I’m going to be testing out a swing strategy on a demo account that makes use of a 55 EMA channel to try and determine trend breakouts. The setup is two 55 EMAs – one applied to the daily high, one applied to the daily low. Also using a 10 RSI. I imagine this method could be utilized on the faster time-frames, but I’m choosing to trade on the daily since I work a day job and can’t be in front of the charts for long periods of time.
The rules are as follows:
Enter when price breaks out only after a close outside of the channel AND another candle closes in the direction of the breakout.
For a long entry, RSI cannot be above 70. For a short entry, RSI cannot be below 30.
Look to exit when RSI breaks the 70 or 30 thresholds.
I don’t know that I’m sure of the RSI setting. I haven’t tried to trade daily charts before, so maybe looking for a little feedback on whether 10 periods is an appropriate setting. The standard 14 seemed to give too few exit signals. Or perhaps there is a better exit method… Any thoughts are greatly welcome
i’ve seen a lot of “profitable” systems in my day (been trading for 5+ years; just joined this forum), and i can tell you that all the systems out there are mostly crap, that will draw down your account. 99% of the scams you come across will turn out to be crap, and i know crap when i see it (what you are testing is crap, unless it really works).
[QUOTE=“lucariga;631033”] Would you like to share with us a good “non crap” system?[/QUOTE]
well, i would stick with the fundamentals and don’t get too fancy (naked chart, no indicators, just price action); there’s a few systems on babypips that do seem to work. Look through the forum, you’ll find them.
[QUOTE=“lucariga;631041”] I love PA too, and I’ve read some of them also here on BabyPips. What are the systems that do seem to work in you experience?[/QUOTE]
I think galaxy trade system has some merit and also you should join master kiwa for some lesson (i believe he’s giving them) on how to scalp effectively. otherwise, there’s a lot of “profitable” systems out there that will draw down your account. personally, i just look at a naked chart, see where the price is moving–if it’s been oversold, buy; if it’s been overbought, sell.
Some technical indicators have merit (in forex and commodities more so) primarily because so many traders in those markets use them, they become a self fulfilling prophecy of sorts. They work because they’re used so much. Now, I’m not an advocate of piling them on to the point where you can’t even see what PA is doing, but to write them off completely is baseless in my opinion.
Ok cool so you only do tests if you know it really works. So now we know if it doesn’t work don’t test it, if it really works, test it! That’s so logical thanks for the tip.
[QUOTE=“PipsAndFlows;631062”] Thank you for this gem of brilliant analysis. Some technical indicators have merit (in forex and commodities more so) primarily because so many traders in those markets use them, they become a self fulfilling prophecy of sorts. They work because they’re used so much. Now, I’m not an advocate of piling them on to the point where you can’t even see what PA is doing, but to write them off completely is baseless in my opinion.[/QUOTE]
what you are using here (rsi, of all indicators) is very unreliable–I would say about 50% of the time rsi works like it should, and what you show is only one situation (in reality, there’s multiple ways price action can accumulate). so, i would definitely not even “consider” using it. it obviously doesn’t work very well.
[QUOTE=“PipsAndFlows;631078”]So I take it you use only PA for identifying overbought/oversold conditions then?[/QUOTE]
i wouldn’t use rsi. there’s a better indicator out there; the stochastic oscillator for over bought/sold. volume is also important, but this you can get just by looking at the chart itself.
[QUOTE=“PipsAndFlows;631088”] What exactly makes it better? I have been under the impression that they essentially tell you the same thing.[/QUOTE]
for one, there’s a crossover in stochastic; i would say you have a second opinion there as a deciding factor. rsi, you can’t use effectively beyond period 14 (not true for stochastic). so obviously, there’s more features to base your decision on.
Best system I’ve read to date is to trade breakouts of trend channels and the trick is to draw the trend channels with the assistance of MACD.
Google ‘macd trendline’ and it should be the first result.
Basically, if price is in an upward channel one would draw a trendline connecting the lowest points in the last 2 macd downtrends. When price falls below that trendline then you have a breakout.
I use something similar to identify trend changes and then trade a pullback ONLY if price is os or ob on stoc. Eg, if an upward trend breaks down and turns down, ie, lower highs and lower lows then I will look to get in the downtrend when price spikes up and becomes oversold ONLY if the high that is created is lower than the previous high when price was oversold on stoc.
