I am almost ready for attempt number two of London’s Small Account Challenge.
However, for this second attempt, I am going to be turning things up a notch by trading live on YouTube!
In anticipation of these live trading sessions, I have created a new indicator on TradingView that I plan to use for the challenge.
It’s called Engulfing Signals.
I have made the indicator free and open source so that others can freely use it or even join in on my challenge this time around!
My indicator incorporates price action, in the form of engulfing candles, moving averages and a momentum oscillator. You can also plot either a Simple Moving Average or an Exponential Moving Average over varying periods in order to determine if price is respecting a certain level or to develop more accurately-timed alert signals.
Engulfing candles can be a good indication of a change in sentiment and momentum but they happen far too often to be of any practical use by themselves.
In order to filter out some of the weaker engulfing candles, I have incorporated RSI into the script. The indicator will provide a BUY signal only when an engulfing candle prints and there is a reading of above 50 on the RSI, which is considered to reflect overall bullish sentiment. The signal is printed directly on the chart as a small green triangle just under the engulfing candle.
In contrast, the indicator will provide a SELL signal only when an engulfing candle prints and there is a reading of below 50 on the RSI, which is considered to reflect overall bearish sentiment. The signal is printed directly on the chart as a small red triangle just above the engulfing candle.
In order to maintain a clean chart and maximise the opportunity to couple this indicator up with other indicators that may increase the accuracy of the signals even further, the RSI will not be shown on the chart. However, to verify the accuracy of the signals please feel free to load the RSI indicator onto your chart and you will see that the signals only print according to the conditions described above.
In order to further filter out weaker signals I have made a rule that a buy signal should only print if it is above the 200 EMA and a sell signal only if the engulfing candle is below the 200 EMA. I use the 200 EMA because it is a commonly accepted indication of the general trend and to make the signals as accurate as possible we want to be trading with the longer trend, not against it.
The indicator will not print signals for engulfing candles outside of these parameters.
Just to give you some idea of the power of this indicator, here’s a signal from USD/JPY from this morning:
Like most indicators, Engulfing Signals probably works better in conjunction with other indicators that can then act as additional confirmation of the triggered signals. For the challenge I’m going to be using one or two additional indicators as well as paying attention to certain key levels in the market.
If you’re on TradingView, you can check my indicator out here.
It’s free, open source and very easy to use. Try it out!
Let me know what you all think!