Hello All,
I came up with a very simple system that you can back check in seconds. Opinions/comments are welcomed
on a 4H chart insert a 21 Exponential moving average. Enter long at the close of a 4H candle if it’s above the moving average and short if it’s below.
still experimenting with Stop loss/take profit settings. Any suggestions.system21.pdf (50.7 KB)
What are your results in backtesting? That will help us give you better feedback.
Hugh,
I did very little backtesting…but without TP or SL parameters can’t really tell you, that’s what i was hoping gain here some insight from people as to how to setup SL and TP points. Any suggestions?
I like this, but on your pic, why didn’t you enter long just to the right of the dotted line on around 26-Aug?
For SL and TP, I usually start with the previous H/L and go from there. One thing I am testing now is using the H/L for the SL, but the TP is a 1:1 reward/risk ratio. This method has improved a trade that was 50/50 win/loss to about 60/40 win/loss and a smoother profit graph.
Simple system indeed. I suggest you add a check of a higher timeframe to your EMA cross. If the cross is going in the same way as the cross in a higher timeframe, it increases your chances of winning. It will go along well with Hugh’s money management suggestion because win/loss ratio will increase.
Kudu70 yeah i missed that candle…but it would have been a loss. I think a good SL would be the open price of an up/down candle (when entering the trade at the close of the candle) that would make it a small SL in most cases. if the trade goes in the winning direction after a candle or two you can always move SL to breakeven or 10 pips profit.
Hugh…thanks for the S/L idea…as far as take profit I think it’s best to let the trade run…like the last entry point in the graph…it was an awesome run…maybe the take profit would be if it cross the 21 in the other direction or at a strong reversal candle like a Hammer followed by a strong up candle.
chamane…will have to play with that higher time frame idea…but it might eliminate quite a few trades…it might be too late to enter by the time it shows up on the higher time frames. will test and report back. I guess this method could also work on the daily chart…that would be awesome since it would be a lot easier to check once a day vs. every 4 hours.
It will eliminate some trades all right. But there are many other currency pairs out there you can try. I prefer using a higher winning rate system with less entries than more entries with less chances of success.
Dear pippuller,
plz look at my chart, here i marked some entry with white up and down arrows, according to your rules i marked them as entry for long / short but according to my view those all are false / bad for trade, and we don’t know what comming next, so after forming the entry candle whenever i entered they all gone in vain. I mean, just after entry the next full 4H candle or the complete trade gone against our expected direction, at those cases we all need some SL / money management info or any tips and process which may stop our loss and keep us in profit any way.
So Dear can u help me how to filter those bad entries as per your system?
chamane…here is a perfect example of the daily eliminating a good trade…check out the aud/usd if you waited for the daily to cross the 21EMA vs. the 4h…you would have missed out on almost 400 pips. I think the 4h is perfect for this system if you can monitor it every 4 hours with tight SL.
cda08 the system is by no mean perfect…perhaps one of the rules should be to wait for a secondary bar to close above the EMA that would have eliminated all the losses you mentioned by the white arrows. Do you have a better filter?
…perhaps a RSI set at 21 would have eliminated the false entry as well. what do you think?
pippuller,
Here is what I mean by increasing your chances of winning. On tha same AUDUSD 4hr chart, I plotted large vertical lines showing the 21EMA crosses on the higher timeframe, the daily chart.
From the time price crossed down the 21EMA on the daily chart, every trade short on the 4hr chart came out winners whereas all long trades were losers if you set stop loss level at last swing high/low and take profit level at the same number of pips.
The last cross long on the 4hr chart would have been a winner, but it also shows that a cross long is occuring on the daily chart, it could be a change of trend.
To
Dear chamane,
it sounds good my brother, so the rule may be :
According to my Point of View : the 1st down arrow = 1st SHORT signal, and the stoploss was noted as first side arrow 50 pips away from entry, Result ? withing 2 candles it reached 96 pips in profit
2nd Signal = SL 71 pips and withing 1 candle it gave 80 pips of Profit
3rd Signal = SL 53 Pips and withing 1 candle it gave 96 pips of Profit
4th Signal = SL 74 pips and after moving opposite upto 50 pips it turned to profit at candle 3 and gave 50 pips of profit
5th Signal = SL 53 pips and after 2 candle it gave 60 pips of profit
Except case of 4th signal all signals are too strong and never turned opposite until it gave us some good pips.
In some cases the Price moved in our favour and if we stayed on the trade then we will sure grab some more pips but i personally exit when i think it’s enough. And all the exit described here are 100% my inner view - u may change Exit rules according to ur need.
cda08,
I think your idea is interesting. I personally prefer to rely on last swing high/low to fix the stop loss because it is direct price action instead of an artificial moving average as a support/resistance. But it’s me.
The system should be tested in order to set more precisely parameters such as SL and TP levels. I think a good w/l ratio should be 1:1,5 or 1:2. Trailing stops can be tested as well to catch big moves.
Also, I like the idea of using other signs like harmonic patterns or divergence to increase the odds of a winning trade. I am showing 2 hidden divergence occurrences in the pic.
Of course it will lower even more the number of trades, but there are enough pairs out there to give enough opportunities during the week. Some have higher spread, but on a 4hr chart, it is less significant. And let us not complicate things. The simple cross of 21 EMA on two different timeframes with a good money management should be enough to give interesting results. Divergence with MACD is just a crosscheck tool.
chamane…i’m even experimenting with the lower time …like 15M or even 5M for a quick scalp…works good with RSI of 21.
let me know if you want me to attach a chart to see what i’m talking about.
definitely, please share that.
and plz also include a link so that i can see in original mode of ur pic, (attachment pic aren’t quite good for view)
Thanks
Great simple system. Let me explain how I use this:
ENTRY: I run a 21ema and a 50ema and a 100ema. I look for price to close on the other side of the 21ema as suggested, but if the 50ema AND the 100ema is not pointing in the direction of the trade, I ignore the trade and wait. I also look at 3 x double TFs (so if working on H1 chart I then look at H2 and then H4 and then H8 for the same directions). If all 3 point in the right direction then I wait for the price to cross the 50ema and then 1 more candle which is usually a reverse candle. Entering on this 2nd candle gets you a better entry position. If the 100 or 50ema is flat then I either regard it as the previous direction or a no trade. I enter 2 positions with SLs at the 50 or 100ema line as long as there is a SL of at least 50. 1st position is set to a Target of 50 and the 2nd is set to 100 but I watch this one and move it as it goes by lots of 50, and move the SL along with it staying 30 behind all the way.
EXIT: When the price closes on the opposite side of the 50ema, I close all positions ASAP and then I set a re-enter order at the 21ema line or at the top of the candle that 1st penetrated the 21ema should the 21 and 50 be close together. This ensures if this is a reversal, I can get back in safely and continue the ride.
Sorry if this is way off OP but this whole thing came about from this thread.
Last night I placed on 2 currencies with 2 positions each as mentioned. Quickly took the 1st 50p on each and then left the remaining 2 with a target of 100 and a SL of 0 and when to bed. When I woke this morning both had closed with +100p each and when I checked the charts both went to well over +200 had I left them. Not bad.
Hope some of it helps.
