Greetings!
I’m a relatively new trader that has gone through the multiple difficulties typical newbies face. I have tried several trading systems and numerous indicators. I’ve experienced many trend-following, breakout and momentum strategies that I found as a package or that I created (sometimes from scratch). Today I thought I’d share with you the only system that has been capable of producing constant returns for me. It is a hybrid one.
I call it the “Compounded Matrix System”.
I have made a PDF document explaining the whole strategy which I have linked to this post. I will copy-paste it right below for those who do not want to download any explanation document.
Before I go any further, I want to mention that I have not created the components of this system. I have simply taken indicators that were thrown out there as part of different systems and I have combined together. The only credit I should have is the assembly of the elements, that’s it. I would like to post the indicator’s sources links but as I have not posted 5 times as of today, I cannot do so (I’m new to this forum). I will add them as soon as possible or send them privately to you if you ask me.
I will upload the indicators on another post if a member asks me.
Without further ado, here is the strategy explained:
1 INTRODUCTION & TECHNICALITIES
The Compounded Matrix System (CMS) is designed to ride short-term trends developing on any liquid currency pair and on any given timeframe. It is a hybrid strategy: the entry opportunities are mechanically generated but the actual entry and the other details regarding the trade are subject to the trader’s discretion.
. Currency pairs: Any liquid pair (small spread, especially important if scalping with this system)
. Timeframe: Any (Recommended: 5M, 15M, 4H, and 1D)
. Time of the day: Any
. Indicators :
- Genesis Matrix Tape Indicator
- Heiken Ashi Tape
- Semafors
2 ENTRY
For a long entry, the following conditions (in order) must be met:
i. Semafor shows a positive signal (colored dot that implies a swing low)
ii. Heiken Ashi Tape is in positive territory
iii. Genesis Matrix Tape Indicator has shown a colored bar in the direction of the trade (entry must be made on the next candle)
For a short entry, the following conditions (in order) must be met:
i. Semafor shows a negative signal (colored dot that implies a swing low)
ii. Heiken Ashi Tape is in negative territory
iii. Genesis Matrix Tape Indicator has shown a colored bar in the direction of the trade (entry must be made on the next candle)
Important note: The trade should not be taken if the signal candle (the candle on which the conditions were met) generates a Semafor as it may imply a change in the trend. The trade must be skipped.
3 PROFIT EXIT
The trade management is the part of the system that is discretionary to the trader. In fact, as market conditions change, a human’s perception of the current market specificities is more adequate than a generic exit rule. However, the following guidelines can be used to give a general idea of the profit exit on the CMS.
A trade shall be closed when one of the three following conditions is met:
i. The price reaches a major structure level that is likely to make the market reverse or consolidate
ii. A Semafor in the opposite direction of the trade’s dircetion is generated.
iii. The initial target is hit (or a trailing-stop). As a general rule, the following gains can be expected on these timeframes:
a. 5M: 5-10 pips
b. 15M: 5-20 pips
c. 4H: 30-100 pips
d. 1D: 60-300 pips
4 STOPS
In the same manner as the profit exit, stops parameters should not be generic since market conditions are constantly evolving.
The best way to set-up the trade’s initial stop-loss is to place it below/over the previous price swing (depending on the trade’s direction). It should not be moved under any circumstance to allow free price fluctuation (except for the trailing-stop which overrides the initial stop-loss).
The trailing-stop is subject the discretion of the trader in regard to his desired risk. As a general rule of thumb, once the trade has reached half of the initial target, the stop may be moved to break-even. A trailing-stop may additionally be added if the trader wants to secure profits along the way, although it may prevent him from making big gains on stronger movements.
5 POSITION SIZE & MONEY MANAGEMENT
As mentioned before, the CMS is a hybrid system. Although the entry signals are mechanical and systematic, the other aspects of the trade are left to the trader’s discretion. This premise is the same for position sizing and money management. One’s favorite money management strategy shall be used (eg. risking 2% of the account’s equity on one trade). It should be noted however that if the CMS is used on a scalping fashion, less than 2% of the account should be at risk on every trade as bad drawdowns can and will occur, thus possibly causing big losses.
6 MARKET ENVIRONMENT LIMITATIONS
Like many strategies, the CMS is not to be used extensively during choppy market conditions. In opposition to other systems, however, it filters fake breakouts pretty well. Periods of extreme volatility (eg. NFP, interest rate decisions, etc.) may represent a good moment to stop the system for scalpers. Longer-term traders should not be worried about economic announcements as the price is likely to revert to its mean (however, a moving fundamental change can be factored into the trade’s management).
7 INDICATORS DETAILS
The indicators use in this strategy are not available on any charting platform or package. They are custom and can be downloaded on the web.
i. Semafor Indicator
Period1 5.0
Period2 12.0
Period3 35.0
Dev_Step_1 5.3
Dev_Step_2 5.3
Dev_Step_3 5.3
Symbol_1_Kod 159
Symbol_2_Kod 159
Symbol_3_Kod 82
ii. Genesis Matrix Tape Indicator
TVI Settings
TVI_r 12.0
TVI_s 12.0
TVI_u 5.0
CCI Settings
CCI_Period 20
T3MA Settings
T3MA_Period 8.0
T3MA_b 0.618
T3MA_MaxBars 5000
T3MA_Label T3
Gann HiLo Settings
GannHiLo_Period 10.0
iii. Heiken Ashi Tape
(No inputs are required)
I do not provide any backtesting results/data or equity curve for that matter. You should be doing your own backtesting. All I can say is that it is a very successful strategy.
If I made any mistake in my document, please let me know and I will correct them. If you have any questions or constructive comments, feel free to post.
Lukas. :38:
Compound Matrix System_Clean_V1.pdf (397 KB)