It was mentioned earlier that this system might be tested on the 4 hour or daily charts.
With regards to the daily charts, you would need to be ready for lots of drawdown, but a big reward in the end.
I found a simple yet effective strategy for anyone interested in trading this system on the daily charts.
Basically, enter using the normal rules (EMA cross, RSI cross, and MACD cross).
Exit is tricky on such a big time frame. The best way, I believe, is to use the MACD indicator solely to determine your exit.
See the chart below for a detailed picture.
Essentially, once the cross happens on the MACD, all the bars will be on one side of the median line. Exit on the first re-cross of the bars on the MACD graph.
This means if you sold X/Y pair, the time to exit your sale is on the first positive MACD bar. Vice versa for if you bought the pair.
See the picture for comprehension.
I may test this method out sometime in the future.
Indicators
5 EMA – YELLOW
10 EMA – RED
RSI (10 - Apply to Median Price: HL/2) – One level at 50.
Interesting system although I got stop lossed out of the first trade you mentioned. Common fault - didn’t follow the rules and set my SL too small at 35…
I’m new to spread betting and can’t understand your RSI. I know what the 10 is of of course but the rest eludes me. Could you explain the [I]Apply to Median Price: HL/2) – One level at 50[/I] part?
Look out for all of the following pairs to move into a possible trade setup:
EUR/USD, USD/JPY, GBP/JPY, EUR/JPY
All are showing bullish tendencies and are close to an EMA cross.
I am still in my GBP/USD trade. It is moving around quite a bit, but so far I am up around +14 pips in profit. I’ll re-adjust my S/L to break even when it hits 20.
Then, when it hits 30, I’ll trail my stop by 15 or so.
Thanks for your interest in my system. Sorry you got stopped out with the first trade! Make sure all your settings are correct and that you follow the system to a tee. It may help to re-read the first post just to make sure you have it all setup correctly. I’ll try to attach my template so that you don’t have to second guess anything.
Yes, the S/L is very important. I recommend anywhere from 50 - 100. A bigger S/L is advised because you are using a higher time frame.
Regarding the RSI, the settings should be exactly as follows:
First Tab:
Period: 10
Apply to: Median Price (HL/2)
Dodger Blue Color (your preference of course)
Middle Thickness Line
Fixed Minimum: 0
Fixed Maximum: 100
Second Tab:
Level: 50
Dotted Silver Line
Last Tab:
Check “All Time Frames”
These settings are for an Alpari account.
The Median price option displays an average instead of using data from simply the open or close of candles.
I find it works for me so far, so no need to change it.
My accounts are with Capitalspreads and IGIndex and their charts are pretty basic and provide only a period tab for RSI. Low spreads though.
From some back checking the system seems to work anyway. Do you think it’s OK with just the period? Or perhaps I should change to Alpari or an account with better charts? Though I’d rather not - it’s a bit of a bother from Australia with faxing photo IDs and transferring money.
My sentiments exactly. I was a little worried about that as well. A big candlestick, plus the RSI had been flat up until that point.
I had those same thought processes, and I was wary, but given that we had a signal, and this thread is all about testing the system, I went ahead and entered.
It has been a roller coaster ride ever since. I was up about +16 pips at one point, then I was -10 at one point.
Now I’m hovering around Zero.
Everything went way down all of the sudden after I placed the order. Very weird.
Anyways, I’ll hang onto the order and see what happens.
I know people say that such back testing is futile and worthless, but I’m curious about this.
I think that if the system being tested is based on simple technical analyzers such as EMA’s, back testing could prove useful. The laws of mathematics are not going to change from year to year!!
Well, the system comes through again! The cable has consolidated and is steadily rising.
I’ve locked in +5 pips so far and I’m no longer risking any of my capital.
Currently, I’m up around +25 pips and rising.
No matter what, I’ll walk away with +5 pips. It’s a good feeling to know you’ve got that no matter what happens.
It seems that we’ve had some other pairs cross as well, including the EUR/USD and the USD/CAD.
Given that I’m all ready involved with one trade, I’m going to hold off on those other pairs. Also, it seems I would be late at this point with my entry.
Good luck to everyone. See the attachment below if you’d like.
I meant to say BUY the EUR/USD since the dollar will probably go down in value due to the rise in unemployment and the continuing decline of the US economy.
