Basically I have a 4 hour system that I created in which I think is a decent system but I’m afraid of it not catching the large moves (100+ pips) I want and giving me false signals. I figured you guys would be able to give me your insight about the system.
Indicators applied to the 4*hour Chart:
Bollinger Bands (20, 2.0)
ADX (14), (25 and 40 Levels)
RSI (14)
Long Entry:
The ADX line must be above the 20
The +DI must be above 25
The +DI must be above the –DI
The RSI must be above the 50 level
The Candle’s close must be above the middle Bollinger Band line
The Candle must be a bullish candle and not indicating a reversal
Short Entry:
The ADX line must be above the 20
The –DI must be above the 25
The –DI must be above the +DI
The RSI must be below the 50 level
The Candle’s close must be below the middle Bollinger Band line
The Candle must be a bearish candle and not indicating a reversal pattern
Money Management:
1:1 Risk To Reward Ratio (goal)
100 Pip Stop‐Loss
Take Profits after 50 pips
Actually your right, as far as the R2R. But I would adjust the stop loss after I had a gain of 50. I chose 100 because I borrowed it from the OZFx system.
May I suggest for you to use a more clearer indicator in determining you trade. I suggest if add Parabolic SAR will further enhance your decision to enter the trade coupled with Bollinger Band that you already have. Personally, for me the candle stick pattern also a very useful indicator on the direction of the trend in order to catch your pips.
Right now, as I can see from my 4-hr chart as at 07:14pm New York, the candlestick has already shown a bearish engulfing pattern prior to the current candlestick bar. Parabolic SAR still above the current price and the ADX is well over 60 with the -DI well above the +DI. This will certainly tell me to go short instead of long. And the potential to gain 50 pips or even 100 pips is very likely to happen.
As for the 100 pips stop loss should be ok, but again I will need to know the market volatility to use this. I usually look for either the previous high or low to set this stop loss parameters. If it is well over my 5% risk level, I will not trade.
Ok @NikitaFx so should I take more time in reviewing the candles and price action?
@Mukhriz I will take a look at adding the Parabolic SAR. And which Currency Pair were you referring to when you said you received a signal? I received a signal on the 4-Hour Chart for the EUR/USD at 7/21/11, 12:00. The RSI was 68, the +DI was 26 and the ADX was 33. The Fibonacci Retracement levels show that 23.6 level is support around 1.4010, and that 61.8 retracement level acted as resistance but was broken. I went long. At 1.4370. Do you all agree with that decision? Thank you all for your input.
lxlu… do you make pips from the movement of price or the movements of indicators?
Most successful traders do without indicators, or when they do use it, they tend to use one to confirm their analysis of price movements and candlesticks.
Sort of a confirmation or supporting analysis.
Newbies all tend to make the same mistake…looking at the indicators and what its telling you rather then paying attention to the charts itself…
Im afraid I have to say that you are going down a path that has a very high failure rate.
@NiktaFx I understand what your saying. It would be a great help if you explained to me how you trade the market and the strategies you use to enter and exit trades.
Sorry I am referring to USDCAD by looking at your sample chart. As per Nikitafx has explained here, for newbies please do not try to use quite a lot of indicators when one do not have that experience. The best one to practice is the candlestick pattern (the basic 6) and try to see from the DAILY chart first and make your entry, stop loss and target(exit) strategy from the 1-hour chart.
My past experiences of using quite a number of indicators made me a great loser than a winner. By using a simple one makes me a winner, especially on using the DAILY and 1-hour chart time frame. Do not try to use lower time frame.
I wouldn’t necessarily say you have too many indicators (though personally I only have stochs on my graphs and it doesn’t determine buy/sell on it’s own). I think it’s more important that you came here to ask if it’s a good system-that is not a good start. You should surely know yourself if it works? Otherwise all you’ve done is put random indocators together? Also the r:r ratio is inverted, unless your win loss ratio is crazily good, you are fighting an already uphill struggle…
IMHO go back to the drawing board, read and learn some more. Don’t bother with a system till you understand the basics…
I have actually read all you guys replies. Your actually correct. Indicators are usually the last things to change. No indicator sees into the future. Price action is what is happening now. So right now I’m reviewing candlestick patterns and looking over the Pure Price Action thread, which is actually genius. That’s the reason for the forums is for people to learn. Thanks.
Lxlu
I came to the party late it seems. But its great to see that you are open to new ideas. But absolutely what everyone said here is bang on. Although our systems may differ a lot of us use price action and what the chart says. Its just how we apply that knowledge is different. You know I have been reviewing my system, for the last week and i have back tested about 100 months of data of FIBER. You know what, I am adding an indicator to my charts. Its just simply a 50 period EMA. Why? when i have been trading naked this entire time. Because it will personally remind me what direction the trend is in and i can see divergence of trend more exactly in lower vs higher time frames. But the key is, does the indicator tell me to enter or exit a trade, NO.