Hi all,
I am glad to share a system that I have now been trading consistently for a few months and has been very efficient for me.
[U][B]Market, timeframe[/B][/U]
Forex, H4
[U][B]Indicators[/B][/U]
21 period exponential moving average
two elements from the Ichimoku system : cloud and Kijun Sen
7 period RSI
Fractals
[U][B]Long Entry[/B][/U]
Go long when following conditions are met :
Price above cloud
Kijun and 21 EMA have a good upwards slope
Find a new low in the uptrend by waiting for the RSI to dip back towards the 50 mark, then go long when it bounces back up again, indicating new momentum
Short entry is the reverse
[U][B]Stop-loss[/B][/U]
Position stop loss at latest fractal
Money management
initial risk : 1 to 1,5%
trail stop as fractals appear
never give back an inch of profit if you reach R3
I have been trading this system since Feb 2015 and have been profitable every month since. May performance : +10,45%
Before taking a trade, you need to make sure that the pair you are trading is displaying clear market condition, meaning a clean chart uncluttered by violent price swings.
Before you enter a trade, check that there is no significant piece of news on the docket for that pair (central bank announcement, rate decision, macro indicator release)
Thanks for your posts. I’m watching the thread with interest.
I also routinely trade (for one of my systems, but on faster charts than you’re using) using some components of the Ichimoku together with a Western MA.
I’ve seen “kumo only” systems before, and “Tenkan Sen and Kijun Sen only” systems, but I think this is the first I’ve seen with the kumo and the Kijun together without the Tenkan Sen. Interesting.
I don’t use Chikou Span at all: it doesn’t tell me anything that a quick look at the chart doesn’t tell me, really (and I think the moving average makes it redundant, too?).
Thanks Bobillbrowne, I’ve been stopped out of both trades due to a sharp pullback on USD today, but my money management keeps me safe with very low risk. All of my trades and pas performance can be found on my website.
Do you happen to have any back-testing evidence of whether this system trades just as profitably without the RSI component being included at all? (I ask because I strongly suspect that it might: there’ll be more trades, of course, including both losing and winning trades, but the profit factor might be the same and the results therefore more beneficial, overall, simply through trading more frequently?).
To answer your question, no I haven’t tried to backtest without the RSI because it is an essential part of the strategy, being the entry timer. The point of this momentum strategy is to catch new lows (in uptrends) and new highs (in downtrends) and the role of the RSI is to track pickups in momentum to confirm renewed trending. The system has been very profitable for me since I started trading it exclusively and rigorously in February. I’m up nearly 40% (10,45% alone in May) so as it is I’m very satisfied with it.
How do you know it’s “an essential part of the strategy”, if you haven’t backtested without it? And how do you know it needs to be a 7-period RSI?
I will second that. Although I think the RSI will turnout to be essential (I have some ideas how but this is your system so I’ll keep my ideas to myself).
My question have you thought of using the standard 14 period setting on the RSI?
Well these are both valid questions. To be honest I haven’t found the time to backtest with different RSI settings. The main question I ask myself with the RSI is whether the bounce needs to be on the exact 50 mark or can a slight tolerance be accepted (such as a 45-55 range). Something else I will have to backtest.
I have been backtesting your system in FT and so far so good. The problem is is you give back allot of profits when the market goes into consolidation. You don’t know when that will happen until you loose a few trades and can then see the ranging characteristics that caused it. But I am up 15% on one pair in 2 years. Which since I trade 30 pairs and with a theoretical 15 pairs trending on a 4 hr chart at any one given time and extrapolating the performance across 15 pairs that’s an acceptable return.
I just need to figure out how to tell when the market is about to go into ranging. Then I could charge for that service and make billions.
I am intensely interested in this system. I set up a new demo account in mt4 with 30 pairs. I am thinking that the “giving back” your money can be minimized with a few modifications to how one views the slope trend of the Kijun and 21 EMA. Can you provide more info on how to minimize getting whipsawed?
The profits look real good in trending markets just following each fractal with the stop but this leads to disaster when the trend lessens, reverses or the market begins to range.
Looks promising but I have said that before. Time will tell.
By the way are you referring to the r3 pivot line? It seems to be a contradiction to have a 1 to 1.5 rr and to say to “never give back an inch of profit at r3” unless I am misunderstanding something.
John, if it’s of any interest or relevance to you, for your demo testing, another established exit method for trading systems of this kind is to trail the stop “one spread” (e.g. typically one pip, for a retail trader using EUR/USD) beyond the position of the Kijun Sen line [I]3 periods before the current bar/candle[/I].
I’ve found this, overall, [I]at least[/I] as good as any other exit method, and better in the long term than many.
It sounds (at first glance) as if you’d be moving the stop “all the time” but it really isn’t as inconvenient as that, given that the Kijun Sen is quiet often flat for several consecutive periods.
[QUOTE=“John Denver;705569”]By the way are you referring to the r3 pivot line? It seems to be a contradiction to have a 1 to 1.5 rr and to say to “never give back an inch of profit at r3” unless I am misunderstanding something.[/QUOTE]
John, by r3 I mean profit at three times my risk, sorry this could be a bit confusing (with pivots).
