicators which I will post soon along with my template.

This system is of course not perfect and it will suffer losses just like any system, but it is built on very sound principles and I have not been able to find anything that is better. I also enjoy the fact that it is so simple that anyone can understand how and why it works.

There are so many threads here and on all other forums that focus on systems and approaches that simply do not work or are so difficult to understand that they become black box systems. I thought I should offer something that works consistently over time and that doesn’t use anything else than simple indicators from what can only be regarded as the public domain.

To be continued

TrendLover.zip (5.19 KB)

2

Sounds interesting…looking forward to your future posts and modified indicators.

Will this work on any 3 consecutive TF’s? If I usually trade based on the 1 hour chart can I validate the trend via the H4 and D1 TF’s instead?

3

Is the Donchian Channel a standard indicator in MT4 or do you have to get it from an outside source? I don’t see it in the Indicator list. Thanks again.

4

Hi Ace, yes you can. That’s what I meant when I referred to the scalability of the system. You’re spot on, for 1H you would use the 4H and Daily as higher timeframes.

Strangely the Donchian is not included as a standard indicator in the MT4 package. I will upload it together with the other files. Generally it is however a standard part of almost all charting packages, MT4 stands out in this respect.

5

I’m attaching a zip file here which contains a few indicators and a template file.

Indicators go in the experts/indicator folder and the template file goes in the… template folder of your MT4 installation.

If you apply the template you will get almost the same chart setup I use. I’m saving a few tweaks that require explaining and I use an alerter function that might not be useful to everyone.

TrendLover.zip (5.19 KB)

6

Quick screenshot to illustrate. This is XAUUSD 5 minutes. Price on both of the higher timeframes, 30min and 4H is above the 60SMA, so we’re looking for long Donchian breakouts after the 5min Stoch falls below 20.

Not marking out the entries, instead your task is to find them and figure out whether the period of time on this screenshot would have resulted in a net profit or loss?

Click the link for a bigger image…

xauusd-m5-oanda-corporation.jpg700×376 27.6 KB

7

As you alluded to in your post, this is basically Carll’s hook trigger (from Technical Templates) minus the other additions.
I’ve used it ever since I first came across it whenever the primary conditions are in place & it’s the most successful trigger I’ve ever utilized.

The only strict conditions apart from an established higher timeframe trend are time of day (especially if I’m taking a day trading view on european crosses and/or the majors) & the percentage remaining of average day’s range.

It’s a solid, consistently successful set up, which isn’t really surprising considering the logical criteria it’s based on.

8

Yes, Carll is one of several traders that I’ve come across that use the stoch hook as a trigger. My memory may fail me but I recall that maybe Carll used a slightly faster setting for the stoch. In either case I’ve learned a great deal from the Technical Templates threads and their participants.

As a part time trader the Time of day concept is hard to implement. I tend to trade the 4H timeframe and then I plan sessions of intraday trading when my schedule allows.

For this same reason I don’t look that much at the ADR although it can certainly be useful.

9

I believe he still does yes. I understand there are different settings for particular instruments, including shares, but I don’t have access to their live room/forum so can’t offer any further specific input on that.

The parallel hook set up (but I didn’t trade gold on Friday by the way) for a typical entry on that instrument would have triggered on that hook during the mid-london morning session @ c1308.70, but as it’s not reflecting the topic you’re presenting I will refrain from steering it off line.
The earlier hook (05.30-06.15 gmt @c1305.15) would have been invalid due to the time it set up.

The thing I love about this simple set up/trigger is the fact it will only offer a valid (potential) entry once the background elements have slotted into place. It typically does offer multiple entry opportunities throughout the day once the higher timeframe trend is established, but the entry & trade management decisions will be very much influenced & dependent upon the individuals objectives.

Good luck with the thread though.
The core concept is both logical & sensible!

10

Hi. Nice strategy.
How long have you been trading this strategy & what’s you average risk/reward & win/loss ratio?

11

hi, your strategy sounds good, I like it. But can you elaborate a couple of things for me:

  1. how exactly should I use this indicator? I see there are certain parameters I should put in but I don’t know how. Is it supposed to plot 3 moving average in my trading timeframe? Also what if someone wants to trade weekly or monthly? There is no ‘2 timeframes’ above our trading timeframe so what is the deal?
    I tried searching it in Google but to no avail. Hopefully you can somehow post a screenshot of how you use this indicator.

  2. why are there 2 ‘Donchian channel’ indicators in your zip file? What’s the difference?

  3. can you go a little deeper into stop loss and take profit placements?

Thank you for your time and really appreciate your help!

Shuo

12

Yes, individual objectives and abilities are key. They can give wildly different results in two traders trading the same method.

13

I’ve been trading like this for about a year, and before that I traded similar approaches but not as clearly defined as this. I like this approach very much since it’s so mechanical that even I can’t mess it up.

I tend to win around half of my trades and the average reward to risk is somewhere in the 1.5-2.5 area, it depends on the timeframe I trade of course and the pair etc.

14

Hi zhang

  1. Weekly and Monthly can’t be traded in this way for the very reason you mention - there are not enough higher timeframes to make it possible.
    You don’t have to put in any parameters, just place the indicators in the correct folder and the template file in its folder. Then apply the template in MT4 and it will load the indicators correctly for you.
    I’m going to upload a new template file where I’ve hidden some of the MTF moving averages to make it easier to see only the relevant ones for each timeframe.

  2. The ay-donchian file is the one drawing the weekly highs and lows in dark brown color in the charts, that’s something that the ordinary donchian can’t do, so that’s why there are two files.

  3. I’ll cut and paste a bit here that should help with the stop loss and take profit part:

[ul]
[li]Initial stop loss placed beyond last bar before Donchian break, or in some situations two bars back[/li][li]Move stop to break even as the unrealized profit becomes bigger than the trade risk[/li][li]Stop trailed along the Donchian channel until it triggers[/li][li]Trade is either exited by the initial stop loss getting hit or by the stop loss trailing the Donchian getting hit[/li][li][/li][/ul]

15

Hi, thx for your reply. just a couple of questions:

  1. The ‘MTF Moving average’ doesn’t show on the chart once I apply the template. I tried to add it manually but it doesn’t work. Can you take a look?
    And do I just apply the template to our trading timeframe, then just follow your trading instructions, all on this trading timeframe (don’t have to switch to the 2 higher timeframes)?
    Where do I put in ‘60’ to make it ‘60SMA’ of the 2 higher timeframes?

  2. Also what exactly does ‘ay-donchian’ do? I don’t see you metioned it in your post. Can I just stick with ‘Donchian channel’?

  3. When setting initial stop-loss, what do you mean ‘last bar before Donchian break’ & ‘two bars back’? As far as I understand, when you see Stochastic dips below 20 and you set your pending order, there’s no ‘Donchian break’ yet?
    And maybe I missed something, but before your pending order gets hit, your pending entry and stop loss are all changing (with the Donchian channel)? If so, how do you do your initial position sizing (money management)?

  4. How are you using the ‘Alerter’ indicator?

Would definitely be more helpful if you could explain these with some charts.

Thank you and sorry for so many questions.

Shuo

16

Thanks for your time in presenting this strategy to us. Having a full time j.o.b./family and limited time to trade, I am a part time trader like yourself and look forward to trading on a longer time frame. (plus it is nice to get in on a thread without having to read 4 year’s worth of post to catch up.)

17

Quick clarification please,
If price is above both moving averages, and stoch closes below 20, we then place an order or a pip or two above upper Donchian channel line. We then wait for next candle to close to see if triggered, if not, we move order a pip or two above next candle’s upper Donchian line. Do this until filled or price retreats below moving averages.
Just checking as it seems other Donchian triggers say to wait until candle breaks the channel but it doesn’t seem to ever break on your screen shot.

18

Make sure that the MTF_MovingAverage.mq4 has been placed in the MT4 indicators folder and then restart MT4 to make sure it’s loaded into MT4.
Once you get the template working right you’ll see that you only have to have the trading timeframe open as the higher timeframe Moving averages are displayed on that timeframe

The ay-donchian file is the one drawing the weekly highs and lows in dark brown color in the charts, that’s something that the ordinary donchian can’t do, so that’s why there are two files.

Read more: 301 Moved Permanently

Yes, you’re quite right. Unfortunately this is the part that will require some guesswork. The pending order changes with every bar and so does often the initial stop loss. Depending on the size of the bars formed while we are still waiting for a potential breakout I will place the stop either at the extreme of the current bar or the bar before, or sometimes I’ll use judgement and place it where price action suggests it should bot be hit once a breakout occurs.
I’ll try to put up some charts to show examples

I’ll get into that later on, but I use a different stoch indicator that sends alerts when it breaks above 80 or below 20. The alerter indicator can be used for setting alerts on horizontal lines and trendlines.

I’ll try to put up some charts

19

You’ve got it right! But I’m not sure what you mean about price not breaking the Donchian channelon my screenshot? A Donchian channel isn’t like for instance a Bollinger Band where price actually goes outside the band. Price never penetrates the channel but rather the channel is forced to shift upward or downward, that is the break of a Donchian channel.

20

Ok, here’s a chart to show what the break of a Donchian channel looks like.

SPX500 Daily chart, the first horisontal and vertical lines show where we would have entered the trade since the weekly trend was up (for Daily trades I settle for just one higher timeframe, and stoch has gone below 20 some bars back)

The second vertical and horisontal lines show where we would have been stopped out with our stop trailing the lower Donchian channel

Chart SPX500USD, D1, 2014.02.22 21:29 UTC, OANDA Corporation, MetaTrader 4, Real - MetaTrader Trading Platform Screenshots

spx500usd-d1-oanda-corporation.jpg700×321 22.8 KB