You many be onto something.
Weekly looks even more interesting.
Hi all,
Is anyone using this system still?
I’m finding it’s a very useful entry point indicator that works well in conjunction with other indicators such as chart patterns and divergances.
I can’t post up screenshots at the moment but this morning I went short on EUR/AUD using this system as an entry signal after what looks like a reverse head and shoulders or double bottom on the daily chart.
I also used stochastics which have pointed out what looks like a bearish trend continuation divergence - can anyone else see this?
I entered at 1.5640, set my S/L at the neckline resistance around 1.5742 and set T/P at the support area and psychological 1.5500
If I had more time I’d hold off and use the 1H chart to set up an optimal entry point but I don’t.
I’m still new so can anyone please point out any flaws with this trade?
I think this system could really rock when compined with chart patterns and divergences to filter out the good/bad trades.
Will update the progress of this trade - it’s also my first live trade, crazy I know but I want to experience the feeling of real money being on the line.
ddinnov,
My only critical observation is that you seem to be overcomplicating it. All the filters in the world will not tell you which direction price is going to move.
Also, concerning the issue of take profits, why would you set a pre-determined profit point? If you have a 1% risk per trade, the best way to ensure the system has a long-term positive expectancy is to allow it to run as far as it will go. Think of profits in terms of multiples of risk and try to make those as high as possible.
As I said before, I use ATR(14)*2 for the initial stop, and use the size of that stop to determine the number of lots that will equal 1% of my capital. Then every time price moves 1ATR in my favor, I move the stop along with it. I just keep following that pattern until price eventually gets stopped out.
Thanks for the reply.
My experience so far with this system is that there are a lot of crossovers if you apply this template to all the (major) pairs available. Some are fantastic trades and some are aweful and some are dissapointing but OK.
If you just blindly jump in on every crossover and cross your fingers with a predetermined trailling stop the results aren’t always that great
What’s struck me in the short time I’ve spent on this is that when following a robotic system there is a bigger picture that needs to be looked at. Which is why - for me - I will be using this crossover system as the starting point for a potential trade entry.
I know it’s complicated but there are so many tools and so much data available that we can build on this indicator to filter out the really good trades and skip the bad ones.
This may not be to everyone else’s taste but I’m now developing my own checklist and point scoring system for trade entries that I see using this system. I could jump on every crossover trade and let the law of averages do the rest but I like to dig deeper.
Surely for a good ‘set it and forget it’ system it’s better to be in fewer better trades where you don’t have to spend so much time checking your stops/profit orders etc.
Anyway - it’s different strokes for different folks. I’m still learning a lot so I’m intersted in applying all the stuff I know. Some people may just see a crossover, for this trade as well as a crossover I saw a divergence (attachment1) and what looked like either a double bottom or part of a reverse head and shoulders chart pattern (attachment 2).
As for the stop and profit levels I look at support and resistance (attachment 3). In this case I think if the price goes down then it will only go 100 pips or so and retrace back at which point I’ll take profit and enter in the other direction. If it keeps going I’ll take profit and keep going. maybe a ‘set it and forget it’ trailling stop will be good - but in this case I don’t think so.
We don’t really know where it will go but I’m seeing chart patterns I’ve read about and I really like the idea of divergences 
This system is great but it’s prone to fakeouts - to filter them out I believe we need to look at the bigger picture. Just my take.
After all that the EMAs have uncrossed since this morning! Should I stay in this trade and will the divergence come good?
This is turning into a nice trade.
My broker closed and reopened my position last night (as they do with any position open for longer than 48 hours) at which time I was actually down about 21 pips at 1.5661.
Woke up this morning around 100 pips in profit from the new position of 1.5661 and about 80 or so from the original 1.5642.
EUR/AUD is now trading at around 1.5550 so I have moved my stop loss to 1.5590 (locking in 50 pips from the original position) and trailed it by 45 pips.
This really does feel very different with real money on the line, I’ve done more fundamental analysis over the last day than I have in nearly 3 months of demo trading 
My next dilemma is the exit point - the chart pattern is getting very close to a reverse head and shoulders although the downward trend could keep going as per the divergence, stochastics and now ADX which I’m using (currently at 27).
Also there are some major news releases coming out for the EUR in a couple of hours, it’s tempting to take my 100 pips and get out before that.
I firmly believe that S/L and T/P is a trade by trade thing - if you take a cookie cutter approach and set it and forget it you’re leaving a lot of pips on the table.
Trade closed at 1.5547 - stopped out by (45 pip) trailling stop for a total profit of 92 pips
I’ll take that for my first live trade 
Now I’m not suggesting that anyone pay attention to this but I’m introducing a checklist to this system (for me) to filter out the best trades. It is quite extensive (and complicated) but I’d be interested to hear any opinions anyone may have.
So when a crossover is found I will go through the following checks:
[ul]
[li]Is there a divergence preceding the crossover? Yes – note this down this can be [B]VERY[/B] good
[/li]
[li]If there is a divergence is it a trend change or trend continuation divergence? Does the divergence support the direction of the crossover?
[/li]
[li]Is stochastics in overbought or oversold? Is stochastics moving in the direction of the crossover and not overbought/sold?
[/li]
[li]Are there any double tops/bottoms or head and shoulders just before this crossover? If so do they support the direction of the crossover?
[/li]
[li]Are there any triangle formations prior to the crossover? Do they support the direction of the crossover?
[/li]
[li]Have the Bollinger bands been broken prior to this crossover? You can just apply bands to the chart temporarily to see this.
[/li]
[li]Is the direction of this crossover against the trend on the weekly chart? - bad
[/li]
[li]Is the direction of this crossover going from a move against the weekly trend to the direction of the weekly trend? - good
[/li]
[li]Are there any major news reports due for the currencies in this pair that are due out in the next 2-3 days?
[/li]
[li]How many pips away from the current price is the most recent support/resistance?
[/li]
[li]Using support/resistance for stop and profit levels is this within or close enough to your risk/reward ratio?
[/li]
[li]Is there any fundamental analysis to support the direction of this crossover?
[/li][/ul]
Monitoring all the available (major) pairs my broker has i could quite easily take 7-10 trades a day by just jumping on every crossover there is, I’ve been doing this the last few weeks and had very mixed results - hence the checklist. I might even introduce a point scoring system to filter out the real gems.
I also see that EUR/AUD is the lowest it’s been for a long time looking at the weekly and even monthly charts. Will it go lower or is a reverse head and shoulders pattern in the final stage before a big move back up?..
Took another 2 trades last night - both live trades:
AUD/NZD - short @ 1.2639 - currently +12 pips
EUR/CAD - short @ 1.4879 - currently +19 pips
Both crossovers followed bearish continuation divergence patterns on the daily chart using stochastics as the divergence indicator.
If these go well I might filter out this system to take only crossovers that follow divergences in the direction of the cross. A lot fewer trades but hopefully only the really good ones
EUR/CAD - short @ 1.4879 - currently +90 pips, stop loss moved to 1.4829 - 50 pips locked in.
EUR/CAD - short @ 1.4879 - currently +30 pips - don’t expect much to happen here until Sunday night
Hi all,
Just thought I’d report back with some results so far. They have been pretty amazing as my live account is over 20% up since I started trading on it using this system last Wednesday. Below are my trades – my broker closed and reopened my positions last night and converted floating to unrealised but I can get the original positions when I get home and check my spreadsheet.
I currently have 5 trades open – they are:
AUD/NZD - Aus Dollar/NZ Dollar Spot Sell
Traded - 1.2556
Current - 1.2461
USD/CAD.fx US Dollar/Canadian Dollar Spot Sell
Traded - 1.0598
Current - 1.0581
EUR/GBP.fx Euro/GB Pound Spot Buy
Traded - 0.8726
Current - 0.8751
GBP/CAD.fxGB Pound/Canadian Dollar Spot Sell
Traded - 1.6958
Current - 1.6849
GBP/CHF.fx GB Pound/Swiss Franc Spot Sell
Traded - 1.6869
Current - 1.6827
I’m using stochastics (5,3,3) and ADX to filter out the trades I take. Trading on divergences only is a bit too restrictive so I take trades on the following criteria:
The crossover is the starting point of more investigation.
Stochastics must support the direction of the crossover
ADX must be 25 or higher
Divergences in the same direction of the cross are amazing
Important chart patterns (double tops/bottoms – head and shoulders) preceding the cross are pretty great as well
Stops placed at support/resistance or 100 pips if no recent support/resistance
Take profits at support/resistance/Fibo levels and psychological 00 and 50 levels. ADX and stochastics help when choosing profit levels.
I’ll move the stop to breakeven and trail it by 100 pips when the trade has moved 100 pips my way
I’ll check the daily fundamental analysis forum for the currency pairs to get an idea of fundamental data to support/invalidate the trade
News releases tend to not really affect trades if the stops are at support/resistance
I also avoid the popular ‘high profile’ pairs like the cable, EUR/USD and pretty much anything involving JPY. They are too volatile for me for these trades and the less popular cross pairs tend to just do what the charts indicate they are going to do. Not saying that I won’t trade the cable EUR/USD or the Yen but I find them more suited for day trades - just my preference.
These results are not statistically significant yet but I’ll keep trading this system and hopefully soon after enough trades some strong patterns will emerge.
I know it’s complicated but the extra validation and research is something I’ve only started doing since trading live - when real money is on the line I want to do everything I can to increase the probability of a successful trade.
I’ll get up some screenshots and original positions later when I get home
hi ddinnov,
i like your list of checks…
how’s ur trades so far?
Those trades didn’t actually work out so well. Mainly because of trading against the general trend and being too greedy with the profit targets.
This week however I’ve banked 912 pips and have 2 trades still open. Closed trades are:
EUR/NZD (sell) entry - 1.9855 - exit - 1.9555 - 300 pips
AUD/CHF (buy) entry - 0.9352 - exit 0.9525 - 173 pips
EUR/AUD (sell) entry - 1.5751 - exit 1.5529 - 222 pips - closed this one manually before going to work due to being +222 pips and EUR news coming up
GBP/AUD (sell) entry - 1.7993 - exit 1.7659 - 334 pips
GBP/CAD (buy) entry - 1.6752 - exit 1.6640 - -112 pips
The main changes are:
Use of the SHI indicator to draw trend channels. I now only take trades where it is a short trade in a downward channel or a long trade in an upward channel. Sidways channels can go both ways. I’ve posted up a screenshot of a valid trade that I actually didn’t take over concern about the fundamentals (EUR/GBP). I wish I had because it would have been a great trade!
You can see that the price has bounced off the upper trend line for a very nice short trade in a downward trend. The WMA crossover and trend line bounce is the signal. Also I have ADX and stochastics to gauge the strength of the trend.
I set profit target #1 at 2 x stop loss
At the moment I’m only aiming for 1 profit target (risk x 2). Soon I will implement having 2 positions, closing 1 at T/P 1 and then moving the stop on position 2 to trail the price by 50-75-100 pips depending on the strength of the move.
That way I bank at least twice the pips risked and can still trail the move further if there are more pips to be had.
So the answer to the great debate about take profit vs trailling stop is;
Do both!
I’m trying to get into some more fundamentals as well
EDIT I was asked for proof of the trades this week so I posted up a screenshot of my MT4 closed trades for this week.
hi ddinnov,
I have been following this thread and testing this system. I really like how simple it is and the signals do seem to show good entry points.
I have never used the SHI indicator, can’t seem to find it in MT4, would you mind posting it?
Happy trading
Hiya,
You can find it attached to this post here:
I’ve found that it cuts down the amount of entries a lot but they do seem to be just the good ones
We’ll have to make a lot more trades with them to get any statistically significant results though.
[B]EDIT[/B] I forgot to mention I also have a 200 SMA which can add some perspective. If the price is above the 200 SMA the pair should be considered trending up and if it is below the 200 SMA it should be considered trending down.
But then again it could be in an upward channel but below the 200 SMA and on it’s way to crossing over and trending up (and vice versa)
I’m not discounting long trades below the 200 SMA or short trades above it, like I said it’s just there for perspective at the moment.
Great, thanks for this.
I really need to make sure that i exit my trades when news is expected! Keep hitting my s/l when news is released (maybe they are too tight).
What s/l do you use?
No worries.
I put my s/l at the recent swing high/low and about + 20 pips. pretty much trend line + 20.
This is an important way of how I trade this system now as well - I will only take a trade if the risk/reward ratio is at least 1:2. So if the WMA’s crossed over and the price has bounced off the trend line and I’m a bit late I’ll measure pips to the stop (trend line + 20) then multiply that by 2 and see if it’s viable to still put on a trade.
Generally about 100-150 is the average stop with profit target #1 being twice that at around 200-300 pips. Like with bollinger band systems I like to see profit target #1 (s/l x 2) at around the middle line of the trend channel.
So if it’s moved too far already (like EUR/GBP in the screenshot above) the risk/reward will probably invalidate joining this trade at this stage as t/p1 (s/l x 2) is below the middle line.
Do you only trade certain pairs or will you take the trade on any if the conditions are right?
912 pips per week! that’s lot! i only target 500pips per month and my acc still in red 
seem like you trade on lots of pairs… any particular reason?..
I’ll trade any pairs in the majors and crosses as the SHI indicator filters out a lot of crossovers so I’ll take any good looking trade I can get
However due to the fact that they are held for 2-5 days (sometimes over the weekend) sometimes fundamentals have to get involved. EG the losing trade - GBP/CAD (buy) was in contradiction to GBP/AUD (sell). I was long and short on GBP :o
Also I got accused of making a ‘de-facto bet’ on AUD which is why those trades all turned out to be so good…
I just traded valid signals I saw but now I’m trying to add in some basic fundamental analysis to pick out strong vs weak in the pairs. The 2 trades I had open just flapped along sideways all week and I closed one out (AUD/CAD) for just 15 pips yesterday and the other (USD/JPY) is still open after ranging around 40-50 pips…
So that’s 4 winners out of 7, one loser and 2 sideways flappers.
Pipwise it was an amazing week due to the profit targets being hit. The positive AUD news was a nice midweek catalyst although without it the profit targets would have been hit anyway just not so soon.
I did leave quite a few pips on the table with such conservative profit targets but my priority now is to actually hit the targets before getting more aggressive.
Hopefully soon my live account and MM will support putting on more than 1 position per trade and having more than 1 T/P These were all on a demo account BTW.
Tomorrow I’ll go through the pairs and post up my watchlist for this week.
Won’t put on any trades until Monday morning though.
Now I have to go to the gym - meh! :rolleyes:
Thanks for the insight ddinnov,
Can you explain how exactly you use the SHI indicator to confirm an entry? I need to filter out the bad trdes that i am entering.
Also, which broker are you using. I’m currently on demo with IBFX but im not sure if they offer live micro accounts which is what i would want to start with!