Hammering out the exceptions to my trading system

Hey Everyone,

I’ve been working on my trading plan, testing it, and this is what I have. I’m concentrating on breakouts in the USD/CAN pair (I’m Canadian, if one wonders my choice of currency pair:)), for either long or short positions, which are indicated by, my trading plan

  1. 1hr Chart
  2. Cross over of SMA (9, 18)
  3. Cross over of the MACD
  4. RIS (10 periods) cross the 50 level

This systems works well, back tested about a month, with a little tweaking to catching trend changes earlier, it could improve. Two examples of where it works attached.

However, attached is another area where the above conditions are met in several places, but the trend reverses quite quickly, without any chance for gain, and possibly even loss. One example is around Dec 03, 1pm. My system doesn’t account for likelihood that the trend will indeed continue, sufficiently long to make some gain. I understand that I haven’t yet included fundamental analysis yet.

I was hoping to get a suggestion on what indicator, if any, I could add to detect these weak break outs. Comments on how to improve the system when it works would also be appreciated. I’m going through the pipsology school trying to improve it based on the concepts, but maybe an expert will see something I can’t.

Thanks


Update - February 20, 2010

I’ve decided you use this thread to log my trades, and discuss my reasoning for entering the trades, and my thoughts about it yada yada. I’ve been demoing for about a month now and of recently become profitable (i.e. net change is profitable).

Update - February 18, 2010

A lot has changed since I posted this trade system. I’ve learned a lot, and have a bunch trading tools in my box.

I trade only on 4hr or day charts, though I will use the 1hr to find better entry points.

I have found all I need are the following indicators:
LWMA 10, 20
Stochastics (14,3,3).

Valid cross over has similar conditions as the HLHB system.

I use this to determine a valid trend change, although these past several days, having found a valid entry point. Been making demo pips through broken supports and resistances, retracements and the like.




Fellow Canadian,

I will try to keep my comments constructive, but I must temper my comments with my doubts. First of all the CAD is not a very good choice of currency for a beginner. My suggestion is the GDPUSD and once you are comfortable with it, try others. You probably will not want to trade the CAD even then. The reasoning - the order flow for the CAD is too thin and this causes sudden reversals and weak moves. Plus you have to understand the effects of oil and gold prices. This is too much to start with.

One month’s backtesting is of little use. One year would be the minimum amount of time to be able to determine anything. One month can be an anomaly that will point you in the wrong direction.

You don’t need any more indicators - in fact you could probably do without the MACD. I trade without anything except a 15 - 20 period SMA on my chart. Once in a while I will look at the RSI or the ATR to confirm what I see on the charts. My favourite system is Synergy from CompassFX but without the TDI and RSI. There are threads on other forums (can’t link) about it.

You said that RSI you are set up on 10 period, but I saw on you pictures that you post RSI hase period 2.

2 simply refers to the line. In ForexPro you can have three lines on your RSI chart, so I saw that RSI2 had a value of ten, so I checked that and unchecked the others.

Cheers,

Synergy

Late reply,

Thanks for your feedback. I use simply two LWMA’s and slow stochastics, and that seems to be all I need…for now.

This should be an interesting thread to follow.

Best Regards,
Matt Jones .

Hopefully!

USDCHF

Well this past week I’ve had three consecutive profitable trades with the USDCHF pair. It’s been in an ascending channel for a while now, and I have been capitalizing on its continuity bouncing off the ascending support and resistance lines. Note I use the SHI Channel MTF indicator to draw the channel lines, and they have done a pretty good job at point out the ascending support and resistance regions. I had one short trade and one long trade in between them.

I would enter my trades after the 1st or 2nd (can’t remember now) candles confirmed that price had bounced up and support of resistance line and was heading up/down. Stochastics were properly in the oversold or over bought conditions, giving another indication that the trend would change.

I would set my stop at the high/low of the previous candle, or at a level that was equivalent to or less that 1% of the demo money in my account. Since I’m trading micro lots (two of them), the stops were much smaller, that is I was actually risking around 0.5%. I took profits at around the middle of the channel.

My sell hit its target profit. The buy, I set a trailing stop after the price went up around 20 pips. This trade was stopped out when the price retraced a little on the uptrend.

This these past two trades were mostly technical trades. I knew the USD was strengthening the past two weeks. The news for the CHF this week was that it was Carnival time…not sure how that affected it! Perhaps allowing the USD to influence most of the price action and allowing the price action to continue in the trend that it did.

So these were mostly technical trades. Not much fundamental analysis.

So to summarize:

Buy at 1.0716, hit ts at 1.0781
Short at 1.0875, tp at 1.0760

This thread is now of trading log for my trades =)

I second that :slight_smile:

Best Regards,
Matt Jones .

grrrrrrrrrrrrr

I just spent the last 20 minutes posting an explanation of my trend channel trading system. And my darn google chrome for some reason refreshed on me.

I’m too tired, so I’m just going to post the picture, showing my entry points. i will explain later…

I had everything explained…entry points, indicators, MM etc…grrrr