Looking for help with this system. In testing, opinions, better stop loss and take profit ideas to lock in profits.
Rules
100ema, 50 EMA
Can only trade when a candle closes above both of these EMA’s.
Also the RSI with a setting of 5 (close) must be above 50 for a buy and below for a sell.
Once you get a closed candle above the 50ema and rsi is above 50 place a buy stop 2 pips above the candles close.
If the next candle does not open then the buy stop is cancelled and wait for another candle, I’m not sure wether the rsi must go back below and above again at the moment if it’s above 50 you can buy the next candle.
I also used a stop loss and take profit of a 5 ema so once price falls on or below the 5ema cancel the trade (candle must finish) so this should cancel all losing trades quickly and keep the winners a bit longer.
I’ve back tested this on pairs and this seems to be successful! I tried last week on a demo and it didn’t seem to go as well but need to be patient especially as this was on the daily and might not get a good winning run for a month so it’s hard to test. although I believe more profit can be made as last week I opened trades which all went into profit then moved below a few days later and then closed at the 5ema so maybe to move up to break even or have a specific pip target in mind may be useful??
Have only tried this on daily but don’t see why it won’t work on other timeframes.
Also this will work much better with a strong trend so maybe an indicator that determines this will help? Also maybe set rules for what candles I take? Just ideas…m
Would really appreciate some feedback, help, advice, thoughts?
I did also think I could use the relative vigor index for entries and sits as this seems to match up very well with a 5 setting. Would love opinions on this?
You mentioned in your first post that the MAs are:
But your charts seem to suggest you have dropped the 100EMA and replaced it with a 10EMA? Or was that a typo in the first post? (The 10EMA is not in the first chart?)
I would like to first ask you how close are you hoping to keep to your original strategy? Is this something you have evolved yourself or are you starting with an existing strategy and looking to develop it?
How did you arrive at this choice of MAs? As you know, moving averages can be very useful but they can also be very deceptive. It is very easy to adjust them to fit the particular segment of price we are focusing on, basically curve-fitting, only to find that on another segment where price is ranging, they only whipsaw.
I cannot comment on the Vigor index as I have never used it, but, in general, be wary of applying too many indicators, especially if they are meant to show the same thing (e,g, momentum). We have to accept that any set of indicators will not work all the time and we cannot plug the holes by just adding more.
I think it is very important to be able to step back and assess what is going on and observe the big picture and even the current issues that are affecting a particular pair (e.g. Brexit and GBP pairs), This way it is possible to look at the indicators in a number of ways. Again, for example, the angle of your longer term MAs will give an indication of trend direction and strength or whether the pair is entering a consolidation period of ranging prices.
Yes i am mainly using the 50 ema the 10ema was just me looking at it at the time, it isnt meant to be there!
This is something that has evolved for me, but Im more than willing to change things ofcourse if it is for the better.
I have been getting good results today backtesting this on the daily with gbp/usd
Please see the rules i have been using below :-
STRATEGY
Is it above or below 50ema
Is it a decent enough candle use judgement with price action.
Is it above or below rsi (5)?
Is it crossing or in a good position within the relative vigor index (5)? (this has really helped me not have as many losers)
If crossing from a while below to over 50 ema wait for a further signal to confirm!
If happy with all place a trade with a 150 pip stop loss.
Once candles close if in profit move stop loss to BREAKEVEN
Then move up 50 pips each time, you can give trade to breath a little use discretion BUT REMEMBER A win is a WIN if been below move to BE asap and take profit when you can. 50 pips a day is alot!
Now follow trade and close once IT HITS MOVED STOP LOSS OR the relative vigor index crosses.
Be patient its on daily so will take time for good trades!
If you are finding good results from backtesting then don’t be in any rush to change anything. Give it a good chance to prove itself first, or at least to highlight any specific integral weaknesses over time - as you say, daily charts demand patience!
I just wonder how you are doing your backtesting. It can be difficult with this kind of method.
One possibility might be to use the simulator in the FXCM Marketscope platform, which is an excellent and versatile platform anyway, except it does not feature the Vigor to my knowledge. You can do this with a demo account.
It is useful because you can pick a certain start and end date going back even years. You can set your starting balance and instrument and it also provides a record of your trades.
Once open it you can fast forward the data feed and trade it as it comes. It is real historic data.
You can set up the platform as you wish with all your normal indicators and lines etc.
That is a decent stop for daily charts, it gives room to “breathe”. It would risk an accidental stop out if it were any less than that.
That can be a problem on a forum where there is a strong pressure to post regularly!
And this is a message that many should take to heart. Often no trade is the best trade. Especially on daily charts there is not a trade every day and there is a tendency to “invent” one just to satisfy the urge to trade!
I backtested using tradingview.com moving 1 candle at a time trying to act exactly how I feel i should regarding my rules etc, so of course this can change in real life but its the best way I have found at the moment.
Regarding your method on the FXCM marketscope? is this a computer that checks this for you like a simulation? or can I do this myself as if its a real live chart just backdated? as I would prefer this, as some of my rules etc are judgement on price etc.
It would be a shame if it doesnt have vigor though as I have found this very helpful. its weeded out alot of trades I was entering previously with this strategy.
The one thing I did find hard was creating a strategy and then trying to do this live on the daily as it takes so much time, but I will be patient now as I have learnt this, the good desnt happen over night.
As for the 150 stop loss that was what i was using for GBP/USD in my testing, but having looked at other pairs it might be too much I believe so i did think oof using ATR im just not sure wether to use 1 x ATR 1.5 x ATR or 2x ATR
It is a live chart and you can fast (or slow) forward it as you wish and you can pause it whenever. You open and close trades as you would normally. I use it a lot just for practicing and trading over different scenarios like December or the summer months. And it is often surprising how differently a method functions in different time periods such as back in 2014-15.
Another issue comes to mind. You are basically looking for strong trending markets - how are you selecting your pairs? Have you considered matching your method with Dennis’ SW analysis of the majors to identify high probability pairs?
Personally, I use an initial default value for both TP and SL and then fine tune it according to the identified S/R points. Mathematical numbers for stops don’t really mean much as they stand. They should reflect (a) where the price, if reached, would nullify your reason for having entered the trade, i.e. you no longer have a reason to be in it, and (b) in conjunction with position size meets your criteria for risk exposure.
At least that is my own view. But there are many approaches to these issues!
Ok I will have to check that out, ive tried to find anything that I can backtest on that is as real life as possible but its very hard to find!unless you probably pay stupid money.
As for the markets I am looking for I havent looked into this as of yet but I tottally agree a strong trending market is best for this strategy, I really need to find either a indicator, some kind of tool, website or something that tells me strong trending markets… what are the best ways to diagnose these?
To be honest I have no idea what Dennis SW analysis is? Do you think it will be beneficial for me ?
I agree ive always thought i would use default stop loss but different pairs move more pips than others so it doesnt seem right to have the same set on these different pairs.
I could easily do it n the highs or lows near etc and adapt accordingly I am thinking, as you say I will know its moving the other way than i predicted then.
If you are interested in using the FXCM simulator then I have managed to find the RVI indicator that you can download to the platform. It is not a standard indicator there.
As an example, I have reconstructed your example in your above post from Nov-Dec 2016. It seems usable to me. You can run the simulator on fastforward and you can pause manually at any time at the end of each day, for example, for analysis. It also records your trades and updates your simulator account balance as you go.
If you decide to try this simulator out then let me know if you have any questions with it.
(Naturally, FXCM would be hoping that users might actually upgrade to a live account one day! )
Well, I will leave you here with your testing for now!
You are using a good TF with a good selection of indicators (although RSI may prove redundant) and good selection of TP and SL together with sound risk/profits management. It all looks very solid - Well done and good luck!
Hi, ok that all looks great, I had a look at FXCM and it looks a little confusing, what part do I need to use? can I just sign up for a demo account? Do I need to download any software for the simulation? I cant even see where that part is.
I will look again now but it was kind of hard to get about on there so i gave up.
All you need do is open a normal demo account and download the Marketscope platform.
The simulator is not a separate product it is just a different function within the demo account features. I.e. you either login to your own account or into the simulator option.
Some great points arising from discussion of a good system.
Alright, you might say its a boring and conventional system - 2MA’s for trend set-up, a momentum indicator as an entry filter, a fast MA for exits, blah, blah, blah. You might say, nothing new here. Yes, that is the point. Why are there so damn many small variants of conventional trading strategies like this? Because they work.
One small point I have to add, and that is to consider basket exits. Normally, every trade stands on its own TA - you keep it running as long as its still trending and hasn’t triggered any of its own exit rules.But I have found there are two situations where it pays to over-ride the conventional approach. One is where you have one or two long positions in currency X but you note that all the other X-based charts have turned bearish - might be a good idea to close your X positions no matter how strong their individual charts.
The other is where the market suddenly and significantly moves in your direction. A whole set of your open positions suddenly accelerate and double your unrealised gains in just a few hours. Typically you won’t have seen this coming using TA on the individual charts. I regard this as a market aberration (Al Brooks calls it a “gift”) and close all the winners without delay.
It is not a trading strategy. It is just an analysis of the major pairs to identify which pair(s) is/are currently trending most actively. It is up to the individual trader how they want to trade that pair.
A trend trader, such as yourself, can then apply their own strategies to these selected pairs. It is just an effective way of actioning one’s own strategy with a pair with the greatest probability of further movement in the trend direction.
Dennis has been posting his daily numbers for over six years now - and he wouldn’t still be doing that if it didn’t work for him!
Yeah i completely agree, the more simple some can be the better aslong as you evolve and understand the strategy. The times I have tested this ive found it much better to keep moving the stop loss, i did this in 50 pip movements, but any way someone wants to is fine, I think people forget myself included in my learning aswell is that a wins a win and you dont always have to get the most out of the trade as possible, if you wait it normally turns against you.
Is a good idea so you could maybe open 2 trades for the same trade especially if all the other pairs are moving in the right direction?
I often have more than one trade open in the same base currency, but usually these will all be in the same direction as each other and as the majority of their more important charts in the top 28 pair charts. So I have at times maybe 3 or 4 or 5 AUD-based trades open but these would all be either long or short, not a mixture. Occasionally, you can take a position based on a currency in the opposite direction but that would usually be against its partner currency, a currency it works very closely with: in AUD’s case this would be NZD, so its acceptable to have open e.g. 3 AUD longs but also be short AUD/NZD.
BUT - more trades = more risk so it can be a good technique to open the parallel trades over a period of time so that maybe the first one is breaking even before the second one is triggered, etc.
A little mistake I think I’ve made with this trade is, all things looked set up for my but entry but when you look at the weekly chart it’s right on the 50ema against my rules etc
So maybe the weekly needs to match my entries on the daily before I make a trade?
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