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

[Ingot54]

Thank you very much Sammyru.
You have made me think very hard about your comments, and it looks to me that you have supplied a missing link for me.

There is no rule that says we have to capture every pip.
But there could be an unwritten rule that says the pips we do capture, should be safe ones.
In my quest to get into trends early, I may be damaging my account without realising it.
It is likely that the pips lost in choppy trading don’t need to be.
And we haven’t taken into account the psychological cost of frustration with a difficult market.

I will go over your approach a few times until it sinks in better, and I fully understand what you are saying.

I think all of us here can learn a lot from what you have said - very much appreciated.

Thank you again for your willingness to share.

[frandlost]

In my quest to get into trends early, I may be damaging my account without realising it.

This has been a big issue for me to overcome and accounted for staying in a trade that had gone against me resulting in tremendous losses. I would catch myself doing it by adjusting indicators to “catch every last pip”. It can’t be done. Now my goal is to get in after what “appears” to be a substantial confirmation. Which is still objective as you have consistently said you don’t know what the market will do.

I will spin a chart back and click through one candle at a time to see how my rules “play out” it has led me to remove certain MA types/indicators.

@Ingot54 great thread! tx for posting!

KC

[Ingot54]

I have to admit that this flat market is taking its toll on my enthusiasm.
Technically we are using an approach that has crashed and burned many times in many forums.
But the difference here is that we are attempting a more conservative approach, by using filters that operate in slightly different settings from each other.

The rationale to that approach, is that we will see the setups early enough to be alert, while being restrained by some of our filters NOT yet confirming.

This works well when markets are trending - and it works well to pick turning points in the markets eg the beginning of reversals, without attempting to pick tops and bottoms.

When looking at historical charts, it appears plain that reversals occur at exactly the positions we are looking to locate. So I think we got that right.

At the moment the whipsaws are hurting this strategy.
I can see the AUDJPY and the EURJPY are beginning to trend as we hoped, so we are doing fine there.

On the other end of the scale, the GBPUSD and EURUSD have followed those above two pairs, by rallying with them.
The MA crosses occurred exactly 3 days ago, confirmed 2 days ago.

I have allowed the GBPUSD and EURUSD ro run a bit, given the chop they have emerged from.
Not sure that was wise, because now we are on the wrong side of the GBPUSD and EURUSD.

In total we have at time of writing, nearly 100 pips drawdown, with the GBPUSD accounting for all of it on its own, and the other four pairs balancing to make a current position of zero gain or loss.

The other pair included above is the EURGPB, which is negative 20 pips as I write.

I will stay the course, despite the situation not being ideal.
To stick this out is not something I would do in live trading.
If live trading this, I would make a decision on tomorrow’s candle close. Right now we are almost half-way through the life of the current daily candle.

But in demo trading you can experiment by doing things you would not be able to tolerate using real money.
And in doing so, you learn a tremendous amount about the markets.

I hope no one is trading any of these pairs live, because the strategy is still developing, - thus the reason it is in the Journal thread.

So while I am disappointed - that’s natural and I accept disappointment - I am not ashamed to have bared this strategy to you all.
The markets do not care about disappointment and shame. Markets just require us to be humble.

In the end, I have no doubt that we can improve this approach to be a much better strategy if we don’t simply give up on it.

I think Sammyru located a major problem with the approach, and that is we got in too early to these developing trends.

It is nice to get in early on the trade if it is a winner. Yes. And by ‘early’ I mean at the first confirmation of the MA cross - the new candle that confirms it. However all we have demonstrated so far, is that in flat/choppy times, we really need more candles for trend confirmation.

Sammyru you also gave a strong hint that we would do better to enter the trades once the MA’s were wider apart. We are seeing that now in the AUDJPY - EURJPY - GBPUSD - EURUSD.

That’s not to say we should suddenly jump ship and join the two losing pairs.
But I agree that about now would have been an ideal time to get into these, rather than 2 days ago.

So I will stick to my words and allow these to run until they close the current candle tomorrow…
That means we may lose the GBPUSD to a stop loss.

But in days ahead, we can be more patient and wait until the MA’s are indeed wider than we have to this point.

This approach is certainly worth our persistence and coaxing.
Right now it is in the labour pains of birth.

[Ingot54]

This has been a big issue for me to overcome and accounted for staying in a trade that had gone against me resulting in tremendous losses. I would catch myself doing it by adjusting indicators to “catch every last pip”. It can’t be done. Now my goal is to get in after what “appears” to be a substantial confirmation. Which is still objective as you have consistently said you don’t know what the market will do.

Yes indeed, Frandlost - I have also blown up live accounts doing this. Thanks for sharing your experience.
If we are open about it, we will find ways to fix our trading problems together.
No place for ego in trading - we are not Larry Williams

[Ingot54]

Taking some notes to add to my book of wisdom. Thanks!

Thanks Dudebro - that’s encouraging to see you getting something from the thread.

[Dre_Trader]

Hi from Cairns, Ingot54…just been reading through this posting and appreciate your insight into developing a strategy that resonates with me…still trying to get this trading thing sorted…just when you think you’re onto it …boom…market gives you wake up call…Anyways, just thought I’d share an indi you may like to look at,Stochastic Momentum Index (SMI), I find it pretty accurate and it may be a good fit for this system…Cheers,Andre

[Ingot54]

[quote=“Dre_Trader, post:46, topic:250744, full:true”]
Hi from Cairns, Ingot54…just been reading through this posting and appreciate your insight into developing a strategy that resonates with me…still trying to get this trading thing sorted…just when you think you’re onto it …boom…market gives you wake up call…Anyways, just thought I’d share an indi you may like to look at,Stochastic Momentum Index (SMI), I find it pretty accurate and it may be a good fit for this system…Cheers, Andre [/quote]

Thanks Andre
Will take a look at it.

I like the Stochastic_RSI as mentioned, but it is too CPU-heavy and when I have it up on 8 pairs simultaneously, it makes the computer really hum. It can also cause charts to freeze for a minute or so while it loads all of the data necessary to operate.

Others as well as me have also found the Stoch_RSI does not appear on some charts sometimes, or it will appear on the 4H but not Daily, and vice versa.
Having said that, it is the best indicator of change of trend that I know of.
Since your indicator is also a Stochastic (Momentum Index) it is well worth trying out to see if it does the job.

Thank you again for this
Ivan

[Ingot54]

Being Friday and USD Employment numbers coming out tonight, it is unlikely we will be opening new trades today, unless trading the 4H TF.

AUDJPY: It did look like this pair would be kind to us when it was opened. Right now it is in a retracement-and-basing pattern, meaning it has pulled back below our entry, and is now in loss by 14 pips. However, a glance at the 4H shows a small pin bar, and the current 4H has gone nowhere since opening . The last 4H candle has now formed a doji, meaning no-one seems interested in driving this pair higher or lower right now.

The new 4H candle has just opened, so will watch with interest, to see how it bodes for our Daily trade. It is just possible - I mean about 60% likely in my view - that this pair may strike a base here and decide to rally once more. This would be in keeping with a choppy market, but this kind of conjecture requires a crystal ball, and we are not into predicting here.

AUDUSD: This is another pair which we left alone as the MA’s crossed. It is a pair from which about 50 pips might have been made had we entered, and possibly even more on the 4H TF. Since the 4H is currently flat-lining, we will move on. I do not see a trade here this side of Tuesday, unless you are keen on following action on the 4H.

EURCHF has crossed and confirmed a short trade. Monday and Tuesday should be interesting for the pair. ADX is baffling since it still registers as 57, with a strong rally bias, while the 4H ADX is at 41, with a strong retrace bias. The 4H is putting in long lower candle body wicks, which is not too inspiring for a short trade. This is one of those look-and-learn moments.

EURGBP: We are currently long this pair and as I write, about 37 pips in the red.
All appearances are flat right now. ADX is sideways-to-down. With no clear direction, we will allow the trade to ride for now, as MACD while under the mid-line, is still rising. HA candles are very small, signalling indecision in the market as well. The 4H chart is choppy - one-up-one-down, so no guidance from that quarter.

EURJPY: This pair was sold down during the London/New York sessions last night, and today during the current Sydney/Tokyo market, it has produced a base range of 11 pips over the past 8 hrs. It is now 54 pips to the red on our account. Since it seems to be forming some sort of base, we will just wait for now. To remain with it risks further drawdown (DD) but to close locks in that loss. Usual dilemma.

EURUSD: This is another pair which changed direction the day after we entered short. It is currently 48 pips in the red, and quite flat - noticeably on the 4H. Eill sta with it since indications are that it is unstable where it is, and ADX has run out of steam in the lower TF… MACD and Stoch_RSI indicate a retracement on 4H and flat on Daily. Hold.

GBPJPY: This is one of my favourite pairs to trade, but is subject to volatility and is not an easy one to manage. Every indicator except ADX is pointing to a sell, as is price. We still require one more day to confirm a short trade. Traders following the 4H should be already making some pips. ADX is concerning though, as it is indicating “hesitatingly sideways.”

GBPUSD: We are short and in the red to the tune of 110 pips. Daily candle indicators are telling us this pair is in a firm rally. However on 4H chart the ADX is strongly in favour of the rally, but it is alone there, as the rest of the indicators are pointing at the ground! A short on the 4H is not yet confirmed, and won’t be for 4 more hours (on my broker’s charts). We will hold on, since a possible downturn would be in our favour.

NZDUSD: Positive for a rally, but bumping up against resistance today. Since that is the case, and it is Friday, we will stand aside form this pair. 4H is flattening for the past 16 hours as well.

USDCAD: We have had a confirmed entry long here a day or two ago, but the ADX was too weak to support an entry. No advance on the impulse candle that caused the MA crossing, and today the range is just 10 pips - flat. No possibility of a trade on the 4H right now - chop.

USDCHF: The 5-day range is between 100 and 150 pips. Currently sitting close to recent support, and the 4H is flattening. ADX is strengthening, while still a little soft at 27. There is a chance this pair could continue to go south and break through support. As with all USD pairs today, much will depend on the news in about 11.5 hrs time. Nothing for us today - We’ll follow its progress next week.

USDJPY: I like the look of this pair right now. Seems poised to fall 100 pips or more. 4H ADX is down at 31.6. Daily is sideways. This is yet one more pair that is consolidating and flat, and could also be strongly affected by USD news results tonight. As much as I would like to short this now, I will stick to the rules and wait until the ADX is confirming the trend.

That is the summary as I see it.
I would be interested in the thoughts of others regarding this, as I am always keen to learn how others see the charts.

[Ingot54]

Will be examining the role of the ADX indicator I am using - the ToR 1.02.

It seems to be keeping us out of more trades right now than it allows us to enter.
Further, while I am using the ToR 1.02 on both my demo and live charts, there is quite a difference between the readings on both, and I put that down to the 1H time difference between the different brokers.

One would think that on the 1H both would be in complete agreement, despite there being a consistent pip difference of 1 to 2 pips .But no - even then there is a small difference in ADX readings. Settings in both are identical.

So I am constantly reviewing the benefits of the ToR 1.02.
“ToR” stands for “Trend or Reverse” and generally does a great job.
It could be just the choppy markets that is the issue, and this indicator is attempting to keep us out of trouble.

We will watch.

[aalcaraz]

Ingot54: thanks for sharing all your hard work, it shows you really enjoy trading and that is a very good motivation for the all of us. I notice that “pips” is one of your key measurements, and it would be very interesting if you could relate it to the ATR of the different pairs, since volatility is very different depending on the currencies. By using the “pips” by themselves you run the risk of loosing track of the “money” in the sense that you may target very aggressive or conservative SL/TP, that instead should be related to the ATR’s. Money Management is key, I also trade the D1 timeframes, and the way I decide which lot size I’m going to use is depending on the risk I want to take related to the ATR, which in a sense would be what we can expect from the market.
Thanks again for sharing and hope everybody is having an excellent week end…

[Qed]

Hello Ingot54, wondered where you went from IC … I dont know if you solved the problemm of overlaying HA candles on same chart . All you have to do is load HA the alter the colors in the indicator control pane . You have to alter colors in both “imputs” and “colors”

[Qed]

woops Apologies Ingot54 . misunderstood . thought you wanted HA overlayed …cheers Q

[Ingot54]

I notice that “pips” is one of your key measurements, and it would be very interesting if you could relate it to the ATR of the different pairs, since volatility is very different depending on the currencies. By using the “pips” by themselves you run the risk of loosing track of the “money” in the sense that you may target very aggressive or conservative SL/TP, that instead should be related to the ATR’s.

Appreciate input Aalcaraz

I mentioned earlier in the thread that money management and position sizing would not be discussed (by me) in the thread, as most traders can find these things elsewhere.
Thus the reason I am only concerned with progress in pips.

Having said that, I take your point on board, and affirm that you are correct - the ATR does indeed have a valid place in anyone’s weaponry, if they choose to avail themselves of its virtues. You have also rightly pointed out the vastly different volatility between pairs eg GBPJPY and USDCHF.

Pips values also vary.

I’d be pleased for you to continue any sort of input - money management and position sizing included if you wish to do so. Such things go hand in hand with good trading strategy, and are welcome here.

Thanks again
Ivan

[Ingot54]

@Qed

Hello Ingot54, wondered where you went from IC … I dont know if you solved the problemm of overlaying HA candles on same chart .

Good to see you here, QED - long time no see.
I moved on from IC because there was no charting at the time that covered Forex pairs.
Am also dabbling in Crypto - specifically ADA (Cardano).
Have steadily built up a decent holding and continue to accumulate on dips.

My Forex fortunes are usually in a state of flux.
Recently made 800 pips (live trading) but failed to recognise the beginning of whipsaw/consolidation activity, which wiped out a goodly portion of those gains before I decided to liquidate.

One would have thought that with all of the exposure I have had to this market over the past 15 years I’d have seen it coming, but such are the vagaries of price movement, I was asleep at the wheel, or drunk on my own successes.

Regardless, I stood aside from live trading and began to examine the higher TF (again for the umpteenth time ) in this journal as a means of exploring other strategies.

As you can see we have run into whipsaw activity once again.
A quick look at my fav pair the GBPJPY shows that the ATR has fallen off the waterfall, and sits at an extreme low of just 26 pips on 4H and 90 pips for the Daily.

On 24th October the Daily ATR was 204 pips. There were a couple of 400 pip days leading up to that average. Essentially the market has been sideways since 17th October, and this needs to be recognised earlier rather than later, or traders will find themselves donating pips to the brokers.

Feel free to share anything you please here - nice to see you also retain an interest in this “game.”

[Ingot54]

Not much reason to post last few days as the markets are keeping intentions to themselves.

Pips-wise, we have gone from a loss of 270 (maybe more while I slept) to a basket total right now of 30 pips loss.

GBPUSD continues to drag us down.
However it looks to have peaked and the tide is receding in our favour.
For traders who like Reversion-to-the-Mean type of trading, there may be something to gain by holding for any sort of correction to earlier averages.
That kind of trading has similar risks to position trading or contrarian trading, since all involve holding on for the ride.
Traders who have previously been strong on scalping may find it difficult to stay the journey here, but it is an acquired taste, so to speak, and demo trading will help build your confidence. Just work out what you believe will happen, according to your rules, and allow your trade(s) to mature. Don’t “own” the activity - and you will learn some lessons that will build the confidence you will need for this kind of trading.

Once you know what you know, the markets will have a harder time separating you from your money.

Now - a quick run-down:
AUDJPY: Our best performer - still powering on and as I write, bumping against recent high. Hold for the profits.
AUDUSD: Whipsaw prevented our entry before impulse candle on 30th October took choice away from us. Currently moved 17 pips in 5 trading days! 'Nuff said. Leave it alone for now. No.
EURCHF: ADX says 'strong trend" at 47 but I do not believe that. Sideways for 4 days in 12 pip range, if you disregard the news spikes. No.
EURGBP: Has traded in a range of approx 85 pips for 15 trading days. No.
EURJPY: Showing promise. Currently 20 pips from top of 16-day range. Would need to break out. No.
EURUSD: Has decided to join our way of thinking - short. If it does, there is a solid support floor about 60 pips south. We’ll hold our line on this and see if it will continue to fall. Hold.
GBPJPY: As discussed - locked in a range. Later.
GBPUSD: As for EURUSD above - good support 90 pips south, but if that fails, then there is a chance for around 370 pips if there is a move. Price is moving in our favour - Hold.
NZDUSD: Price is too fickle to be able to catch this pair. No tradeable trend on daily. Stoch_RSI heading south. ADX at a weak 19. No.
USDCAD: Sideways for 5 days, but indicators remain loyal to a rally scenario. I won’t buy that, given the general mood of the entire currency markets right now. A likely rally - but no confidence. Wait.
USDCHF: Has been in a 150-pip sideways range from 6th September. Currently on an up-leg in that channel, with MA’s touching in anticipation of crossing. Stoch_RSI, Macd, HA candles all in agreement of that happening. Does not fit our entry rules for Daily, but if MA’s cross on daily, there may be a case for an entry on 4H TF. Wait.
USDJPY: If the current candle closes green in 12 hrs time, we will have LONG signal with this one. However serious resistance lurks just 20 pips north, and price is already in that zone. Indicators are “go” for this, but other factors mitigate against touching this at the moment. No.

That’s it for now.

Don’t lose patience (or hope) with this method.
Play at the 4H level if you need action.

In the meantime, feel free to share your thoughts. Been awhile since any winning setups have presented and it’s easy to understand why traders need strategies for both trending and ranging markets.
Hold the line

[Qed]

Ingot, I only started becoming profitable after checking out
Trading is as simple as 1-2-3 @ Forex Factory and
https://www.forexfactory.com/showthread.php?t=588764
Ive cut down to basically 3 instruments and will ditch GU and GJ when I get out of d/d.
Ive learnt to aim for 1% per day and never be greedy .
Delete these links if you dont want them cluttering YOUR thread cheers Q

ps forgot to mark 1 trade for+5 already banked this am

[Ingot54]

No problems QED - while I want to persist with the intent of the thread, I don’t mind the odd interjection where it is intended for people’s good. btw - it’s only greed when you lose. When you win, it’s wisdom

My own live style of trading follows what we are doing here, but once the Daily or 4H shows me the trend, then I am in and out at other levels (scalps) at times.

Here, I am trying to show that it is possible to get into long trends for decent profits.
With patience we will achieve that, but I haven’t seen such a flat market for quite awhile.

Having said that, there is some movement starting in the EURUSD that has potential to introduce the volatility/trending I am hoping to see, so … we might yet get this strategy to fly.

Now regarding current trades - have just closed EURGBP for a loss of 69 pips.
It is clearly now moving down on all indicators.
Have opened a sell trade since the conditions are satisfied.

EURJPY - if this pair closes tomorrow morning (always Australian Eastern Daylight Saving Time or AEDST) with a red candle, I will do the same. The 4H is already moving down.

NZDUSD - Have opened a sell position since the last big red candle confirmed a short. All indicators except ADX confirm, and at the risk of tweaking on the run (which this is) I have decided to ignore the ADX for the moment, since it has been less than helpful in this flat market. It has a place - just not here and just not now.

USDCHF - Have opened a buy on this pair since it has also satisfied the conditions for entry.

USDJPY - Have opened a buy on this pair as well for the same reasons.

Update on pip count: With the closure/reopen of EURGBP for a loss of 69 pips:
Running loss closed positions:221 pips.

Current profit open positions: +20 pips

Open trades:
AUDJPY - long
EURGBP - short
EURJPY - long
EURUSD - short
GBPUSD - short
NZDUSD - short
USDCHF - long

There is diversion between GBPJPY and GBPUSD at the moment - these usually move in unison.
Same with EURUSD and EURJPY…
These have the potential to neutralise each other in our pip count so will be watching and may close any of the quickly should both turn in the same direction against our interests.

It’s just a rule of trading not to take negative and positive positions in pairs that usually move in lockstep.

[mihk]

I coded the ADX this past week. @Shaungliddon asked how it performs, so I wrote the “Directional Movement System” of J.W.Wilder which is a stop and reverse system. Tested in EURUSD 2019 Jan->Aug with PnL=+485
TradeResult.txt (812 Bytes)

The takeaway is that for J.W.Wilder, ADX was the base for a full blown trading system. I didn’t know any of these, which means I’m still a newbie.

[Shaungliddon]

That’s a great thing to think about that I haven’t really before.

Do you have a list of what pairs normally act the same as each other?

[Ingot54]

Hi Shaun

No - I don’t have a list of such pairs, but they ARE available with a bit of digging.
What you would be looking for is pairs that are positively correlated and pairs that are negatively correlated.

The make sure that you don’t trade two positively correlated pairs in the same direction.
To do so would be similar to taking a double position on just one of them.
You end up taking a larger position size than you may have intended.

And trading two pairs in the same direction that are negatively correlated would be similar to going long and short at the same time on just one of the pairs - you end up with a zero pips outcome.

An example would be the EURUSD and EURCHF. These are usually positively correlated:

The AUDJPY and USDCAD is an example of a pair that is negatively correlated.

Without actually posting the link here, you could Google “Positively and Negatively correlated currency pairs” and get a good understanding of this issue.