Hello traders. I am in the process of developing my trend following strategy. My understanding of price action is that markets are either trending or range bound. That means that I should probably find a different strategy for range bound conditions. How many strategies do you use to cover all conditions?
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I just follow trends. If there are no consistent, smooth, stable trends, I stay in cash until one returns. Actually, not precisely until the very first trend appears, but until the forex pairs show a large number of such trends across the 28 charts.
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Makes sense. Since the pairs are correlated positively or negatively, strong trends should show up on multiple pairs.
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But beware of a strong trend on the same currency - e.g. AUS against any other, as it puts it in the same bucket. Recently JPY is the target of many others, but it does move from a buying to selling version depending on key fundamental news about the Japanese economy.
I’ve been bitten several times in the past, so I now restrict to just one trade of the same currency at any one time.
I sometimes setup more than one trade with limit orders and see which one gets filled first and then cancel the other(s).
make a strong strategy with strong money management and find some few pairs which r on trending movement if u r a trend trader. then back test your strategy and view the results. then find out the cause of loses. trust your strategy with patience. don’t migrate strategy randomly.
I am still working on developing my strategy. One of the pillars of trading is strict money management which I do. For all my trades I use position calculator and risk no more than 1% of capital. The thing with my strategy is that it is low probability but high reward to risk ratio. So I lose 4/5 trades but when I win I can make maybe 3-7 reward to risk. I think improving my win rate by even the slightest would make me get agead.
5 loss 1 win means 17% win ratio though you are in profit but this profit is very tiny after loss. this is very poor win/loss ratio. this will be affect on your psychology and psychology is very important for trading. this way people blown their account.
Yes I know my strategy needs further development to improve win rate as well as expectancy ratio. As for psychology you are right that it could affect me having too many losses but I think I am competent in dealing with a lot of losing.
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Agreed. I have done backtesting and intend on doing more of it.
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Op has a long way to go but definitely has what it takes to do this. Great though processes for this stage
Since I trade only momentum I’ve developed only one strategy and focus all my time and efforts to polish or improve it. I wouldn’t advice to spread efforts because it will likely be less efficient.
Thanks for your input. I was considering 2 strategies but only once I have mastered one as my main strategy.
Guys also please don’t forget to forward test your strategy if you want to get robust results. Excessive backtesting often leads to overfitting - the model shows goods results particularly for this dataset but fails on live data.
I absolutely would like two strategies which are independent and equally profitable - one on a short time-frame, the other long-term.
I am continually trying to do this but the only way it works for me is if I trade either one or the other, but not both simultaneously, which would be the ideal. Grrrr…
If the market is either trending or ranging you wouldn’t need to use both at the same time. Were you referring to different timeframes for the same pair?
Yes. I definitely have to trade different strategies on different time-frames - my head cannot cope with them being in the same time-frame at the same time.
A back test of some period in the past that produced profit does not in any way guarantee that live trading will be profitable.
Even the regulatory agencies have disclaimers that say that historical trading does not indicate that the future trading will be similar and produce profit.
Traders achieve profitable back test by adjusting the parameters of the indicators that are the core of their trading system.
The parameters that produced a profitable back test are not going to be the same parameters that produce profit in the present or in the future.
Money management also does not guarantee profitability. Proper money management that trades a flawed trading system will sink slowly. Good money management only slows the sinking of the ship, it does not Ensure profitability.
After a bit of thought I think I’m figuring out how I can use multiple strategies simultaneously without my head exploding.
Ways to make this work -
- its actually one strategy - follow the trend - if the 20EMA is above the 50, longs only
- use only one short time-frame trade type: I cannot spend all day scanning 28 charts every 5 minutes and expect to be cost-effective and profitable
- limit each trade type to one pair only
I’ve got 4 trade lines sketched out and what I’ll do now is see if I find I can live with these over the next couple of weeks.
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@tommor what are your opinions on this?
GBP/USD is looking like it will go back and retest the support level in the range of 1.19450 give or take 50 pips in between. what would the best entry strategy be for this pair for today or this week?