Some Statistics on the Charts

@tommor - Hmm, I am going to have to add that strategy to my list. So it is two consecutive bars with a body greater than 50% of the bar moving counter to the trend? Then you open a trade in the direction of the trend? Where do you put your stop loss?

As an example, let’s take an uptrend. On the D1 time-frame price recently has been printing daily candles each with a higher high and higher low than the one before. Look for 2 consecutive daily candles with a lower high and a lower low: set the entry by order just above the high of the second candle.

There are two obvious places to set the stop-loss - just below the low of the same candle, or based on volatility, say 1 or 2 x ATR14 below the entry.

If you want more confirmation, look for 3 consecutive weaker candles. And you can build in a rule to require lower closes. And you can allow a percentage or ATR-based margin added onto the high of your final candle so that your entry is not an immediate breach pf the high. Or you could enter only on a close above the final high etc. etc. Either way, the principle is that your entry order is only triggered when price moves from a recent lower value upwards in the direction of the uptrend, suggesting its resumption.

The trickiest question is as ever when to exit and bank the profits.


NNFX advises to start off using 1.5xATR(14). The rest of what you both agree with is also included in his analysis, but he says pick two indicators, and try to optimise them for back and forward testing, but do not try to overoptimize. This, of course, is a trend following plan, and will not work in a ranging or consolidating market. The sixth part of his six part plan is to choose an indicator as an exit indicator, either one of the two used for entry, or a different one.
He says he has tested over 2,000 indicators, 1,900 of which were worthless

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I’m finding its quite common for periods of time my 2ATR14 trailing stops get hit, so I’m thinking of pushing them out to to 3. Either that or just use a more selective set-up. Or both.

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@Mondeoman - I prefer to use a SL/TP way to exit a trade instead of another signal. That way it happens automatically without me having to do anything so if I am not online for a few days it does not matter. I guess it is possible to have a SL/TP set up just in case but also use an exit indicator.

@tommor - Thank you for that, I will code it and see what I get. It may be a few days or so before I get to run it.

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@tommor - I did a run on a limited set of pairs and against a limited but similar set of strategies (same trend identifier but using RSI or Bollinger to enter a trade) yours came out on top for the average win percent on trades across the 36 popular pairs (combinations of AUD CAD CHF EUR GBP JPY NZD SGD USD). It was definitely in the running for best overall and made the top for the following pairs (NZD/USD, NZD/JPY and NZD/SGD). I would avoid GBP/CAD for a while if I were you :slight_smile:
I backtested on the daily timeframe using 500 candles which is just shy of 2 years worth of data.


Its very reassuring to see a system that doesn’t break under test. Thanks for doing this and posting on it.

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Have you tried to test this strategy on DOW, Nasdaq and S&P500.
These have an inherent upward bias.
Would be interesting to see how they perform for long trades only.

@tommor @igillman

I use a similar system (trends) on 5min charts, though it would seem to work on higher timeframes and certainly on lower (2min and 1min) Instead of Bollinger I use Keltner 20sma with a shift of one. I use moving averages - 8EMA (very important and the trigger line) 20SMA (on Keltner) plus 50SMA - the 100 and 200 SMAs can be added, I find these useful as dynamic support and resistance. Entry similar to tommor’s pullback system for when trend is in progress .
Now here’s the punch line - I colour the the Keltner ‘fill’ light blue, so it looks like a river. Only enter when the 8EMA and is out of the ‘river’ and proceeding north or south - never trade in the ‘river’ as this will be a range. Out of the ‘river’ signifies good momentum.
I have said this before - the system is a bit like MACD but without MACD.
I tend to only trade indices but it works on currencies.
Daily pivot points are good S and R.
Never set targets (sorry but I don’t have a crystal ball)
Exit - easy - when it comes back into the ‘river’!
In more than 12 years this is the nearest I have found to the ‘Holy Grail’ and that includes years of Fibonacci grid trading!


Sounds simple enough to be successful, simple enough to be maybe called elegant.

How is your profitability?

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Not too bad :sunglasses:
Just have a look at it on your charts - I didn’t trade today, things were a bit erratic - in the ‘river’! :rofl:

I do not have access to an API for other charts, just the Forex ones.

I have re-set a chart set-up to approximate to what you’re looking at. And this does still look good.

What sort of entry signal do you use? Is it so simple as the escape of the 8EMA from the river or something a little more price-responsive?

@tommor Entry - you can use a 8EMA/20 crossover. which, if followed by a surge in momentum taking the 8EMA out of the ‘river’ is good, though it can pop back sometimes giving a failed entry. A good signal candle (general price action).
As you suggest 8EMA coming out of the ‘river’.
Your pullback method is great, nothing wrong with that. Really try not to be too far from 8EMA as this will often result in ‘catching knives’ when it decides to pullback to the 8.
As with all trading, practice tends to lead to intuitive discretion.
You can’t go wrong sticking with your method of pullback though.
I can’t emphasise the importance of the 8EMA - this is the guiding light.
Let me know how you get on if you do have a look. All the best :+1:


Just like to confirm your Keltner setting:

“20 Period SMA with Envelopes using Average True Range and a multiplier of 1”

Is the above correct?

Yes - correct.
I see you like indices - me too.
I mainly do Nasdaq and Dax. If you look at Nasdaq on 20th Jan (two days ago) at 7.30pm GMT, there is a great example on 5min timeframe.
As I have said, I only use lower timeframes to find these little trends. Maybe if you use higher timeframes it could require an adjustment.

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@meza P.S - I know some people may find this statement crazy but sometimes when the 5min is a bit choppy (noisy) I drop down to 2 or 1min timeframe, they can iron out the noise on the 5min.


interesting read and idea suggested about the daily candle, i think any form of algo or system will have flaws and none will make millions but if you can find a way to tilt the edge in your favour then it is well worth a try

That’s interesting that the noise of a 5min chart can be ironed out by dropping down to a 2 or 1 min !

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