MA Position Trading System - Trading the Daily and 4h Time Frames With Filters

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Hi Traders
First a bit of background.

Have been trading since 2004 - moved to Forex in 2004-2005 after weaning off equities. I began to learn this skill because I knew that one day I would need to leave working and would still require a cash flow.

Trading has been as much hobby as it has been a dream, and occasionally it has provided some small returns.

Naturally when that happens, you feel greatly encouraged and get the feeling that you are very close to the dream part. But trading has a way of humbling a trader, and it doesn’t take long before the mood of the market reverses, and so do your trading fortunes.

My mate calls me a fox terrier!
Once the pup is onto a rat, he won’t give up until he nails that rodent!
And that describes me exactly, since once I am onto something good, I won’t give up until I taste success.
Well - if you buy the ticket - you have to see the show, right?

Enough rambling - what’s this about?

Recently I have searched the Internet for Position Trading systems and Swing Trading Systems and similar, because I have an idea. I also read the following threads on this forum:

I went over a couple of threads I wrote on the topic on other forums:
Trade2Win: Getting a Life … Position Trading the higher Time Frame
Traders Laboratory: Optiontimer’s Project: Using Trend, Momentum, & Timing with Strategy (member)
Incredible Charts: Forex Made Easy - Ingots Rainbow Strategy.
Incredible Charts: Ingot’s Rainbow Forex Method

If you Googled a couple of those, you will see that for a long time I have recognised that one of the keys to successful trading is definitely hidden in the Daily and 4H Time Frames.

So why did I not follow my own theories, and get lost amongst the weeds [to use a phrase I think coined by @Clint - FX-Men Honorary Member in another thread]?

I think the answer to that is the missing link most of us lack - inability to recognise beginning and end of trending behaviour, and beginning and end of whipsaw or ranging/consolidation behaviour in Forex pairs.
Most know that if you keep attempting to trade a Trend-following strategy in a whipsaw market, you will soon lose a lot of capital.

This thread is yet another attempt to come up with a strategy to trade the higher Time Frames (TF) while using suitable tools to help identify these subtle changes in direction before they do real harm to our trading accounts … and more importantly - our trading confidence.

I have used material from, and give credit to the above linked threads and their creators, simply because there are only so many variations in the way to create a wheel. The difference I hope to make - and ultimately hope to prove - is that by using suitable tools to identify when to be in/out of the market, and when to Take Profit (TP).

So in the posts that follow, I will lay out the tools I’d like to use, the chart set-ups and other sundry indicators which I think have a role in keeping trades efficient.

Part of the philosophy I subscribe to is the “Kenny Rogers” approach - know when to hold and when to fold!
The rest of the story will have to do with trade entry/exit and trade management.

So I invite participation from traders who have an interest in the higher TF.
I have pretty much laid out how I want this thread to develop, and I request that contributors stick closely to the spirit and intent of the thread. I’m easy-going and can cut some slack if people digress a little, but only if their point has something to do with progressing the philosophy expressed.

If you don’t feel you can do that, then just hang around and read … or start another thread using your idea there.

It’s the weekend, so markets are closed.
Give me a few days to get this thing assembled :smiley:

4 Likes
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Just a few more points in preparedness for Monday morning 0800 hrs Daylight Saving (Sydney) Time Forex market opening.

Fairly straightforward:

Will be using the MT4 Trading Platform
Will be trading 12 pairs in Daily TF, with a look at 4H occasionally to see if there is advantage in that
There will be ONE chart with the HA candles and only two moving averages.
There will be a second chart with all other assisting indicators and standard candles. Right now I am searching for a template that allows both HA candles and standard candles to be displayed on the same chart. If I locate this, it will cut down the need for the second charts, saving 50% of the desk-top space.

Choices of indicators will be made from:

  • Stochastic RSI with setting 8.8.3.0
  • MACD_EMA with setting 4.21.1.5
  • A MTF (Multi-TF) ADX dashboard
  • 10 Linear Weighted Moving Average
  • 2 Linear Weighted Moving Average

That covers my choices - some of which I may not use, since they can not only clutter, but be redundant.
If no access to the same MACD I am using, substitute standard MACD with settings 4.21.5

Notes:

  • MACD was created by Gerald Apel, and warns of increasing/decreasing MOMENTUM
  • Stochastic is a momentum indicator created by George Lane, as an oscillator - which warns of a move from consolidation.ranging pattern, to a trend, and the closer the stochastic sticks at or above or below the 80/20 lines respectively, the stronger the trend. It changes direction BEFORE the price does, and as such could be considered a LEADING INDICATOR.
  • RSI was developed by J. Welles Wilder. It is a momentum oscillator that measures the speed and change of price movements, and oscillates between zero and 100.
  • Stochastic RSI, was developed by Tushar Chande and Stanley Kroll, is being trialled as a substitute for the standard stochastic 8.3.3. The Stoch RSI will indicate WHEN the breakout from the whipsaw pattern occurs, or is about to resume, thus keeping us OUT of pip-wasting trades.
    Since the Stoch RSI combines the strengths of these two oscillators, we will not use them. Instead the Stochastic/RSI should suffice.
  • The MTF ADX dashboard indicates when trend is under the 30% level, in which event we will not be entering any trade.
    That should cover the indicators we will utilise. Most should be easily located on the Internet. I am unable to attach them here because some have a .exe suffix, prohibited by Babypips in attachments, for good reason.

Remember, the purpose of these indicators is to filter out trades which could be harmful.
Importantly as we have all seen before, when using any MA crossover system, the Achilles heel is almost universally the propensity for this method to get us into unwanted whipsaw trades.

I feel that if we can overcome this problem, we will have a decent strategy.

It is not a part of the philosophy of this thread to go into position sizing, or money management.
We will simply be aiming for a pip count, and for this reason I will be using very small positions with a large account balance, to eliminate such disruptions as margin calls and the like.

EDIT:

  • Have changed RSI Stochastic setting. Now 8.8.3.0 as earlier 7.7.3.0 setting would not show indicator on 4H chart
  • Have included the MA’s in the above list of indicators.
  • Have now found the indicator that splits the chart window into normal candles in the top window and HA candles in the sub-window.
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While the main purpose of the thread is to nail entries and exits using MA crossovers in the most efficient way, while avoiding account-damaging whipsaw activity, That’s not going to be very satisfying without showing account growth in the process.

The most effective way I know of to consistently produce trading income, is to have the procedure documented and set out in fairly clear and easy-to-follow steps.

Trading is as much an art as it is a skill as it is a science.
So if we accept that premise, we need to be prepared to show a bit of flexibility as well as willingness to nudge the rules a little to accommodate changes in the mood of the market.

However an approach like that can end up being unsuccessful and eventually tossed in the bin because it was so flexible it was of little use when the real opportunity to profit presented. Quite a mouthful to say, but what do I mean by that?

Simply this - we already KNOW that markets both TREND and RANGE (move in a pattern of consolidation, without really rallying or retracing.)

So our strategy needs a filter, and as stated earlier, I have chosen the ADX for this.
The form I have chosen automatically works out for us the percentages, so that at a glance we can see when both 4H and/or Daily price movement is in a strong trend. This will be indicated by the arrows, and if it proves not satisfactory for our needs, it can be scrapped in favour of something that does fit the need.

I will attach what indicators I can in the next post

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The indicators:

Heiken Ashi Subwindow:

Stochastic RSI

Tor_1.02 MTF
*Trending or Ranging: ToR 1.02 - Trending or Ranging - Moving Average, MA - Technical Indicators - MQL5 programming forum
Hint: Don’t download the other newer developments - they contain features not needed for our purposes, and may use up excessive charting bandwidth once loaded on 12 charts.

MACD:
*I have the MACD_EMA file but cannot attach it here. Please private Message me for this one, or simply use the standard MACD with settings 4-21-5 instead of 26-12-9

It’s after 0130 hrs here and I should be snoozing :smiley:
Any indicator I may have missed I will attach or send instruction where to download in the morning.

To make things easier to construct on chart I will make the .tpl available once all the indicators have been added to charting files. Otherwise most of you should be able to construct your charts from these indicators and save as .tpl file

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OK - have created a chart of the only pair in watchlist that is close to a trade entry.
The Daily USDJPY.
This is Monday and I do not usually trade at all, so not interested really.

Annotation explains it. Should mention ADX is 26 and sideways too, so no trade.
Basically it is simple saying “Wait until tomorrow.”

USDJPY Daily
USDJPY Daily1101×653 194 KB

For those watching the 4HThe story is similar.
However the Stoch-Rsi is trying to cross upwards through the 50 line, and the new HA candle is green. The MA’s don’t appear to be going to cross for at least the next new candle, and possibly two, if there is to be a 4H trade.

Please note - when changing from the Daily to the 4H charts, the HA sub-window will disappear.
Just refresh the Template when this occurs, and make sure you are not writing on your chart before switching TF.

Have attached my template below, but please make sure you have the indicators required in your files or you may get different results.

EDIT: Replaced Template

Project.tpl (7.7 KB)

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If you have all the indicators attached to your MT4 files and have loaded the Project Template above, then when you apply the Template to a chart all of the settings should appear the same as this one:

Project USDJPY_Daily
Project USDJPY_Daily1080×748 196 KB

Have had some issues with the Stoch_Rsi when applied to the Japanese pairs.
Using different settings seems to have solved them.

I think the chart version is the final one - maybe a minor tweak but nothing major expected.
All that remains is for a daily analysis of each pair.

I have noticed that the Stoch_RSI is very heavy on CPU when it is updating data.
If all of your charts are set to this template it may cause your computer to freeze.

My work-around is to have only one - maximum two charts running the template at a time. have had no problems that way. And make sure you don’t close your platform with all charts running the template. It may take quite awhile for it to open your charting properly if you do.

Don’t know why it is happening - maybe someone will know how to solve this?
If you don’t want to risk it, simply remove the Stochastic_RSI from the charts and resave as a new template.

Tomorrow morning I will go through all of the pairs and see if we have a trade.
You may be able to spot good setups on the 4H charts through the day and trade those. But I will only be documenting pips made from the Daily candle trades.

Some of those 4H entries go on to become Daily candle entries as well, and sometimes massive pips are there in those.

Here are the pairs I will look at - chosen for some sort of balance:

AUDJPY AUDUSD
EURCHF EURGBP
EURJPY EURUSD
GBPJPY GBPUSD
NZDUSD USDCAD
USDCHF USDJPY

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22nd October 2019: No Trades today.
There are some good trending pairs, but no legit way to enter under my rules.

EURCHF and USDJPY come close But the two MA’s have not crossed, and even on the 4H charts the MA’s have not given a tradeable signal. Check in tomorrow.

23rd October 2019. No trades today, although on my platform, some MA’s DID come close to crossing.

For those who like the 4H there are some nice setups on some of the pairs listed at the end of the previous post.If you trade, pick the cleanest and strongest. Make sure ADX (Trend Strength) supports your trade.

If I had the energy I would be trading some of those 4H pairs, but I am busy today.

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Bit more to this morning’s update:
Up until I posted, the 2LWMA had touched (several times) but not crossed the 10 LWMA.

If the current daily candle closes lower than it opened, then at the open of tomorrow’s daily candle, we will have a short entry.

All indicators are confirming a short (sell) trade.
Those who also keep an eye on the 4H chart might like to consider taking a trade also.

The 4H MACD is below the mid-line, and the MACD has crossed too.
The 4H Stoch_Rsi has also crossed and remained below it’s 50 level.
And the 4H HA candles are red, indicating a change of direction.

Meanwhile, we anticipate a trade tomorrow, but wait for confirmation.

USDJPY_Daily
USDJPY_Daily1064×629 160 KB

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Followers should have no problem understanding WHY we wait until the DAILY candle has closed, or is within 15 minutes of closing, before making a decision to open positions in this TF.

This time yesterday, and even 7 hours or so later, even I was getting ready to set up for a trade entry.

You can see today the wisdom of patience. The turnaround of +/- 20 pips has scuttled any trading for today, since a glance at the chart shows the 2LWMA skimmed along the back of the 10LWMA without crossing on the closed candle.

Charts below.
As for the other 11 pairs:
EURGBP, EURJPY are worth watching closely.
EURUSD, GBPUSD and GBPJPY are still at least a day from having their MA’s cross.

BUT - USDCHF has crossed cleanly - it just has not delivered a candle that has CLOSED in the right position necessary to trigger a trade. I would be hesitant to entertain a trade in this pair, because the Daily ADX reading is 18.33 as I write. NOT FOR ME!
As well, the Stochastic_RSI looks hesitant at the 50 level in its sub-window, so this is fantasy trading - whipsaw material - STAY OUT!

We have spent the seek so far just window-shopping.
That’s how trading is, and how it should be.

Spot target.
Get target in cross-wires.
Take aim.
Confirm field of view is clear in all directions.
Squeeze trigger.
Collect trophy.

See charts below of USDJPY and USDCHF - both in a zoomed view.

USDJPY_Daily
USDJPY_Daily1136×842 224 KB

USDCHF_Daily
USDCHF_Daily1134×856 225 KB

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Update Thursday 16.50 hrs 24th October 2019:

Wise decision to stay out of all trades today.
Confirms markets we are waiting for are simply not trending in a way we can profitable trade using this approach.

However, looking back over all of the 12 pairs, I can confirm there have been some great trades for the month - we simply cannot just jump in and hope the nice trends continue.

With patience we will get into our share of these.

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Excellent thread! I really appreciate how much detail you put into explaining your thoughts. I’m following along!

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Likewise
Good Luck

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Thanks for your interest Dudebro and Jeffre4 - you are welcome here.

Charts are telling me we have several pairs in which the two MA’s have crossed.
They are listed below. I intend to take positions in all of them providing the ADX is above 30 - a rule I may not have explained in any detail earlier, but no time like before opening a trade to confirm any rules.
No doubt there will be other small, but consistent refinements I have missed.

I will list my reasons for opening/staying out of trades, and also set the basis for Stop Loss (SL) and Take Profit (TP).

I am human just like you and approach trading with the attitude it is as much a skill and an art as it is a mechanical activity. That just means I get the wobbles and may close a trade if I see news coming that will affect the direction, so that I don’t give too much back.

My emergency stop is ONE ATR on Daily charts, keeping in mind that since activity has been flat for days, this may not be enough leeway for all the trades to get established, and simply breathe a bit. So I will also be looking at recent high range candles. A big breakout candle or a retracement candle may hit any ATR-based stop, so I will need to be sensible about placement.

I have a demo account I’ll be using, just so I can open ALL of the trades to see how they go.
Management will be AFTER each Daily candle has closed, or earlier if some really adverse news is looking certain to threaten the future of the position.

Here are today’s early qualifiers, BEFORE I look at the filters, such as ADX:
AUDJPY … AUDUSD ---- EURJPY … EURGBP
EURUSD … GBPUSD … GBPJPY … USDCHF

More to follow, so in the meantime, followers can get their charts ready.

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On closer inspection I am feeling hesitant about these trades, because the MA crosses are fairly tight.
Should a reversal happen today, it may be seen as entering prematurely.
I am going to go ahead anyway, as an exercise in simply watching.
It may prove ok in hindsight on Monday, or it may look like a very risky thing to have done.
Therefore I implore anyone following NOT to take live trades, unless you are on the 4H and can keep an eye on them with each candle close.

Impatience kills accounts, and we have no urgency to jump in with real money - Monday will be soon enough, and if these are good entries or not will be confirmed then.

There is another factor - it’s FRIDAY, and I usually seek to be out of trades over weekends - particularly since world leaders are using Twitter more and more to declare market-changing news.

The news outlets should begin a new category - Twitter releases!
End of rant. Just to say that because these are demo trades and we want to learn, I will go ahead and open and also remain open over the weekend. Most trading trainers might say close over weekends, but this is DAILY trading and can run for weeks, so …

My charts are on different Time Zones.
My live account looks different from my demo account, so while I will be posting my LIVE account MA crosses, I will be demo trading on another. I will show you what I mean:

LIve account screen shot of GBPUSD DAILY:
LIVE GBPUSD DAILY

Demo account GBPUSD DAILY:
Demo GBPUSD Daily

You can clearly see on the Demo account that the MA’s have not crossed.
Nevertheless I will still open this trade, based on the live account data.
Charts posted will be LIVE ones, but pip data will be screen shots of the open trades.
Hope that’s not too confusing, but since price movement is very closely mirrored on both charts, we will be capturing relative price movement regardless of charting.

Let’s go with the charts - 6 of them.
Based on ADX values, I have omitted the AUDUSD and the USDCHF.
Will keep an eye on them for coming days.

AUDJPY_Daily
AUDJPY_Daily1177×715 177 KB

EURJPY_Daily
EURJPY_Daily1170×715 173 KB

EURGBP_Daily
EURGBP_Daily1173×707 173 KB

EURUSD_Daily
EURUSD_Daily1173×715 174 KB

GBPUSD_Daily
GBPUSD_Daily1175×710 174 KB

GBPJPY_Daily
GBPJPY_Daily1173×714 174 KB

ADX is visible and we can see every filter is pointing to these trades being good ones.
I am confident, but have no control of market moves, naturally.

I will now go ahead and open these trades on demo, and come back with the screen shot of those positions.

NOTE: Please treat this as an educational exercise.
Do not rush to trade live.
You only have ONE account, but you have the rest of your life to trade.
Be wise and cautious.

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OK - got the trades on and have mainly arbitrary Stops in place - just so we don’t get caught out with big swings.
If we do, at least we save the account.

Forgot to switch the position size back from the 1 full contract per position, but will stick with it for now. I will switch the display from $$ to PIPS so we are all on the same page.

Let’s learn something from this exercise.
The purpose of my placing this thread in "JOURNALS’ is so I can create a record of trading for myself, while exposing my mistakes. Thanks for your interest, and I’d be happy to have your comments and critique.

25th October 2019
25th October 20191145×171 45 KB

EDIT: Expect some drawdown.
These early entries typically create candles with wicks, and the wick is a part of the early losses that trades make.
The reason we open trades regardless, is that price may NOT make that wick, and you are left trying to get into a trade that has moved in your direction without your being on board.
Later today the losses should disappear, as we move from the Tokyo session into the London/New York sessions.
It might be possible to add the two pairs which did not qualify due to ADX numbers, on Monday when the markets re-open.
Don’t sweat if we see these trades run away without us.
It might be about the pips for some, but take a hint from me, the real object of trading is to teach us to be good managers of our accounts.
The old Chinese saying was: “Hurry Hurry has no blessing.”
The modern Chinese saying is: “A fish rots from the head” … meaning YOU are the manager, and any responsibility for what happens is down to the manager - YOU (and me) :smiley:

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Hi Ingot54

Looks like an interesting strategy and being so indepth shows that you have a passion for this to succeed. At least you will ‘never die wondering’. Good luck with this project.

1 Like
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Hi @Ingot54! :smiley:

What a complex piece of work you have set up here! Good luck! :+1:

What you say is true and weekends are not normally an obstacle for long term position trading on daily timeframes.

However, I just popped in to place a word of caution here. As everyone knows, anything GBP or EUR related is currently highly sensitive to developments in Brexit - and there is a lot that could change from today through to end-Monday.

The EU is meeting today to consider the request for a extension. It may be agreed today or over the weekend or even on Monday. It could be anything from a few weeks (France) to 3 months (majority view) and may contain options to leave between those extremes.

In addition, the UK parliament is voting on Monday whether to hold a general election on Dec 12 and whether to accept the offered additional time to handle the Withdrawal Agreement Bill prior to the end of parliament if an election is agreed, which would be around 6th Nov.

There are also major points in the so-called WAB that could cause major shifts in the GBP outlook such a a possible referendum.

Whilst your approach is TA driven, this might not be the best day for entering GBP or EUR positions ahead of this uncertainty, since new longer term trends are most likely to start after these matters have been cleared and on the basis of these results rather than on the technical setup from previous price movements.

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This is the type of planning and patience needed to trade the higher time frame! Thanks for posting!

KC

1 Like
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Dropped the indicators onto IG MT4 but not looking like yours.
Can we start with LWMA do not appear to have that one is that related to MACD

Cheers

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Linear weighted moving average is included with the mt4 platform.

Go to the moving average dialog box in one of the tabs or drop down menus it will allow you to choose simple, exponential etc… and there should be a choice for it, some type of weighted average which is the linear weighted moving average.

KC

1 Like