@PhilipPirrip, thanks for answering. I appreciate it. I noticed on a lot of cross currency pairs that sometimes the stoch does the right thing but the stoch will only go to 25 or 76 as an example and not the full 80+ or below 20. I am thinking the stoch has to be 80+ or 20 or lower for me to take the trade with EMA’s crossed. Should it be always 80 + or 20 or lower?
Yes, always.
@PhilipPirrip OK, thanks for letting me know. When the stoch crosses from 80+ to below 20 , is there a certain time limit or candle limit that I should wait before it crosses in other direction? Example: EUR/USD crosses on EMA’s within a 4 hour chart, stoch is oversold. The stoch doesn’t cross into overbought until 3 more 4 hour chart candles.
Hi Philip, I re-engineered the logic for Stochastic cross on Exit per our previous conversation. It was do-able. I’m now looking into RSI Threshold testing using 4H data bars, which is much tougher.
I reviewed this thread again, and I want to re-visit something from Page 1 on rules, and just want to verify:
Questions:
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For us to take a position after EMA cross, do BOTH of the Stochastics (Slow D and Slow K) have to enter the opposite Overbought/Oversold regions, or does just the Slow K have to penetrate the necessary region?
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After #1 occurs, must the subsequent Stochastic cross occur within the Overbought/Oversold regions, or can they happen anywhere?
The reason I’m asking is due to the recent revision of my understanding of trade Exits (none-Stops), and I just want to be doubly-sure.
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Only focus on Slow K.
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The only thing that matters is that they cross. It doesn’t matter if its inside or outside.
It is also important to note that this has to happen chronologically. The order of the steps cannot get mixed up.
OK, so what you are saying is that Entry and Exit rules are mirror opposites effectively.
anyone else having issues with the chatroom?
2 steps forward, 1 step backwards, but at least making some progress here. I re-implemented the Entry and Exit (non-Stop) algorithms, based on further conversation with Philip, and the results are shown below. Test was performed on Dow-30 Daily data from circa 1984-2015, starting w/a $250,000 account, and simple money management techniques (10% of account per trade). The results below use Philip’s Monthly RSI(14) filter (don’t take a Long trade unless RSI > 66.7; don’t take a Short trade unless RSI < 33.33). I also implemented an EMA100/200 Monthly filter (don’t take Long unless above both; don’t take Short trade unless below both). Some interesting observations:
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The Monthly RSI(14) filter outperformed the Monthly EMA100/200 filter. Over the period, both yielded about the same overall net gain, but the RSI version did it with half the # of trades;
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RSI filter had higher Winning % (by about 7%), not that that should even be an issue;
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Short trading was minimal, but lost money overall, but RSI filter minimized # of short positions;
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The system still had 6 losing years, with the worst one coming in 2009 (about a 12% loss). EMA100/200 filter implementation lost almost double though in 2009;
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The overall # of trades on this data only has about 13 trades per year, due to filtering, which really doesn’t make it a tradeable systems using Daily data, and reinforces the need to trade at lower intervals (like 4H bars);
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Of all trades (419), approximately 75% of them exited via the 3-step Exit approach; the other 25% exited through Fib Extension Stops;
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The Trade log is attached to this post. Download it, and rename it to have a .XLS or .XLSX extension to view in Excel;
The next step is to try and implement the RSI(14) Weekly filter against 4H bars.
Hey Phil,
When drawing fibs for trailing. Attached there is a HH the a LH before the crossover which do we use for the fib anchor?
Thanks
Seems quite good actually.
There is no way to do the monthly RSI with the 4hr bars. The weekly will do good but I think the monthly will be more picky.
And yes you are spot on, the exit for a failed pattern is the mirror opposite of the entry.
[B]@Shemski[/B] I don’t know I’ll try to log in now and see.
Yes, looks pretty good, indeed. Add some better money mgmt, and we can probably get rid of those (small) down years. Yes, going to be looking at RSI Weekly filter for the 4 Hour bars. Definitely getting there…
I can build a case also fora relationship between high-volatility and a decrease in winning %. But I’m still studying and hopefully your new back-test will show us we don’t need it.
You wouldn’t be looking at drawing fibs at all in the first place as there was no short signal delivered yet. After EMA 20/50 gave a bearish cross, stochs did not move above 80.
And to the left side of the chart, the bullish cross, you’d be drawing from the low to the first high after bull cross and prior to the retracement… that’s about 9th candle low to the yellow circled candle high.
I know this goes a bit beyond what you asked, but the chart you shared, actually shows a failed signal in progress. Previous buy signal would be entered on the closing price of the candle on the 3rd vertical period separator on the chart. Price failed to rally and instead gave you a bearish EMA cross.
Technically, you could have exited at 0-loss at the last two spikes, or you would hold until you get a opposite signal
There was a problem for a while yesterday, but seems to be working fine
Can I just confirm, if the EMA’s crossed upwards again before Stochastics gave the sell signal (Purple circle on the right-hand side of the chart below), would that then invalidate the currently forming opposite signal, and the trade could just be left to carry on, waiting for either a brand new sell signal to form from scratch or exit through TP’s at fib levels?
If you went long there is no reason for you to exit based on the chart you shared.
I appreciate the help but I’m not live yet and need to handle scenarios such as the above. As I’m still learning. We will not be in every trade so if a short is triggered then I would like to iron down fib anchor because exits are more important the entries (I believe).
Can anyone can answer the original question. Thanks
yeah - no reason to exit as there has been no reverse signal - even though the 20 and 50 EMA’s have crossed to the downside, Stochastics hasn’t retraced up to the Overbought area - went close but not quite - so no signal to dump and run.
What I mean though is, if the EMA’s crossed upwards before the Stochastics gave a sell signal from the overbought zone, would that make the sell signal invalid, and therefore we would stay in the trade even though Stochastics gave the sell signal?
EDIT: I think I know the answer now, please ignore my question. Sorry to distract from Bioshock’s original question.
Misread your question
Refer to the chart above.
0% Fib marks the start as that is your Lowest low before crossover
100% Fib marks the end as that is where Stochs started moving down from 80
Green line marks the long entry
Besides the mere question of the fibs and using this method, the chart shows a clear head and shoulders pattern formed too (not a perfect text book case but close enough a pattern worth considering).
You also mention: “so if a short is triggered then I would like to iron down fib anchor”
Assuming you want to draw Fibs in preparation for shorts, then you’d simply be looking at the HH and the LL, as seen in the red lines below.
