The Cowabunga System

Dont know Hypnos but the EA will be based on the original MAs not the ones you are using so I wouldnt be surprised if there are differences

Hello,

I’d like to spreadsheet, please email me at <[email protected]>. Thanks.

Hello,

I couldn’t find the Cowabunga EA v5, could you tell me the posting number and which thread so I can go try it out? Thanks.

Hi there everyone! :slight_smile:

Quick question about stochastics, what is considered trending down/up for this system? For example, today at 7.00am GMT (GBP/USD), both stochastics lines were going up, but the 7.15 candle was a big bearish candle so the fast stoch line reversed direction and crossed the slow line, pointing down. However, the slow line was still going up slightly. Is this enough to be considered “trending down” or does the slow line need to be going down as well? Basically, could I open a short position or not?

I’ve attached a couple of images, stochastics at 7.00 and 7.15am. Fast line is blue, slow is red:

Thanks :slight_smile:

I trade the daily time frame. I gave the Cowabunga a limited trial, figuring that if it worked on a lower time frame it should work even better on the daily, as there relatively less noise. Because as a trend trader I wouldn�tleave home without the ADX, I included it just for kicks. And in fact the Cowabunga worked quite well, as you can see from the chart�4 winners and one loser. However, I noticed a couple of things, one of which would have prevented the loser.

In the chart, green arrow denote entries, either Long or Short, and red arrows denote exits. The thick trend line shows the direction of the trade. Entries are mandated by the Cowbunga criteria of EMA 5 crossing 10, RSI above or below 50 as appropriate, and Stochastic rising or falling as appropriate.

First, the Stochastic seems to be superfluous. On each of the 5 trades it gave a go-ahead, even on the loser on 2007.10.15. If EMA 5 has crossed the 10 and the RSI agrees, the Stochastic will usually rubber-stamp the deal.

Not so the ADX.

On the Long entry, 2007.06.19, ADX has crossed upward above 20, the +DMI is dominant and the DMIs are diverging sharply. All is well.

Notice that I ran a Fibonacci Extension on the mid-trend retracement and set a Take Profit at FE 100, and the trend peaked there. I did this on all 4 winning trades and it always worked. If the 100 level had not been hit I would have exited on a turndown of ADX from a peak or on EMA 5 crossing back over 10.

On the Short entry, 2007.07.27, ADX has turned down from a relatively high value, and the -DMI has angled sharply up to meet the sharply falling +DMI. All is well.

On 2007.09.05 the Short entry taken because EMA 5 had crossed below 10, RSI is below 50, and Stochastic is falling. However, ADX is <20 and the DMIs have been whipsawing. All is not well. And indeed the trade turned in the wrong direction, hit the stop, and lost 316 pips. Note that the Stochastic, which is the method�s momentum oscillator, did not worn of this bad entry.

On occasion 2007.10.15, when Stochastic would have kept us from going Long on a 5/10 cross, so would the sub-20 ADX and whipsawing DMIs. The subsequent Long entry would have been confusing, since 5 had already crossed 10 without an entry, but ADX comes to the rescue. On 2007.10.29 ADX has swooped beneath both DMIs and risen 4 points (our usual criterion), +DMI has crossed above _DMI and they are angling apart. Stochastic, however remains pinned. It appears that for this application anything Stochastic can do, ADX can do better.

On 2007.10.15 a Short entry is mandated by an EMA 5\10 cross, an RSI slightly below 50, and a falling Stochastic, although the wimpy RSI position might give pause. We see that ADX has turned down from a high value and the rising -DMI is angling sharply toward +DMI but has not actually crossed it. ADX-wise we are technically still in Bear territory. This is a judgment call. Notice the Bear divergence shown on ADX and Price, less convincingly on RSI, and not at all on Stochastic. This means that a fairly large decline is probably in the offing and should tip the scale toward an immediate entry.

On the daily time frame at least, the method would seem to benefit from replacing Stochastic 10,3,3 with ADX/DMI 14. Incidentally, this would give us an all-Welles Wilder trading method.

But wait, there�s more. Because the RSI measures the averages of the up closes and down closes, it is a rather crude instrument, and this is evident on the chart. RSI often wavers almost to 30 and almost 70 when there is actually no trend, and so it is rather ambiguous when used on quick-changing mini-trends. If you automate it you will get a lot of false signals. Because the DMI and its derivative the ADX measure directional movement relative to true range, they are finer in their representation of trend and momentum. They rarely give a false reading. In truth, the RSI can also be dispensed with.

But this good news is also the bad news. The ADX/DMI contains a lot of information, but the elements must be integrated in order to realize their potential. Have the DMI�s been whipsawing? How far apart are they, and at what angle? How high is the ADX, and how steep? Are the peaks diminishing uniformly or raggedly? And so on. For this reason, it is not very feasible to automate the indicator in a high-confidence way. It must be read intuitively. And you must insert a Fibonacci Expansion every time there is a retracement, in order to get good exit points.

So where does that leave us? With Price, EMA 5 and 10, and ADX/DMI 13, which are to read manually. If you trade the daily time frame, you will have to actually look at the chart once a day. Hmmm. When you look at it that way�

That is not to say that I am not extremely impressed with the Cowabunga track record. I just can’t stay at the computer to trade 15-minute charts, and my post merely described my first cut at adapting Cowabunga to the Daily time frame. Of course, I don’t really know what I’m talking about because I haven’t studied the method via the excellent Blog. But I intend to. I will try to use Cowabunga on the Daily after I get my sea legs. Or possibly on the 4-hour. I don’t quite know what time frame to use for trend verification–weekly or monthly, will have to cast around. Will probably add ADX 13 to the mix for emotional support, then follow trades on the Blog and try to emulate the reasoning on the Daily. I don’t even know yet if anyone has applied Cowabunga to the Daily, going to rummage through the posts. Anyway, I’m very impre3ssed with babypips.com and particularly with the effort that must go into the Cowabunga blog. These lessons are priceless.

Hello

How can I know whether to place my exit on the nearest 50 or 00 price or to place it at the same amount i’m risking?

Take a look at todays chart:

As you can see i got a short signal at 01.30 ET. Entering at 1.9607 and since i was only 7 pips away from the nearest 00 or 50 level i decided to go for the same amount I was risking, 29 pips. I put my initiall target at 1.9578.

The price didn’t make a clean break here, the candle that broke the 578 level closed at 1.9585, so i cancelled the trade and took my profit. After that however, the priced dropped below 1.9550. Had i put my target at 1.9600 (where the price made a clean break), and then moved it on to 1.9550, i would have gained 57 pips instead of only 22.

So, my question; how am i supposed to know when to put the target at the 00 or 50 level, and when to put it at the same amount of risking

One of the things you just have to accept about trading is that all exits are always unsatisfactory. If you don’t catch the very last pip in a move, your human nature will nag you about it, and if the result is negative or breakeven, you’ll be disappointed in that too. Proper trading is painful… just like proper weightlifting, marathon-running, etc. That said, one thing you can do about the way this trade worked out for you is to stop making your exits all-or-nothing. Consider breaking your exits into stages. Had you exited half your position at the first target and moved your stop to the original entry on the remainder, you would have easily caught the rest of those pips. Now, you have to consider also that you could easily have ended up with an even smaller profit had that breakeven stop gotten hit… but such is the nature of what we do. Any yahoo can enter a good trade. One of the several things that distinguishes a professional from the amateurs is how they exit. You can overly complicate the exit just like anything else. The first thing to do, as I said earlier, is to accept that no matter how you exit any particular trade, there would have been a more profitable exit. The next thing is to pick an exit strategy that is simple, but not so simple as you’re currently using. A 2-stage exit such as the one I mentioned should be more than good enough for trading in the 15m frame. It’s easy to calculate and simple to execute. Take care and Happy Trading!

Thanks for the input and tips

hi,
quite new to trading. been using ur setup on demo but lost a few virtual $. painful though not real. however my 4H period does not give corect timimg on the chat. i wonder if this is the reason behind the loss.
kindly update this blog often so we newbies cld stand up too.

Does anyone happen to have cowabunga results since the last blog entry by PipSurfer? What was the pip tally for Jan and how has it been doing so far this month?

I think you people are selling yourselves short (NPI) when you enter a trade and set an arbitrary target. I would look for a logical target such as a measured move. Only if I couldn’t find one would I depend on an arbitrary rule.

I ran a Fibonacci Expansion from the top of the previous wave, which I’ve labeled Wave and where I placed a X, to the bottom of the wave, where I placed another X, then to the top of the retracement wave, which I’ve labeled Wave B and where I’ve placed another X. Actually, I offset the bottom of Wave A to the left so that the Fib Expansion, shown in light green, would not run past the area of interest, but the result is the same. The Fib Expansion then "measures where Wave C is likely to end, at FE 100, at FE 100.

And lo, price hit that target before retracting slightly. Why does it do this? Because a lot of traders are looking for a measured move, so it tends to be a self-fulfilling prophecy.

In entering short on a wave down, I would look for an applicable Fib Expansion (MT4, click Insert, Fibonacci, Expansion), and I’d set a Take Profit at that level or slightly short of it. Then I’d try to let the trade run to that point.

Nevermind… just found it out

I also think using fib extensions for targets are very useful, albeit outside the rules of cowabunga. I haven’t backtested the inclusion of extensions with cowabunga but i know how useful they are in trading my other methods.

I tend to work off an hourly chart fibbing the previous days range to identify support/resistance areas between the 38.2 and 61.8 levels, coupled with longer term fibs across daily, weekly and monthly TFs. This provides enough market flow information to make sure trades are with the trend/flow and I guess wouldn’t be too far off the 4hr trend chart cowabunga uses. I use the 38.2 extension for target purposes, if you are trading with the trend/flow this level is invariably hit once there is a test and break of the day’s fib levels resuming price action in the direction of the trend.

Using the 15min cowabunga rules to identify entries with the flow of the market but holding and sometimes building the entries as price makes it’s way to the extension targets over a day or two (sometimes longer), could be a useful variation on the existing rules…but I stand to be corrected; I haven’t tested the idea thoroughly yet.

…as an example against today’s action, the first chart represents the 4hr cowabunga chart (it’s hourly and has transposed EMAs). The 4hr trend is down, we’re looking for shorts today off the 15 min. The first chart also shows today’s range so far, fibbed to give an idea of likely resistance on the current retrace, which price has already banged up against twice.

Notice the 38.2 fib extension @ 1.9307. The 2nd chart is the recent 15min entry chart and could well signal an entry short soon. The profit target would be set to 9307 (or thereabouts) and the initial stoploss set to last swing high (as per cowabunga rules) @ just above 9420.

Until the 9307 target is hit (or trade stopped out) leave alone and add valid 15min entries as they arise…but not beyond 12pmEST each day, as per cowa rules.

EDIT: NOTES/IDEAS only, i haven’t backtested this. Usual disclaimers apply :smiley:



A cowabunga short was triggered around the time of the post below which stopped out for -27.

Fibbing yesterday’s range suggests longs today, at odds with cowabunga’s 4hr trend chart which still indicates shorts…the fibs indicate a counter trend bias which i’ll exploit on the next valid cowabunga 15min setup, as long as price holds above the long fib level (c9450)…the target for longs being 9555.


…the news already delivering yesterday’s fib target, almost to the pip - i wasn’t in the move, there’s always next time. Now waiting for a pullback and a nice clean cowabunga long setup, if they’d be so kind :slight_smile:


…intraday fib pulled up as price action unfolds to monitor strength of the move so far…no long cowabunga setup yet. News over the next few hours likely to give it another kick around.

Last post on this cowabunga variation, hopefully enough here to give food for thought.

Good trading all.


Like what’s up fellow Pip Surfers!

I’ve been gone on a bodacious vacation in the Philippines for the past 3 weeks and haven’t even looked at a chart until now!

While it was fun checking out the real waves at the beautiful beaches of Boracay and Palawan, I’m totally stoked to get back in to the Pip waves to catch awesome moves!

I will resume posting this coming Monday, Feb. 25th. Until then, I’m going to take a few more days to chillax and prepare my brain to do some serious trading.

I also wanted to give props to all of you who have been staying faithful to the system and adapting it to your own personal style. That was my whole intention of sharing the system. I love reading posts, good and bad, because it shows me that you take a great interest in your trading career. Cowabunga dudes! Keep on sharing with each other. Try new things (on demo first of course!). Get better and better and better!

So like I’m totally ranting but I’m so excited to be back and I hope you’re just as anxious as me to get started up again. Until Monday dudes and dudettes!

COWABUNGA!!!

I, too, am finished posting on this aspect of Cowabunga. I do not trade on the 15-minute. Rather, I trend-trade the daily, with trend vetting on the weekly, and I depend heavily on the ADX and also on moving averages, the Ichimoku, Bollinger Bands, and–for divergences only–MACDH. I often run Fibonacci Expansions as price targets. After an overlapping wave, I may also exit on an ADX turndown or a moving average crossover. I don’t usually use Fib Retracements, including extensions, as they are more of a range-trading tool, at least in my mind. I just wanted to raise the issue of using a logic-derived target such as a Fib Extension, with the Cowabunga method.

I was not able to apply a Fib Expansion to the present bull move because it did not make an A-B pattern so that I could estimate C. I do not understand the logic behind using a Fib extension to 138.2 unless, of course, you find that it often works for whatever reason. If I saw such a steep bull run on a daily chart, I would be inclined to exit at the first sign of exhaustion, such as an Evening Star or an ADX turndown, particularly if the the bull move faltered with an overlapping wave.

Just off the top of my head, if one were to use a Fib extension as a price target, it would seem that more traders would be watching the 200 level, which might cause the prophecy to be self-fulfilling. And, as it turned out, price did hit that level.

I do believe, based on my brief look, that the Cowabunga might benefit from using some kind of logic to set the price target. When price is moving in your direction it is more likely to continue than to stop, so why exit the trend unnecessarily?