Tweaking a mechanical system

Trading Systems
1

Hi all, first post so please excuse/correct any naivety and TYIA.

I’ve been actively reading up on the ins and outs of Forex for the past few months and have decided it may be time to follow through on a strategy and attempt some backtesting, purely to see what I can learn in practical trading and step it up a notch.

I have been using this simple mechanical system I found on an aged post here, however using a 4 hour timeframe: Amazing Crossover System - 100+ pips per day!

My biggest concern so far is false signals that regularly produce losing trades - watching price action and trading with some discretion could prevent this however I’d like to keep it strictly mechanical. I’ve pondered holding out on opening a trade until X amount of bars have closed after signals, but the new problem becomes that a good portion of trades would miss out on some nice movement, and regularly miss the TP altogether as a consequence. Any thoughts on this issue or other tweaks/methods would be welcomed and appreciated!

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2

MA crossover systems produce a high percentage of false signals and late signals. That is their nature. You can adjust how fast you get poor results but its very difficult to improve the results. So if the failure rate is 40%, it will always be 40% and all you can really do is make it 40% of 10 signals per hour or 40% of 10 signals per per month but it will still be 40%.

But if you’re getting 100 pips net profit per day, why worry?

3

Hi, in mechanical systems, the most important thing is statistical advantage. if you combine it with good money management, you can expect a positive return on the investment. Regards Greg

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Thanks folks this is great advice - currently I’m looking at a 1:1 ratio, being that I’m strictly placing SL and TP 100 pips from entry for knowledge. Using that I could look back and see how altering those would have affected my backtest. Glad to feel a little more on track with improvement :slight_smile:

5

1:1 r:r might be about the best you could manage with a second-rate entry tactic like MA crossovers.

You might consider varying your pip distance according to volatility, say using ATR. At times of low volatility, 100 pips might be far too wide.

6

MA crossovers by themselves don’t work. I would not waste time with this system.

7

Hello. Can you suggest a better one you might try?
@QuadPip

8

Please see this post.

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