I spent several months in a practice account trading GBP/USD developing a little system as I went and practicing money management. Went live last week and as of now I have cleared nearly 550 pips in 6 and a half days of trading.
All I am doing is following the trend on the RSI on a 30 minute chart and buying/shorting based on changes in the trend between midnight CST and 8-9 AM CST. When it changes direction and starts moving up, buy, when it starts going down, short. I’m also using daily pivot points, MACD chart, and parabolic stop/reversals as indicators to get a “feel” of if I should follow the RSI or not. So far, I have mostly entered in trades at the beginning of a new candlestick on my 30 minute chart.
Once I am in a trade, I set a 50 point stop…every 50 points the trade heads in my direction, I move the stop 50 points up. I do not set limits, either let it hit the stop or manually exit a trade.
The trailing stop has bit me a couple of times, but has also bailed me out a time or two…I just like having the safety net.
What I’m doing seems to be doing a very nice job of catching the daily trends. As you can imagine, I’m pretty excited about my initial results!
I would like some expert opinions on if I have just had a case of beginners luck and am using indicators that will fail in the long run, or do I have a decent system that, with safe money management and sticking with it, has the potential to be successful over the long haul?
Can it really be true?? A newbie that understands money management?? I thought such a creature only existed in story and song!
Seriously though, we get lots of new traders in here that think they’ve found the secret to millions of dollars. It’s just refreshing to get one like you every now and again how actually has found the secret. Low risk trading with proper money management is the key!
You have, from what you described, a good trading system. You’re placing reasonable stoplosses, and you’re using good money management so you can survive through any losing streaks you may encounter in the future.
I think you’ve basically got everything you need! My only suggestion to you would be to backtest your system over a couple of years. Some systems work well for a while, but then market conditions change and they stop being successful. This is especially true of indicator based systems like yours.
If it turns out not to be profitable in the long term then so what?? As long as your using good money management you’ll be fine when the losses do come. Get the pips while it works and then find another winning strategy.
Phil, thank you very much for your feedback. I have really wanted to backtrack this little system, but can’t figure out how to with the software I’m using (FX AccuCharts…anyone familiar with this to point me in the right direction :o ).
I can’t help you with FX AccuCharts, I use Metatrader myself, but if you don’t mind posting the details of your system I’d be happy to do some backtesting of it myself and post my results.
Here are the very minimum requirements for me to enter a trade:
Short:
1 red candlestick
RSI reverses from upward trend and starts trending downward
MACD line is above TRIGG line and gets closer to the TRIGG line or gets passed by TRIGG line
Buy:
1 green candlestick
RSI reverses from downward trend and starts trending upward
TRIGG line is below the MACD and gets closer to the MACD line or has passed MACD line
Set trailing stop at 50 points and move accordingly.
Trades placed based on 30 minute charts.
As of now, I am only entering trades between midnight CST and 8 AM CST.
Hopefully that explains it ok…it’s getting late…uh…early and I’m not too sure how well my communication skills are this time of day:D
Ok, I tested this through most of 2007. I started there because I felt that if this system was going to break down it would be around then because of the low ranges GBU/USD was making at the time.
I didn’t do “down to the pip” measurements because the trailing stop makes it to time consuming, but overall this system had MASSIVE losses in 2007.
The reason is that from early 2008 to the present GBP/USD has had abnormally huge daily ranges. It appears that this system works great in those conditions, but lousy outside of them.
My advice would be to keep trading this while it’s profitable, but to just be on the lookout for large losing streaks that coincide with small daily ranges. That may be the signal that this system is dying.
Thanks for the heads up! On choppy days it has been tough to just break even. I will certainly try to find something that would help me out on smaller range days…maybe use 10 or 15 minute charts to get me closer to the action?
Personally, I’d go the other way and use larger time frames instead of smaller ones. If you’re looking to avoid chop then smaller is most definitely the wrong way to go.
If you do go to a different time frame be sure to adjust your trailing stop. 50 pips would probably be too small for larger times, and too large for smaller times.
