I have been messing around with creating longer term strategies the last few weeks. I am looking at how longer term swing trading compares to day trading (based on my limited knowledge so far).
I started creating an automated strategy in dealbook 360 last week so I could back test some different indicator setups and rules faster. I started on a EUR/USD chart and came up with something that performed reasonably well. I then applied the strategy to the 3 other majors and it performed horribly. So I tried a different set of indicators on the GBP/USD chart. Again the results on the GBP/USD pair were reasonable but the strategy performed horribly on the other three majors.
Is this normal? As much as I have read up on forex in the last month I have not come across free strategies that say "only trade this strategy on this 1 pair).
If your trading long term then you should be looking for a pair that is trending well
So eurusd or eurjpy would be a good examples.
Some currency pairs are well known to be range bound, example eurgbp, take a look at the charts on the daily and weekly timeframes you’ll see what i mean.
Just to add to that certain systems such as ema crosses will only work well in trending markets, where as in a choppy market your going to have loosing trades
Trading support and resistance in a range bound market you should do well,
Also, don’t forget no completely automated strategy will work across every pair, for all time. You’ll find ones that work for a while, and work for certain pairs. As long as you know why it works (eg pair is trending) or why it might stop working (eg excessive volatility) you’ll do grand.
Thanks for the replies. I have noticed that while I can come up with auto-strategies that work very well for a certain pair for most of the time, I am running into a few issues during times when the pair goes into a range mode instead of trending 1 way or the other.
I think that’s the problem for most traders who are trying to only trade trends…they perform poorly when the currency is ranging.
You can either use 2 strategies, one for trending and one for not, or do what i do…that is always use a trending strategy but on a long enough time frame (4h for me) so that even with the trending strategy you’ll be able to bag some pips before quickly retracing down.
I do this by manually seeing what the maximum amount of pips are for each trade given perfect circumstances, for 3 months to 1 year. After I see what the lowest amount I could have gotten was, the average amount, and the most.
This gives me good levels to put my stops and take-profits at also.
Thanks for the reply. The trending to ranging problem is something I am having problems identifying for my EA. Like you said I have developed a few EA’s in th last few days that have very favorable backtest results in trending markets, but then when the market goes into a range it eats up the profits.
I have noticed that when I code an EA with no stop losses and exits based on Camarilla lines then the problem goes away, however the downside is the floating losses that sometimes get as high as 250 pips (on GBP/USD). Obviously I don’t have a big enough bankroll that can withstand the floating loss before the market rebounds without triggering a margin call.
If you want to be successful long term with forex you need to learn a few things. You always need to protect leverage or you’ll be wiped out. Many traders make errors that are very simple and it hurts them in the long term, changing a very profitable forex business into a game a craps at the casino.
Understand Standard Deviation of the Price - Most traders don’t understand this. Standard deviation comes from the math of statistics and it’s basically the difference between data points. The reason this is important is because the data that comes in isn’t going to be linear or contain all numerical posts. That means there could be differences of 0.5 in between the data.
Swing trade must have enough capaital. You must have a/c more then $10,000 if you want to trade swing trade. This amout also not really enough because of high leverage . The best amout is 50 k to 100 k a/c for 1:100 leverage if you are good trader. if you are beginner then select 1:20 leverage. If you beginner , really want trade swing trade , open a/c with Oanda and select 20:1 leverage with the $10,000 amout. Those don’t have enough , don’t proceed with swing trade. Just proceed with day trade with 50 to 100 pips with $10 k a/c movement for save money management. This is because of high level of volatility may happen anytime without you proper knowledge on swing trade & you not concern about economics news and the money management, if you use high leverage on your a/c , you a/c will wiped out just in few second. This is what happen for those are beginner and want to proceed with the swing tarde without proper money management.
Both Forex Day Trading and Swing Trading are typically carried out using Technical Analysis. However the higher the time frame, the more accurate the technical analysis becomes. Due to this, technical analysis is more accurate in Swing Trading than in Day Trading.
You need to use Fibonacco Tool on the longer term Strategy for look at support & resistance , when to enter &exit of the trade. , macd , rsi , cci & volume indicator for better result. On the cci & macd indicator you can look for divergence for reversal trade. not so much use the automated strategy because you lost % is higher then the winning position. The best thing is to do manually.
Check back in the 11th grade of the School of Pipsology
which outlines one system. More importantly, it
states the objective in formulating your own trading
plan. These are:
Your system should be able to identify trends as early as possible.
Your system should be able to avoid you from whipsaws.
The 11th grade system is taken from the daily chart.
If you identify an early reversal on the daily chart
using your own system, or that stated in the example,
you should be able to stay in the trade even when
the pair is ranging. Early entry enables that. Make
sure that you have in place an exit strategy then you
will not need to worry about being stopped out.
Also, don’t worry about placing much money into
your account. Just use very small leverage and
minilots. Good Money management is of the utmost
importance. Work with a demo or very small mini
trades until you have mastered your system.