Blindly Following A System--Profited For 3 Weeks, Wiped Out During This Week!

Beginner Questions
1

Hello Everyone!

Glad to make my first post on the forum!

I have been blindly following a system since the week starting 8th August, profited for 3 weeks (up by 24% in 24 trades) however this week (29 Aug-2 Sept) I made multiple straight losses putting me back to 0% What happened?

The system I use:

Buy when all these conditions are fulfilled

-MACD (12,26,9) crosses above its signal line
-Stochastic Oscillator (5,3,3) main line crosses above signal line AND <80
-Acceleration Oscillator Green

And Sell when

-MACD (12,26,9) crosses below its signal line
-Stochastic Oscillator (5,3,3) main line crosses below signal line AND >20
-Acceleration Oscillator Red

30 Min charts, trading EUR/USD,USD/CHF,GBP/USD,USD/JPY
Stop loss at the nearest Support/Resistance, and number of lots bought ensures I always lose max 3% of my account when I hit stop loss. Take Profit at the nearest Support/Resistance that will make me >3% of my account.

I still can’t figure how I was able to profit consistently for 3 weeks and lose it all during this week despite my risk control and strict discipline on following the rules. Did the market conditions change? Or is my system not robust enough?

Hope to listen to the more experienced ones out there!

2

Since the start of August it ranged. This week it trended. Your system is good for ranging markets. Rubbish for trending markets.

edited because I wrote this wrong

3

Quoted just to hammer this home as goldenmember is spot on.

You’ll probably find that any strategy which relies soley on blindly following indicators to tell you when to trade will end in failure (I tried and failed). Indicators were designed to pull infomation from the price for you to analyse and make decisions on, not to predict the future price. If you setup a computer to trade your systetm mechanically I would expect it to lose over time, just my two cents.

4

notice my deliberate spelling mistake

5

yea if any indicator actually worked more than it didnt then everyone would use them all the time and everyone would be rich. there is no indicator that is actually worth a damn in my opinion. Fibonacci is about the only one i really use. and still i have learned to not rely solely on it. one thing that you might also consider is your risk management. maybe reducing your TSs and SLs. i have just recently started profiting and a large part of it is due to reducing my losses down to as little as possible. i can loose 4 trades and win one and still break even.

6

Thanks loads!

Just zoomed out on the charts and realized it was apparent on hindsight, but what are the signs that a ranging market is transiting into a trending market?

7

boils down to screen time

8

Technically all charts range - so maybe you can check on the daily, match it to the same criteria. For instance, stoch 5, 3, 3 on the daily was well into the sell zone on Monday. So maybe your auto system needs to say not to trade when the stoch is way overbought on the daily, and only trade in the middle between 40 and 60.

9

Many simple systems will work great in a particular market condition then crash and burn when the market changes. The market always changes. So the obvious logic is that indicator systems are junk. Well this isn’t really true, if you can decide when to use a particular system. Or know what the systems expected win rate and drawdown are. When a system goes outside of the expected results stop using it until the market changes back. This doesn’t mean a strat is bad you just need to know when to use it. Just practice keep an eye on longer time frame charts run a few strats on various demo accounts and PAY ATTENTION to what the charts look like when they work and when they don’t.

10

one can never predict the future … unless you can provide me a way to know if you are in a ranging market or a trending market… you will know it when you are out of it

11

any sudden news can change the market movement.

12

Its hard enough making decisions analyzing one main chart.

You now add another 3 more to your trading and expect to make things easier?

Think about it.

13

I don’t get it though, I check my trades once in 30min(as I am using 30 min charts) for the 3 criteria which are all ‘yes’ or ‘no’ questions, how will it complicate my analysis?

14

If it was only as easy as drop below 20, get out of a sell, break above 20 and buy. Same to the opposite if it crosses or breaks 80.

Many indicators come with such description.

None works that way. If it were to be so simple everyone would have a finger in the pie.

Indicators are best left to traders who really know what they are doing.

Nearly all beginners who die out are because they spent more time looking at the indicators rather then the candlestick charts.

That is the one true chart. The rest are just interpretations of what that chart means.

15

Nikitafx, thanks for the advice! In fact now I’m reading your thread “Pure Price Action For Dummies” and hopefully I can learn a thing or two :slight_smile:

However, I’m determined to ‘figure out’ this system though. It worked pretty well in the first 3 weeks and crashed in the 4th only because the first 3 weeks were ranging and the last trending. This means as long as I stay out of trending markets it would work right?

I have a question for everyone. I will keep using this ranging-based system when the market ranges, but when the market changes to trending should I

  1. Switch to a trend based strategy OR
  2. Do nothing and wait for the market to range again?

Any inputs would be greatly appreciated :slight_smile:

16

again … when will you know when the market switches … to trend or range … of from range to trend … you will know when it is to late ; your switch will always be with latency; and due to that fact you might be holding/changing your strategy to late and already be returned in a ranging market when you think you are in a trending one

17

All will look very good on hindsight…that is one of the biggest problems with Forex market interpretations.

When would you know it trended or it ranged??

The answer, more often then not, is after the market had done so.

Its of no use to the trader by then.

18

From a newbies perspective, any thread relating to trading that starts out with the words “Blindly following a system…”, I would not expect to be followed with words amounting to … ‘and I made millions of dollars but am having trouble getting all of the money to my bank…’

19

I don’t see why you can’t have multiple working systems. The problem with blindly following any indicator is that all it takes into account is price. You don’t know whats going on in the world or what is going on in the market (yes there are several types of “markets”) so you will get burned by applying the wrong indicator at the wrong time. You should devote your time to understanding how indicators work and when you should be using them. All indicators do is give your information, its not a red light green light to trading.

20

I was trying to be funny with my last post a bit. It’s tricky for any person to say to another ‘what you should do.’ I am very much a newbie to trading, but am a little familiar with international financial services. I’ve been doing this for a few months and am a break even trader (sadly.) If I were going to give my best friend advice on what I’ve learned so far in trading it would be this: The last thing to concern yourself with are indicators. The best / most meaningful indicators are charts which show price action. Any business / every business comes down to supply and demand (support and resistance), and there are several great free sources that teach this for free. Start with the ICT thread and others. That is my two cents, as I’ve been lucky enough to learn it on BP.