Interesting ideas Sivric. Here are some initial questions and thoughts:
And yet your method contains none of the OP elements! For this reason I would normally suggest moving this to another thread out of courtesy to the OP, but since this thread is dormant and Moneybaggy has not been seen since last year, I guess we can continue here?
If you are trading the 15 min TF, then this is not really a long-term trading system at all. It is a very short term method that you only have access to for a short time “window” each day because of your work. So my first question is:
) What time zone do you live in and what times are you available to trade? Depending on your working hours, does your free time coincide with the Asian, London or NY markets? This is quite important with the 15m TF due to variations in price movement activity characteristic of these various markets.
Why do you wish to use shift=2 instead of shift=1? I guess this can give a clearer signal? The idea underlying a ribbon is that the shifted line is a shadow of the main line and when the main line breaks below its own shadow then it is possibly making a significant turn - i.e. it is like an “advanced warning” of a possible change in direction, and that warning is faster than waiting for a reverse crossover of MAs with different periods. This leads to my second question:
- What currency pairs are you planning to follow? I ask because the 6 sma on a 15min TF is extremely sensitive. Since some pairs are more volatile than others then you will see many false crossovers with these. You might find with some pairs that it is better to use maybe an 8 sma or even higher?
Checking the underlying longer term trend is a very wise precaution and avoids many false breakouts. But I am not sure that the 200 ma (sma or ema?) on a 1-hour and 4-hour is the best choice with respect to trading a 15min TF. They are so slow moving compared with the 15min trades. Also, they may work fine while the long term trend is in its prime but when this trend is fading and starts reversing you might find that 15 min trades no longer have an edge in the trend direction.
As a example, here is last Friday’s EURUSD 15m chart with these 200ma’s laid over. I don’t see much benefit here?
I think there are better ways of achieving this bit. One might be to apply the same approach as used with the 3 Ducks Method, which is a long time method here on BP. It uses a 60-period sma on the 4H and 1H charts to identify the underlying trend and the trades off the 5 min. This 60-period may also be suitable for your method as you are using it for the same purpose and the crosses would be sooner?
There are three other approaches to this that we could look at but I don’t want to throw too much too soon here into the pot! Let’s see how you feel about my comments overall before proceeding further with this bit.
Personally, I think this is a good cross-check. I use it myself and it does help as a confirming signal. Some people do not like off-chart indicators like this one and I confess I do sometimes forget to look at it! As always with short TFs, this can give false signals and I find it more reliable on the 1H chart - but it is an extra aid…and just an aid!
Whether or not the previous candle body is entirely through the ribbon is a good principle but maybe can be treated with some discretion in the context of the price movement as a whole and maybe it is good enough that just the bulk of the candle and close is through the ribbon (and not necessarily the start as well)? - remember, the 15minTF is not a precise science at all!! Maybe another consideration is even more important and that is to be very wary of reversals with large candles on this TF. By definition, the profit targets are not great per trade on this TF and a large reversing candle has often already swallowed a lot of the potential and frequently rebounds on the next candle. A general rule is to enter on a 50% pull-back of the large candle. Treat these with care!
I would add to this that it should also relate to any nearby S/Rs, latest high/lows, etc. In other words, all the normal stoploss criteria but on the opposite side of the ribbon.
If you are talking about your take-profits here, then I do not think this is a good idea on a 15min TF. Crossovers on the 6MA ribbon come fast and furious and you will suffer many small losses as well as lost pips from the max potentials. This will only work on those few strong straight up/down moves. (Again look at the above chart). The original idea of ribbon trading was to look for a fixed target that related to the stoploss and the overall price movement. E.g a stoploss of 15 pips and a target of 20 pips and then to wait and re-enter on another crossover either in the same direction or reversed.
In other words, there are three exits:
- fixed target
- reverse in opposite direction before target hit
- stop out
Well, that’s a lot of waffle from the BP’s best waffler! Most people can say in three words what I take three pages to write, but I hope it helps and if you are interested then we can take this further…