I’ve recently started properly practice trading after completing the School of Pipsology with independent research and learning for the last 6 months. For a bit of context, I’m using a version of the MACD crossover strategy on the 30m timeframe.
On my first 3 trades, I had a weird experience where I was a complete robot for 2 of them and was satisfied that they’d be successful, and if not then I’d done enough analysis to be confident I did everything properly with no emotion.
My third one (Long), however, ticked every box, it had a crossover on a strong trend, it was above the 200EMA and was away from any major contact points with said 200EMA, but I noticed a divergence in the MACD. Now, this isn’t covered by my strategy, but I KNEW it wasn’t going to be successful, but being the good robot I put the trade on and let it run.
Lo and behold, it failed and was the only one that did so, so my question is, if some sort of outlier like this appears that isn’t covered by the strategy, do I play the dumb robot and go right ahead in case my analysis is incorrect, or do I be a smart robot and work with this new information to make my decision?
TL;DR - Do I account for things outside my strategy when I make my trades, or follow my strategy blindly?
It is part of Forex trading that you’ll get what the market throws at you at times despite the strategies that you use. No underlying reason except change of market sentiment.
IMO, do not tamper with your strategy if you are confident it works for you. Keep it running for at least 100 trades. Journal every trade and see if you made any mistakes on losing ones ?? e.g. but I noticed a divergence in the MACD. Now, this isn’t covered by my strategy
I would also set up the MACD on 3 -10 -16 which has been backtested hundreds of times by pro traders against other settings and found to be best for identifying entry opportunities earlier than the standard setting…
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I did the 100 trades backtesting and found it got a 60% success rate, I did this twice, once going back and doing chart analysis and once using the rewind feature on trading view so that I could practice with it as though I was making the trades myself, so I’m confident in the strategy. I think I may just be experiencing those moments anyone new goes through where a bit more experience would help.
I’ll give those settings a go and see what difference it makes, I do find that the current settings are very slow for entries.
I do log my trades as you’ve said, but say I come to the end of the 100 trades and there are 5 trades that failed for the same reason, would this be cause to review your strategy to account for this?
If you could identify what it was that caused 5 trades to fail for the same reason - you have your answer.
Whether any changes made to rectify that which could affect the other 95 successful trades is questionable.
My technical designed strategy is now bulletproof, IMO, but during my examination of every trade I took in the last 9 months, I tweaked it a little - more psychological than anything major. For example I now cut losing trades quickly, never let them run to the S/L on the hope they could reverse. And use trailing T/P to keep at least a good profit.
I’m still new so I know I need more experience first, but one thing I’ve learned is as you say, no need to let it run to the S/L and take advantage of trailing T/P. Still working on finding/developing a strategy that works for me, but thanks for your advice on this matter.