Okay, today being 26th of October 2019, I discovered my trading mechanical system for 1D chart.
SETTINGS
-SMA of 5 and 10 applied to close
-RSI of 9 applied to close
USAGE
On a very good day I hunt for double top or double bottom on various currency pairs using the 1D chart, once I see that pair with my half shape signal (i.e double top or bottom, more like the shape of M and W but not fully formed yet ) I concentrate on it.
Next, I open the 1WK chart to confirm the trend that is currently at work on that pair because trend is my Friend. So assuming i opened it and discovered that the present direction is an uptrend using my RSI indicator (for me RSI above 50.24 indicates an uptrend and below 49.76 indicates a downtrend). The RSI was above 50.24 in the 1WK chart. So I head back to the 1D chart (My preferred trading time frame) and check if my hunted double-bottom signal (i.e W) has an RSI of 50.24 or above. If the RSI is valid then i wait for confirmation of the double bottom (i.e when the last arm of W start to form while also hitting my RSI uptrend point above 50.24 and when there is a crossover between the two SMA). I buy at this point placing my TP a little below the double bottom resistance level and my SL a little below the double bottom support level.
But when the present direction in the 1WK chart is downtrend, I head back to the 1D chart and wait patiently for double top formation (i.e M). I wait for the confirmation of the double top (i.e when the last arm of M start to form and hit my RSI downtrend point below 49.76 and when there is a crossover between the two SMA). I sell at this point placing my TP a little above the double top support level and SL a little above the double top resistance level.
PS: If the 1WK chart shows an uptrend, I concentrate only on double bottom signal in the 1D chart. If the 1WK chart Indicators show downtrend, I concentrate on double top signal in the 1D chart, basically means if I see a double bottom (or W) I will ignore it. That is to say uptrend indication in the 1WK charts means being on the look out for ONLY double bottom in the 1D chart why downtrend indication in the 1WK charts means being on the look out for ONLY double top in the 1D chart. You are welcome in Joining me in testing this system.
Its too much to expect it will eliminate fake-out entirely (sometimes the market will do something which you were very certain it would not do).
Plus, the decision as to how long you hold the position while it remains profitable AND moving further in your direction is key to your statistics. So you enter long on Day 1 and price rises further on Day 2 - but eventually price will move down: if it moves down on Day 3 and 4 is that a success or a failure?
Don’t be discouraged - this approach will make money but its not 100% so do not be over-confident.
The other thing I would say is don’t be afraid of losing trades in a good strategy: as long as the losses are controlled. But do be afraid of not getting into good trades.
Thanks Tommor for your splendid contribution. I will keep testing. I’m fully expecting to lose but I also expect my win should be greater than my losses at the end of a long trade.
Yes I do. For the double top movement (M) I take profit when the last arm of M (my entry point with RSI of 49.76 or a little below that value) reaches a little above the M support level, more like an M where the first arm is longer than the second arm. I wouldn’t allow my trade to hit the double top support level before taking profit so I will set TP just a little above it. The double top must have equal edge but it is okay if one edge exceed the other a little, anything apart from this, I won’t enter the trade. I stop loss a little above the two equal edge or slightly equal edge of the double top double resistance level. The same goes for double bottom (W)
But in the case were the resistance level for the double bottom or support level for the double top is less than their two arms, I will take profit at half of the first completed Arm of the double top or bottom. Meaning I will be taking profit a little above the resistance or support level in this case still following my original plan for my stop loss. But if they are above their two arms (short arms) I won’t take the trade.
Did anyone coded the M and W detection? The crossover and the RSI check are easy parts. I’ve seen some quants here lately. Maybe someone shares some code before I start thinking. Ha ha.
28/10/2019
UPCOMING DOUBLE BOTTOM TO CARRY OUT THE FIRST TEST WITH MY SYSTEM ON AUDCAD PAIR
CODE: I will use W to mean double bottom
As you can see from the chart, W is about to form. It is important to note that i use the SMA 5 and 10 line to get my W or M shape confirmation, I don’t Use the candlesticks. From the chart, you will notice that the first arm and resistance of W has been formed while the last arm is yet to be form. I’m paying close attention on the psychological effect of this trade to my personality, I’m currently having a feeling of excitement which is a good sign but I will maintain my cool not to be overconfident. My 1WK chart has a RSI of 34.92 which indicates a downtrend movement while my 1D chart has a RSI of 37.43 (as you can see from the chart) which also indicates a downtrend movement. But according to our 1D chart, we need an uptrend confirmation with RSI of 50.24 - 50.94 (just within the range of 50) before we place a trade. So I’m patiently waiting for an uptrend confirmation from 1WK and 1D chart together with a crossover from 1D chart to enter the trade. More update this coming week.
AUDCAD UPDATE:
Our 1D and 1W RSI indicator have increased to 52.20 and 42.00 respectively, very good Report though haven’t
fully reached our RSI expectation. We are still waiting patiently for our entry requirements to be met, 1W still indicates a downtrend movement but 1D is currently indicating an uptrend movement. So far there have been a slight crossover. Double bottom haven’t lost shape yet so we are still in business.
The RSI differential (1D RSI - 1W RSI) between the 1D and 1W is large up to 10 difference apart with RSI of 1D being the highest. Due to this, RSI of 1D will hit my entry point and the candlestick might go to the extent of hitting half my intended TP before RSI 1W start indicating an uptrend (it will be pointless to place an entry at this point since my reward to risk ratio will be very poor). I won’t be able to place an entry since the trend for 1D and 1W are not on the same page. Notwithstanding, I have decided to make little adjustment from my recent findings.
ADDITIONAL TRADE SYSTEM RULE
I won’t trade large RSI differentials between two time frames because their trend will not be on the same page for a long period during the cause of exhibiting my trading strategy, while one will indicate an uptrend, the other will signal downtrend. Suitable RSI differential should be between 1 to 4 (approximately). Once I see a pair that meet my additional trade system requirement, i will do this again, it won’t be long.
@dudebro I’m still figuring out the pairs that suit this system well enough. I have eliminated 15 pairs out of the 29 pairs I started with that doesn’t fit the trading system I’m testing. I’m left with 14 pairs. As I continue to test I will know the pairs that suit the trading system.
