Spotting entry and exit points with heikin_ashi

[captgrumpy]

Hello Traders—Captgrumpy here-----One of the biggest problems for new traders is being able to consistantly spot entry and exit points.I’d like to share with you how I use the Heikin
,Ashi candles along with helpmates WMA 5 and WMA 12 to
help me spot entry and exit trade points.First off there are three things you should know–(1)-this a swing trading plan for charts
6 hour to 1 week-- (2)You’ll have to be prepared to do something
different from the norm (3)everything is based on the Oanda charts—If you are OK with these things–read on! If not then don’t waste your time going any further.
To start with the chart has to be set up as follows:
1–From the list of available currency pairs select 4 or 5 to your quote list–any combination of the top 7 to 8 major pairs–make
one of your choices GBP-JPY 1 day chart–bring it up on your
computer
2–Choose the Heikin-Ashi candles as the chart line–give the up
and down candles contrasting colors
3–Add the WMA 5 (W5) and the WMA 12 (W12)give them contrasting colors
4–Set chart resolution to maximum --then back off 3 clicks—on
my chart (oanda) the small + and - icon lower rt. corner control
the resoultion
5–Enlarge the chart to full screen size for to show details better
Chart now ready for action-----
Notice that when the heikin ashi candles(now solid bi-colored blocks) (HAB)the chart also reverses direction–at the beginning/end of a run --notice also that the W5 makes a small spike up or down----This I call a trade point (TP) where trades can be made(.Many times this TP.will occur BEFORE the chart actually reverses) At the beginning of a run open a trade (entry point)at the TP–now follow the W5 to the W12–if it clearly crosses the W12 keep on following the W5 and chart lines until the next TP when HAB changes color (chart reverses) where the open trade is closed (exit point)----NOW THAT THE CHART HAS REVERSED the exit point becomes an entry point for a new trade–SO a new trade is opened in the new chart direction–again follow the W5–if it clearly crosses the W12-continue following the W5/chart lines to the next TP—keep repeating this routine…
If the W5 DOES NOT clearly cross the W12 --2 choices–No1
choice–close the open trade ASAP, to limit any loss, --wait for
the next TP to open a new trade–No 2 choice–could open a new trade in the direction of the W12–follow chart lines to the next TP
to make normal trades .
The role of the W12—It clearly shows the general chart trend,but mopre important when the W12 moves away from the main chart it indicates the chart is on a definate run AND will remain on the run until the next TP closes the open trade,When
the W12 is away from the main chart, and on a steady trend, any
small W5 spikes can be ignored until the end of the run at a good TP when trades are made
STOP LOSS And TAKE PROFIT-- Normally the runs between
open and close are fairly small so I don’ set a TP–If the run is long when there is a gain of 300 pips I close the open trade and immediately -----open s new trade in the same direction—as for
a stop[ loss–because the trade is closed if the W5 does not cross the W12 a stop loss setting is not necessary–however I
do set a stop loss far enough out that my trade won’t be closed by normal market activity just in case the chart makes a big move whern i may be away from the computer (that is most of the time because the 1 day chart only has to be checked once a day).
Well that’s pretty much how this plan works–It is hard to get a plan any simpler than this–And one that will produce lots of winning trades…After checking this out over many charts I’m sure you will be able to spot all those entry and exit points==they are there almost 'for the taking!–I hope you can find something in
this plan you can use to make your trading better

Good Trading!

If t

[steveepperson]

I also have been using Heikin Ashi on my 5 minute charts on my practice account. I still trade traditional candles on my dailies for my live account. That may change eventually, though. Thanks so much for the insight.

[Clint]

Hello, grumpy

I’ve been looking at your method, and I would like for you to check whether I have understood it correctly.

I picked a recent period on the GBP/USD daily chart showing 3 clear multi-day swings (two up and one down) and a period of ranging prices, to see whether I could apply your methodology.

Since this is a daily chart, I’m assuming that you would take entries (when indicated) right after the close of a daily candle. Agree?

I have my Oanda platform set up to open and close daily candles at 17:00 New York time. You might be using a different time setting, so your chart might look different. But, the principles will be the same.

When you refer to the WMA-5 making a small spike up or down, I’m not entirely sure what you mean. So, I have marked what I think are the entry points at A, B, and C that correspond to your rules. Do you agree with the entry points I have marked on Candles A, B, and C?

Also, what would you have done in the 19-day period of ranging prices on the right half of the chart? Strictly following your entry rules would seem to indicate 3 or 4 entries in this tight range, resulting in whipsaw losses. Please explain how you handle such ranges.

This is basically a stop-and-reverse methodology, potentially keeping you in perpetually alternating LONG and SHORT positions. Agree?

Can you share any metrics, such as average number of entries per week or month, average pips gained and lost, and your average win-loss ratio?

Thanks in advance for your feedback.

If you click on my chart, it will enlarge somewhat, and be easier to read.

[captgrumpy]

Hello Clint
Thanks for your interest in my plan.I will try to clear up the points you mentioned.You are right with this plan only one currency pair is traded as it moves across the chart so most of the time there will be an open trade’on the books’.
At,or close to) to the end of a run the WMA5 makes a direction change which I called a small spike–it is really just a small peak
indicating the chart has (or just about to)reversed direction.This is what I call this a trade point (TP).with trades actually made at the opening of the first block(candle) after the TP…On the trades
on your chart you show the trades at the closing of the block.
Notice that sometimes the trade indicated by the WMA5 is before the chart actually reverses!!This usually gives much better prices.
Just a reminder that when a trade is opened the WMA5 is followed —if it clearly crosses the WMA12 keep following the WMA5 until the next TP where trades are made—IF THE WMA5
DOES NOT CLEARLY cross the WMA12 the open trade is closed and wait for the next TP to open a new trade–OR,–
when trade is closed you could open a new trade in the direction the WMA12 is going–follow to next TP to make trades.

As for the difficult 19 days following your C trade here is how I
would handle it–At trade C a buy is opened–follow WMA5 to next TP -make trades at 1st block after the TP–follow WMA5 down to the next small peak at about the 23 Oct–make
trades–follow the WMA5—but here it DOES NOT clearly cross the WMA12–so the open trade is closed–now wait for the next TP to open a new trade ,which is about the 26 Oct,open a buy-follow WMA5 as usual to the next TP and carry on with a more normal chart.These flat/choppy charts are always difficult,but as you know with practice one learns ho best to deal with them
without losing a bunch of money .I you see such a chart starting you can always close an open trade and just wait for the chart to begin normal runs again.On a choppy chart like this the trades will be small.sometimes even losing a few bucks !

This is a brand new plan and so far all I have done is some back testing and the results were so good I wanted to share it with
other traders,especially newbies and anyone having difficulty
spotting entry and exit points,even thought not properly tested yet.So as a result I can not at this time give you the stats you requested.
Just for interest sake–The results of back testing the GB-JPY
1 day charts for the period 1 Jan to 11 Nov 17
Total of 27 trades–total pips gain 4392 (Avg.about 262 per trd.)Best trade was + 618 pips, poorest trade was + 40 pips.I tried to do the trading as close to what would be done in regular trading,but you know the results would not be this good in actual
trading with real money.
I hope this has helped clear up a few points–if you still have questions please ask…I’d also appreciate any comments pro
or con
Good trading

[Clint]

I’m continuing to look into this methodology proposed by captgrumpy.

For anyone not familiar with the ability of the Heikin Ashi algorithm to (1) visually smooth the volatility in candle charts, and (2) to color-code swings in those charts – some pictures might be helpful.

Here are three DAILY charts showing USD/CAD from about July 5 until today (November 21).
Screen-shots are from the Oanda fxTrade platform.

This chart displays normal candles.

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This chart displays Heikin Ashi candles.

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And this chart displays Heikin Ashi candles with WMA(5) and WMA(12).

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I chose USD/CAD because the rather orderly swings displayed in the Heikin Ashi charts during this time period illustrate the potential for capturing multi-day price movements using captgrumpy’s methodology.

Any thoughts?

[Falstaff]

They certainly look pretty brilliant. It looks as though the real bodies of the counter trend candles are subtracted from the on-trend ones and then possibly, the bodies adjusted so that more of the wicks are included as “bodies”.

Great for keeping the mind of the trader calm and soothed, but the real candles would still show on the “Profit / loss” side of the trades.

I think I’d have to keep looking at the Real ones to see “What it is really doing” - however, used as suggested, they may undeed be a powerful tool given the right type of chart action.

indecisive action may tear the signals up though as you intimate. @Clint

[Edit - the TP’s on the 5 WMA line, often appear BEFORE the actual turn. There are a lot of “Good indicators” like this where the signal seems timely. What often happens is that the indicator is projected forward as the next candle starts and stays in one position, until the bar completes, Then the indicatore shifts suddenly to show that it had always anticipated the turn !

Not saying specifically that is what is happening here - but I’d be circumspec t about it until I got the “Feel” of it. ]

[Edit 2 - Moving Average crossovers happen this way - The cross which happens between bar 1 and bar 2, actually never formed until Bar 2 was complete, so the entry based on teh crossover cannot happen until a whole bar after it appears visually on the chart. ]

[captgrumpy]

Hello Falstaff—Thank you for all your comments and observations
I agree with the points you mentioned in your edits–that is why a
lot of practice is needed to iron these things out.This plan is brand
new and I have done very little work with it.I’ll have to do a lot more testing to see it it stands up over time before I invest any money.
With the very limited back testing I have done,because the results
looked pretty good,I posted the plan hoping other traders might
also do some testing–maybe between us we can come up with a
modified plan that really works–I guess only time will tell! Thanks
again for your interest----------captgrumpy

[captgrumpy]

Hi Steveeperson—Glad to see that someone else likes heikin-ashi candles --I have my chart at a high resolution so the "candles"
become solid blocks–I like the way the heikin-ashi candles (blocks)
smooth out some of the ‘noise’–I also do only swing trading with
the 1 day chart being my no.1 choice–the longer time frames also
take away some of the chatter–so with the use of the HA candles and the 1 day chart a lot of trading stress is taken off my mind.About the hardest thing about trading 1 day charts is
waiting for check time to roll around(check time is 2345 hours–
Sun to Thurs–at 1600 hours on Friday
I also like the idea I only have to check the chart(s) once a day
which only takes about 15 minutes or less depending on whether
any trades are to be done (that’s about 15 min.per chart).As a result most of the day is free to do anything I please…I’m just
rambling on----anyway thanks for noticing my post
Good Trading-------captgrumpy

[Clint]

I decided to simulate trading with captgrumpy’s methodology, to see how P/L might evolve. I chose USD/JPY for my simulation, and the past 6 months for the simulation period. This exercise can be thought of as a manual backtest, in which I visually identified the entry points (stop-and-reverse points, to be more precise), and measured the swings (in pips) between them.

There was no particular reason for selecting USD/JPY for this simulation. The reason for limiting the simulation to 6 months was that doing it longer would have been a pain in the butt.

Captgrumpy’s methodology is strictly rule-based, so I had to define a couple of rules, and make sure that I followed them like a robot. Defining the stop-and-reverse (SAR) points was the most important rule to be established, and it was also the easiest. See below for an explanation.

More problematic was defining whether and when to re-enter after a false signal had triggered a failed entry – and on that one I punted, simply assuming that a failed entry would trigger an exit (without reversing), after which I would wait for the next SAR signal to re-enter.

This methodology is based on three signals, two of which (as I understand it) trigger an SAR. The three signals are: (1) change in direction of the WMA-5, (2) change in color of the Heikin Ashi (H/A) candles, and (3) WMA-5 and WMA-12 cross-over. The first two signals trigger a stop-and-reverse (SAR), and the third signal confirms the new position.

If (1) the 5-period weighted moving average (WMA-5) is downward-sloping (or horizontal), and then turns upward, and (2) the H/A candles change color from red to green, then a signal has been given to close an existing SHORT position and open a new LONG position. If the WMA-5 subsequently crosses over the WMA-12, then the new LONG position is confirmed. If the cross-over does not occur, then the new LONG position is deemed to have failed, and should be exited promptly.

If (1) the WMA-5 is upward-sloping (or horizontal), and then turns downward, and (2) the H/A candles change color from green to red, then a signal has been given to close an existing LONG position and open a new SHORT position. As above, a WMA cross-over (or failure to cross over) confirms the new position (or indicates failure).

When an SAR signal occurs, it occurs at the close of a candle. In the case of daily charts, such as the USD/JPY charts I used in this simulation, we are looking for signals after the daily close each day. The daily close is defined by each broker, and is built into that broker’s platform. Some platforms allow user’s to choose their preferred end-of-day, and to adjust their charts acccordingly. But, this option is not available on all platforms.

The simulation I ran utilized so-called “advanced charts” in the forex.com platform. These are simply TradingView charts synchronized to match the end-of-day built into the forex.com platform, which happens to be 7 pm New York time. Other platforms utilize 5 pm New York time, midnight New York time, midnight London time, or some other end-of-day. I think that all of these will work satisfactorily with this methodology, although I have not tested that theory.

When a signal to stop-and-reverse occurs, the actual SAR should be executed promptly after the opening of the next candle. In the charts which appear below, I have marked the SAR points with black squares to make them visible, and labeled them with letter-designations. In measuring P/L in pips from one SAR point to the next, I assumed that each SAR price conformed exactly to the closing price of the daily candle giving the SAR signal.

A note on stop-and-reverse: I have adopted the stop-and-reverse terminology from Welles Wilder Jr, whose Parabolic SAR method is widely known. As far as I know, Wilder coined the phrase stop-and-reverse, and the abbreviation SAR.

As a practical matter, stop-and-reverse is easy to execute. After an initial one-lot entry (either LONG or SHORT), the first SAR is accomplished by entering a two-lot order in the opposite direction. So, for example, in my USD/JPY simulation, the first entry into the market was a one-lot LONG entry. When an SAR signal was given (to exit the LONG and open a SHORT), it was executed by “selling” two lots – resulting in a net one lot SHORT position. The next SAR signal was executed by “buying” two lots – resulting in a net one lot LONG position. And so forth.

“Lot” means any position size which conforms to the rules and metrics of your particular style of trading.

On the 4 charts which follow, I have added notes which I believe will explain the (simulated) steps that I followed.

I haven’t totaled the P/L for this simulation, but obviously it is positive.

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The first chart shows USD/JPY for the early part of this year. For this simulation, I decided to begin employing this methodology in mid-June. The initial entry (LONG) into the market is designated as point A.

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After a simple entry at A in mid-June, the first SAR occurred at B in mid-july.

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Chart #3 shows that trouble developed at C-D-E-F, with fake-outs and whipsaws. In order to score the P/L, I made the assumption that most of that path (down, up, and down again) produced losses.

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The entire 5½-month period, from initial entry to present, is detailed in Chart #4.

[anon46773462]

Thanks @captgrumpy and @Clint for all your work on this method. I have to admit I am really surprised how little interest this has stirred! - is this again a sign of the times, or do we just have a different client here these days who are only interested once you have automated it and giving it away for free?

Some “Simple” questions:

1. What is the type of WMA you are using? On my platform I only have the LWMA as a weighted MA. Also, this MA has a choice between using closes from the actual price candles or the closes from the HA. The LWMA using the HA closes seems to correspond best with your charts. But using the actual candle closes gives many more unreliable turns with the 5MA and one needs to be very careful relying on that one!

2. The HA bodies are (of course!) totally different to the actual price candle bodies and it seems to me, @Clint, that the entry areas shown on your simulation would not actually tie in with the actual prices when the candles start. For example the 16.6. Below is the HA and actual charts side by side and it never actually traded at the bottom of the HA candle where the black square is (see red circles on chart). It is the same with the next short entry on 13.7. This can change the P/L quite a lot. In my simulation I “only” got about 500 pips from these first two moves. BTW my charts are slightly different in dates and body shapes due to a slight difference in end-day times, but that doesn’t seem to be a big issue here.

The area in the big blue circles is also interesting in that it shows how HA gives a more subdued picture of the underlying trend compared with the actual price action. If one had been following only the actual price on the RHS chart then I am sure that one would have closed the original position from B for only about 100 pips and then even lost that if one had also gone long there and got seriously whipsawed!! A big difference between the two scenarios!
3) One small point, for non-US traders with hedging facility, the SAR does not function by simply buying/selling 2 lots. This would result in 3 positions being open, the original long(short) and 2 new shorts(longs). We would have to close the existing trade and open one new one.

I will look into this some more! I have never found any use for HA on short term charts but I am gradually developing my interest in trading off dailies and in that sense, this use of HA seems worth looking into again…

[Clint]

[quote=“Simple_Simon, post:10, topic:122057, full:true”]
Thanks @captgrumpy and @Clint for all your work on this method. I have to admit I am really surprised how little interest this has stirred! - is this again a sign of the times, or do we just have a different client here these days who are only interested once you have automated it and giving it away for free? [/quote]

Maybe that’s a question for a psychologist. It’s definitely above my pay-grade.

[quote=“Simple_Simon, post:10, topic:122057, full:true”]
Some “Simple” questions:

1. What is the type of WMA you are using? On my platform I only have the LWMA as a weighted MA. Also, this MA has a choice between using closes from the actual price candles or the closes from the HA.[/quote]

The H/A charts (numbered 1 thru 4) that I posted on the 24th use linearly-weighted moving averages (that’s what LWMA stands for) and they are based on the CLOSE of the H/A candles.

In the two charts posted below, the WMA’s on the H/A chart use the H/A closing prices, and the WMA’s on the normal chart use actual closing prices. There are only slight differences between the WMA’s on the two charts.

[quote=“Simple_Simon, post:10, topic:122057, full:true”]
2) The HA bodies are (of course!) totally different to the actual price candle bodies and it seems to me, @Clint, that the entry areas shown on your simulation would not actually tie in with the actual prices when the candles start… This can change the P/L quite a lot. In my simulation I “only” got about 500 pips from these first two moves.[/quote]

You are correct. The actual candles have been manipulated (mathematically) to produce H/A candles. Therefore, we can only pick “manipulated” prices off those H/A charts. We have to think of the H/A prices as theoretical, or approximate. We are using the H/A charts to alert us to trend changes. Actual entries/SARs/exits must, of course, be carried out at actual prices.

The two charts posted below detail the first swing in my previous simulation – the A-B swing from June 16 to July 13. The first chart displays H/A candles (and prices), and the second one displays normal candles and actual prices. On the two charts, the difference in P/L is significant, with the H/A chart exaggerating the A-B swing and its profit potential.

As we gain more experience with this methodology, it will be interesting to see whether the H/A charts always show larger swings than actually occur in the “real world”.

Clearly, to use this methodology, you would scan H/A charts for signals. When a tradeable signal is found, you would then immediately place a market order, which would be executed at the actual price. What might appear, at first, to be extreme slippage in price would, in fact, be the difference between the H/A price and the actual price.

[quote=“Simple_Simon, post:10, topic:122057, full:true”]
BTW my charts are slightly different in dates and body shapes due to a slight difference in end-day times, but that doesn’t seem to be a big issue here.[/quote]

I agree. As I said in my previous post, I don’t think it matters which end-of-day this methodology utilizes. If you think about it, it would be entirely possible to use H/A charts with an end-of-day of, say, 5 pm New York time, and place your trades on a platform with a totally different end-of-day. Price is price, and it doesn’t care what brokers define as the end of one trading day and the start of the next.

[quote=“Simple_Simon, post:10, topic:122057, full:true”]
3) One small point, for non-US traders with hedging facility, the SAR does not function by simply buying/selling 2 lots. This would result in 3 positions being open, the original long(short) and 2 new shorts(longs). We would have to close the existing trade and open one new one.[/quote]

Good point. I confess to writing from a US-centric point of view.

[quote=“Simple_Simon, post:10, topic:122057, full:true”]
I will look into this some more! I have never found any use for HA on short term charts but I am gradually developing my interest in trading off dailies and in that sense, this use of HA seems worth looking into again…[/quote]

Test this methodology, if it appeals to you. It appears to have potential, but there’s lots yet to be worked out. For instance, how to manage the catastrophic stop-losses that grumpy mentioned in his original post. And how to minimize losses from whipsaws, when trends go wonky.

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[Xanaphlaxes]

You might be able to use ADX to filter out the whipsaws. Don’t trade if ADX is less than 40, for example. It’s worked well for me. Cheers!

[anon46773462]

@Clint

In the two charts posted below, the WMA’s on the H/A chart use the H/A closing prices, and the WMA’s on the normal chart use actual closing prices. There are only slight differences between the WMA’s on the two charts.

Yes, the differences are small, but I would not say “only”. When we are including “flicks” in the direction of an MA that is so short-term as 5-periods, this can be a decisive factor between success and failure. Here is an example from the period just before the entry on 16.6. This chart has the 5 LWMA based on HA closes and the small up-candle in the orange circle is of no consequence to the ongoing short trade:

But if we change the 5 LWMA to actual closes then that up-candle is also accompanied by an upflick in the 5 LWMA and maybe suggests an SAR here based on the entry criteria (change in both 5MA direction and HA candle colour) and awaiting confirmation whether the MAs subsequently cross:

If the existing trade was continued based on the “HA” closes then it would have ended up in profit of about 30-50 pips depending on the entry.

But if the trade had been closed and reversed on the basis of the “Actual” closes then it would have been closed out on the next down candle and whipsawed for a loss of some -90 pips - so the actual impact on one’s account, depending on which closing basis is used is around 120-150 pips.
Here is the actual price chart for the whipsaw section:

Personally, I would be inclined not to consider these TPs as automatically mechanical SAR points. Rather I would look at them as two separate transactions. First exit and then consider more criteria before implementing a reverse direction trade.

One additional criterion here might be to observe the steepness of the 12-period MA. Afterall, this MA is meant to be a kind of trend guidance/continuation line and, as in the example above, to reverse into a steep declining MA is not always wise. It does often seem that, in general, whenever subsequent good trades are initiated, the 12-period is already flat or at least flattening.

Regarding HA candles compared with actual candles, I think it is extremely important than people realise that HA is not a price candle at all. The body of the HA candle is, as you say, Clint, a mathematical manipulation based on previous candles and is deliberately intended to show something that is not visible on normal price charts. For example, the candle open is always the half way point of the previous HA candle body regardless of where the market price actually opens. So if the next candle actually opens on a high or low from the previous candle then the HA candle will already show a body within which the price has not actually traded at all.

But that is surely the purpose of HA, I think? It is also a kind of “MA” in that it tries to identify the overall area and bias of ongoing price action compared with recent specific activity. It applies a kind of weighting to recent price activity, which, it seems can be very useful in determining the overall continuation/termination/reversal of an existing trend?

For this reason, I think it is relevant to consider the HA chart only as a signal chart and not as a trading chart, and to also simultaneously use the actual price chart for entries, stops, etc.

[anon46773462]

Perhaps for those not too familiar with HA, here is how the OHLC are calculated:

The Heikin-Ashi Close is the average of the current period’s Open, High, Low and Close.
HA"Close" = Current(Open + High + Low + Close) / 4

The Heikin-Ashi Open is the average of the prior Heikin-Ashi candle’s open and close.
HA"Open" = Previous (HA-Open + HA-Close) / 2

The Heikin-Ashi High is the maximum of the current period’s high, the current Heikin-Ashi
open or the current Heikin-Ashi close.
HA"High" = Maximum of the actual High, HA"Open" or HA"Close"

The Heikin-Ashi low is the minimum current period’s low, the current Heikin-Ashi
open or the current Heikin-Ashi close.
HA"Low" = Minimum of the actual Low, HA"Open" or HA"Close"

This gives us a clear picture how the HA smooths out the noise in normal candle charts. Its starting point (current candle) is the ave of the previous candle O/C regardless of where the actual price starts and the HA close is a weighted average of the candle’s history and not the last price.

In other words, the averaged price for the current candle has to move beyond the average Open/CLose from the previous candle in order to change the HA colour. And since the previous candle itself is based on the one prior to that, this shows how the HA tries to highlight the core price action range running through the trend rather than just focusing on the current candle whether it is up or down.

But it is important to recognise that the HA body is not price, rather, I think one could say that it is visualising the relative change in price range?

[anon46773462]

Took my first trade with this method this morning.

It has been a long, long time since I last traded USDJPY but I liked the look of the setup.
I am also looking into watching the same signals on a 3H chart to see how it performs in setting up entries/re-entries and exits alongside the daily chart trend…

I have also added a 12-period RSI based on the HA closes with only a 50/50 line drawn. I am hoping this will help give additional confirmation of an entry and, even better, help to avoid fakes.

The Daily JPYUSD finished last week still in a negative mode. But the 3H had reversed on Friday, suggesting that it could be prudent to close out for the weekend and look for a return to the trend today.

We got a reversal on the 3H back in line with the daily trend early in the morning so I sold it there. It is still a sell but I closed it at the pyscho resistance 110.00 as this is a first trade with HAs and with a pair that I am not familiar with and because the main trend already started some weeks back around 114. So, as always, I like to “earn while you learn” rather than “burn while you learn”

Interestingly, the 3H also gave a reversal in USOIL against the still bullish daily and did indicate correctly that today would see oil prices down (but this was a exit signal and not an entry signal since it is 3H against Daily and the trade should be 3H back into the daily direction as with the JPY)

Daily chart:

3H chart:

[Clint]

I’ve decided to experiment with this swing-trading strategy using an Oanda demo account, in order to get a feel for both the strategy, and the Oanda platform. Captgrumpy, the OP, specified Oanda as part of the set-up for this strategy – and, although I believe that any charting package which includes Heikin Ashi candles would work just as well as Oanda, I’m trying not to make too many changes to grumpy’s methodology right out of the gate.

That being said, I’m going to watch a much larger menu of currency pairs, than captgrumpy specified. I’m going to watch all 7 of the USD major pairs, plus 21 major crosses, plus 2 USD minor pairs – for a total menu of 30 currency pairs. My watch-list is shown below.

Grumpy suggests that this strategy is applicable to time-frames from 6-hours to 1-week. I will use only daily charts for this experiment.

And grumpy further suggests that early entries can be made when the WMA-5 changes direction, but before the H/A candles change color. I will use the less aggressive approach of requiring both signals – the WMA-5 change of direction, and the H/A candle color change – before entering (or reversing) a position.

Lastly, grumpy uses the term TP, meaning trade point, to designate the signal to enter or reverse a position. I think that terminology is confusing, because most traders read TP and think take profit. So, I will refer to signal candles as entry candles or SAR (stop-and-reverse) candles, to avoid that confusion.

My Oanda demo platform closes each daily candle, and opens a new daily candle, at 17:00
(5 pm) New York time each day. The first daily candle each week opens at 5 pm on Sunday. The last daily candle each week opens at 5 pm on Thursday.

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Following the opening of the Monday November 27 candle (at 5 pm NY time today), the 30 pairs on my watch-list indicated the following:

… Pair … Most recent signal

• EUR/USD — November 21 - up
• USD/JPY ---- November 7 - down
• GBP/USD — November 14 - up
• AUD/USD — November 27 (today) - down
• USD/CAD — November 26 - up
• USD/CHF — November 21 - down
• NZD/USD — November 21 - up
• AUD/CAD — November 22 - up
• AUD/CHF — November 2 - down
• AUD/JPY ---- November 6 - down
• AUD/NZD — November 21 - down
• CAD/CHF — November 12 - down
• CAD/JPY ---- November 12 - down
• CHF/JPY ---- November 27 (today) - down
• EUR/AUD — November 22 - up
• EUR/CAD — November 22 - up
• EUR/CHF — November 23 - up
• EUR/GBP — November 22 - up
• EUR/JPY ---- November 23 - (?) (this is the messiest chart on my watch-list – ughh!)
• EUR/NZD — November 27 (today) - down
• GBP/AUD — November 23 - up
• GBP/CAD — November 13 - up
• GBP/CHF — November 21 - down (almost as messy as the EUR/JPY chart, above)
• GBP/JPY ---- November 26 - down (4 fake-outs since November 1)
• GBP/NZD — November 22 - down
• NZD/CAD — November 21 - up
• NZD/CHF — November 26 - up
• NZD/JPY ---- November 23 - up
• USD/MXN — November 15 - down
• USD/CNH — November 27 (today) - up

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Based on those indications, I have entered:

• AUD/USD (short)
• USD/CAD (long – one day late)
• CHF/JPY (short – ugly chart, but I held my nose and entered anyway)
• EUR/NZD (short)
• NZD/CHF (long – one day late)
• USD/CNH (long)

I placed a 100-pip trailing stop on each trade (except the dollar/yuan which has a 300-pip trailing stop).

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Each of these trades will be monitored intraday to ensure that the required WMA-crossover occurs, confirming the trade. Thereafter, those trades which are confirmed by the crossover will be evaluated once per day (after the 5 pm daily close) to determine whether they should be held open, or closed on a stop-and-reverse (SAR) basis.

For the next few days, I will report the results of these trades.

[Clint]

Open trades from yesterday (total P/L = 11.6 pips)

AUD/USD (short) -
USD/CAD (long) - crossed
CHF/JPY (short) - crossed
EUR/NZD (short) - accidentally closed
NZD/CHF (long) - crossed
USD/CNH (long) -

---

New trades signaled today (trades placed at 5:45 pm NY time)

USD/JPY (long)
USD/CHF (long)
AUD/CHF (long)
EUR/AUD (short)
EUR/GBP (short)
GBP/CHF (long)
GBP/JPY (long)
GBP/NZD (long)

[Clint]

Open trades from yesterday (Tuesday November 28) - 12 trades

USD/JPY (long) -
AUD/USD (short) - crossed
USD/CAD (long) - crossed
USD/CHF (long) -

AUD/CHF (long) -
CHF/JPY (short) - crossed
EUR/GBP (short) - crossed
GBP/CHF (long) - crossed
GBP/JPY (long) - crossed
GBP/NZD (long) - crossed
NZD/CHF (long) - crossed

USD/CNH (long) - crossed (barely)

Unrealized P/L = 378 pips

Closed trades - 2 trades

EUR/NZD (short) - closed accidently (-2.6 pips loss
EUR/AUD (short) - stopped out (-68.1 pips loss)

Realized P/L = -70.7 pips loss

---

New trades signaled today (trades placed at 5:20 pm NY time) - 4 trades

NZD/USD (short)
AUD/CHF (short) - stop-and-reverse, closing previous long
CHF/JPY (long) - stop-and-reverse, closing previous short
EUR/JPY (long) - crossed

[Falstaff]

Thanks for doing this @Clint

• Just to clarify - when your signal occurs (End of day your time ?) - You’re just doiing an “Entry at market” and the reverse when the trade finishes ?

[captgrumpy]

captgrumpy
Hello Clint–First off I want to thank you and simple siman for your interest in my proposed plan and all the work you have put into it.As noted,I too wondered why so few traders responded-- I
suspect a couple of things–it’s for SWING trading–it uses Heikin-Ashi candles --I am pretty sure there are hundreds of new and struggling traders who might benefit by at least having a look --Oh well --like is said ‘you can lead a horse to water,but you can’t make him drink’! You two have gone over the plan’ with a fine toothed comb’ and you have come up with a lot of things I
didn’t know about and it is probably better I don’t because then
I wouldn’t feel comfortable with the mild aggressive aspect of
my plan Let me digress a bit to give you some background as to how I came up with such a 'wild’plan I am 89 years of age,got ,\my first com[uter ar 80, got into Rx trading in 2011-signed up with oanda for a practice account–soon after got an active account–($5000) before long lost most of the funds in both accounts (does that sound rather familiar?) I decided that if I
stayed with Fx trading I had better learn a lot mote about this business.So I did a lot of reading and studying trying to find a good trading strategy I could use–since I was unable to do this I decided to try to find a plan of my own–This plan had to be simple,easy to use and profitable–Having spent at least 2 years
trying to PREDICT when a particular currency pair MIGHT reverse
direction (as I suspect most traders have,and still do) I finally decided that doing the same thing over and over expecting different results was not working,I decided to try to see if I could
learn exactly when a pair ACTUALLY reversed–not when it MIGHT.So after another 2 years or so I finally did come up with a
pretty good plan but it took another couple of months before I discovered the WMA5 seemed to be pointing out potential trade points when the Heikin-Ashi ended or began a run–then when I
took the chart to maximum resolution ,when the candles now became solid blocks,all the details became much clearer I didn’t
believe such a simple thing like a WMA5 could help spot
entry and exit poins—so after doing some back testing I was
pleased with the results so decided to post it on babypics hoping
it might help other traders–so that is how all this came about.

Now to get back to your last post about really give the plan a good test–a few comments–I was surprised that your oanda
charts closed at 1700 hours–my chart (1 day ) close at 0000 hours12 hr charts at 1200 and 0000hrs.–8 hr charts at 0800–i600–0000 hrs and so on .With your charts closing at a different time I don’t expect your results to be like they would be with my
chart.–also if you are not going to trust the WMA5 signal that too will affect the outcome–If you do not have your chart at maximum resolution you may not clearly see when the WMA5
makes the change–here it shows the block hit with lots of time to make the trades at the close of that block (trade between 2345 to-0000 hrs on my chart–gets close to actual closing time)

Since posting this plan I have changed the WMA5 setting to WMA 2–it shows the small peak clearer and spots the PTP
up to 2 days earlier than the WMA5 I know you find this hard to
accept because it goes against the normal–I mentioned at the beginning you would have to be prepared to do something
different–well this is something different!!!
Another thing I found --the WMA 2 (in place of WMA5)_Works
equally well with the candlestick candles–I checked the EUR-USD charts back about 2 months and the results were identical–same price-- -same day. The 2 charts look different,but in the end the-- same results.
A statement""" Every time the WMA2 makes that small peak when it changes direction,it indicates a POTENTIAL trade point (PTP) (this instead of the confusing TP)–however–every indicated PTP does not qualify for a trade–!!There are certain checks that have to be done when a PTP is indicated–such as the chart trend—whether the WMA12 is away from the main chart (if quite far away chart is in a positive run and will remain on the run until trade is closed by a qualified PTP–Also,where on the chart the PTP occurs–if it occurs in the top or bottom 25% of the chart the trades are made without further checking.
When a trade is closed --if the signals were strong enough to close the trade they are equally strong for opening a new trade.One just has to have faith–it takes considerable practice to
have confidence this is OK–If a trade is made and the WMA2 does not cross the WMA12 the trade is closed,usually with a bit of profit,so there isn’t a big risk if a mistake is made
There care two other items I 'd like to mention—One is about stop loss setting 9that I wasn’t tvery clear on–as you know this a matter each trader has to deal with and come up with a good SL
plan that suits their style and gives he necessary protection.This is how I use the stop loss factor–When a trade is opened I enter details on a daily work sheet–I write down the maximum number of pips I am willing to lose if the chart goes the wrong way–if that number is reached the open trade is closed–take the loss and wait for the next PTP to open a new trade–this seldom happens
because if the WMA2 does not cross the WMA12 the trade is closed–however there are rare times when the chart may go up a bit before starting down as it was supposed to -with the closing plan in place there is no panic if this takes place–I do set s stop loss well out just in case the chart takes an unexpected move against me .For the 1 day chart this SL is set at 400==seems high but I would rather lose that much than be wiped out.I have a policy to never hold a losing trade in the hopes it may bounce back-I just close the danged thing–take my loss while it is still small and move on to a new trade.The second point eludes me at this moment.I hsve rambled on far too long ,but there a few oo[points I wanted to clear up—Looking forward to the results of yout testing.I hope simple siman sees this episode too–maybe he’ll have comments !! In he mean time–good trading
captgrumpy…PS–spelling may be a lillte strange at times!

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