The richbugger system

Trading Systems Free Forex Trading Systems
1

Hello everybody. Here is a system I’ld like to share with you all. Please feel free to go through it and any comments, critiques (not hatings), contributions , questions and suggestions you have will be welcome. And I’ve named it after yours truly, richbugger. Here it is:

Indicators used:

  • Moving average on 4H chart, EMA, Median Price (HL/2), Period = 60
  • Moving average on 1H chart, EMA, Median Price (HL/2), Period = 60

RULES FOR BUYING
We buy when:
1 - When Price crosses the 4H Moving average and is greater than the value of the 4H moving avarage by at least 20 pips. (i.e Price>=4H MA). Tip: Stop orders can be used insead of waiting for price to cross.
2 - Price is greater than 1H moving average. If price crosses the 4H moving average but is still lower than the 1H moving average, then wait for the prce to cross the 1H moving average by at least 20pips. Usually though, Price will cross the 1H moving average before it crosses the 4H moving average. This is to try to filter out fake outs.

Stop Loss when buying:
Stop loss is set to 30 pips below the buying price. The stop loss is then adjusted to be equal to the 1Hour MA, once the 1H MA is greater than the stop loss value.

When to take profit:
Profit is taken once price crosses the 1H moving average from on top. In other words, we are kinda using the 1H MA as sort of a trailing stop.

When to re-enter:
Sometimes after we have taken profit after a retracement, the main bullish trend may continue, and we will re-enter the main bullish trend once Price is at least 20 pips above the 1H MA.
Stop loss rules remain the same, and will be started off at 30 pips and then be adjusted to be equal to the 1H MA once the 1H MA is greater is than our initial SL level.
And another important rule is: we will not trade short when Price is above the 4H MA, even if it is below the 1H MA. This is to avoid trading against the main trend and to help filter out some fake-outs.

RULES FOR SELLING
Selling rules are basically the opposite of the buying rules.

Other notes:
I’m busy most of the time with work and dont have time to be sitting in front of a screen the whole day. So this stategy is supposed to give you the freedom to do what you want and to just check the charts here and there during the day and to adjust your stop order, and stop loss levels. Like I said, I’m still experimenting.

I’ve been testing this on domo for a few weeks and it seems to be doing okay. It performs better in trending markets than in ranging markets. I’ve tried it on the E/U and G/U pair and today I’ve started it on the GBP/JPY pair. I have high hopes the GBP/JPY pair. The unfortunate thing about this strategy is that it can be hit by fake outs some times so I am still trying to figure a way to filter out fake outs.

Please note this is the first strategy I’ve ever developed myself, so it could maybe be tweaked hear and there, but I believe in KISS (keep it simple and stupid).

Also I’m hoping to learn mql4 so that I will be able to develop an ea for this strategy because I think it will help me to discover what the best settings are for this system (e.g sl of 40 instead of 30 pips and stuff like that). Also there are some trades I’ve missed because I was not at my computer when they happened and which is so frustrating so that is why I also want to develop an ea for it.

So please peruse through my system, and see if there are any ways in which we could make this system better. Feel free to add suggestions, questions, comments, contributions etc.

I might add screenshots but I dont think it will really be necessary cuz I mean who can’t add a MA to a chart.

2

Okay here is an example of an entry and an exit on the GBP/JPY which took place on 8/3/11:

As we can see in the chart, price rose crossed 20pips above the MA of the 4H chart. So we would have placed a buy stop at 127.91. Our stop loss at the time of entry is set to 127.61 meaning we are risking a maximum of 30pips. Please note that the price was above the MA on the 1H timeframe as well.

entry.jpg700×325 21.8 KB

As we can see, a few days later, on the 12th (yesterday), price touched the MA on the 1H timeframe at a price of 128.82 and it is over here where we will take our profit. A profit of 91 pips, not bad I’ld say :slight_smile:

take profit.jpg700×325 25 KB

Now if we continue watching the GBP/JPY pair, we will see that price did go more than 20pips below the 1H MA, but we will not go short here, because price is still above the 4H MA. And if we keep on following the pair, we will see that we would have gotten a re-entry signal at 128.97 which is 20pips above the MA of 128.77. We will put our stop loss at 128.67 which is 30 pips below our entry price. And looking at the market now we will see that we will still be holding that position open with the only difference that our SL will be move to 129.17 (meaning we would have locked in 20pips profit). Also note the the MA will continue to move up even if price reverses now meaning we are guaranteed to make above 20pips profit. Check it out yourself:

re-entry.jpg700×325 21.4 KB

3

Here is just a screenshot to show you where we do not get so clear signals and where the market could potentally kill us:

bad market.jpg700×325 22.5 KB

As you can see we are getting mixed signals here. If we could find an indicator to keep us out of the market at these times, then ladies and gentlemen, I think we would have found (or created) THE HOLY GRAIL, hahaha. Anyway, for now, what we can hope is that the profits we make will be enough to sustain us during these type of tough market conditions and still have us walk away with some decent profit afterwards.

4

Hi there richbugger,

Very simple method you got there, and I am all in simplistic method. That is the kryptonite of any MA breakout systems… the fake breakouts. This is just my 2 cents, but perhaps adding some basic S/R analysis could make some difference on the system particularly during choppy markets. My system is based on MA crossovers too and these ugly fakeouts/range markets really kills me.

Happy trading. Keep posting.

5

Allow me to show you some basic S/R analysis technique you could use to further filter out ‘fake breakouts’

bugger.jpg700×302 22.4 KB

6

Perhaps you could add 360EMA (D1’s 60EMA) on H4 to further filter your trend. Perhaps any sell when 60 is above 360 shouldn’t be taken vice versa, or if taken, 360EMA as your Take profit level… and so on. Something you can ponder about buddy.

7

SOme more S/R analysis technique you can use/test.

bugger2.jpg700×302 24.2 KB

8

thanks for the advice. sufiansaid. True, what you say is true. Sometimes I do take a glance at support and resistence levels but I can’t call myself a guru in that department. Also I was hoping for something more technical, more mechanical so that it would be possible to put my idea into an ea. One though I have had is bolinger bands since they measure volatility and are counted using standard deviations from a moving average. Therefore the rule I’ve got in mind is that you only enter a trade when the difference between the 2 different standard diviations is above a certain limit…ah, but they are just thoughts in my mind for now. But I also like you idea of the 360EMA. I’ll take a look at it and see what it would like like.

Interesting, I took a look at your macfibo system and I did have a similar idea to yours but I didn’t like for one idea…fibonacci can be a bit subjective and I guess that’s not really my kind of style. But I’m sure if we put our minds and experiences together we could get closer to the “HOLY GRAIL”

9

Here’s a quick update on the GBP/JPY trade I had mentioned yesterday. As you can see in the chart that we are still holding on to the trade. I have personally moved my SL to 130.188 meaning that we would have locked profits of 121.8pips which is pretty decent in my opinion. As you can see my SL level is higher than the MA, and the reason for this is because I’m not going to remain watching the chart, but if you know how an average works then you know that as long as price is above average then the average will continue to move higher. In other words, even if price falls at this time, the average will continue to move higher until price crosses the average. Here’s a pic:

gbpjpy update.jpg700×319 20.8 KB

10

Hey Richbugger!

Here is a thought for you, if a ranging market is the big pitfall of your system how about we throw on an ADX for confirmation with our buys? It should be able to let us know when the indicator is very low that there is not a trend happening and the market should be avoided. Take the GBP/USD for instance. Right now the moving average is giving a buy indicator on both 1H and 4H, but the ADX (the blue line) is at a very low level. That shows us that the market is just swinging up and down with no strong direction and that it is best to wait on the sidelines for a little bit.

Sideways Market Pattern.jpg700×525 62.9 KB

11

Thanks csbarber. I will think of implementing your suggestion into my system. hmm, I’m just wondering whether it would be best to use the ADX on the 1H or 4H chart. Also I’m begining to experiment with other ways of filtering the fake outs. I’ll update the forum with the results once I’m sure about them. But I can say that they did keep me out of the market when the gbp/usd was ranging but allowed me to enter at an early enough time when the breakout took place. Also so far I’m up 360pips this month so I think that even with the fakeouts it should be possible to make some good pips overally. thanks for your response btw :slight_smile:

12

After some testing I’ve decided that I will include the 14ADX indicator on the 1H chart. I will only enter a trade once ADX>=25.This will be to filter out fake outs. So far it’s working alright. I’m also thinking I need to edit my SL rules because trading my system I’ve noticed some holes in my SL rules but not to worry, I’ll fix em :slight_smile:

13

how’s that working out??

14

Hi Richbugger
what pairs are you using? just the 3 you mentioned on page 1?

Thanks
Christina

15

Can you give a template for this .? as i am new on forex soooo :20:

16

@ Chamaknet: I dont know how to make a template, but it really would not be difficult at all to just plot the moving averages to your MT4 platform. Then you’ll just need to switch between the 4H and 1H TFs. Just go to indicators on your MT4 and select Moving average and put in the parameters I have mentioned.
@ Christina: Hi Christina. Well I’ve actually been experimenting with many pairs and I’ve noticed that this system will work just so long as the market is trending. If the market is choppy, or is rather stagnant, which you should be able to identify through observing a bolinger squeeze, then it would be best to stay out of the market and to wait for better conditions. But a pair which I have observed this system to work really well with is the Gold/USD. It is quite incredible to be honest. The only thing is that sometimes GOLD moves so fast so you will need to put a closer stop loss than what I would have recommendend so as to protect your capital.
@ Goodpunk 6: well I’ve stopped trading this system manually and got someone to create an ea for me which I have been testing for the past month. You can check it out in the Automated systems forum where I’ve created a thread called Creation My own EA.

17

Can anyone tell me where i can find full Price action trading strategy Or a Nice book on this topic with many valuable Information on price action. ???:51:

18

I might suggest perusing through DnBs Price Action thread: 301 Moved Permanently. You may also want to take a look at his website/blog.